Four Nigerian airports to be put out to a concession process. It’s an ongoing story, but who would chance it?

For several years now the Nigerian government has desired to privatise the country’s four main airports by concession but has met with stiff resistance, particularly from trades unions. As the recent CAPA – Centre for Aviation Airport Privatisation and Finance Review 2018 publication indicated, “it looks like a saga that is set to continue”.


Summary:

  • The Nigerian government is persisting with its attempts to concession out the country’s four main airports through P3 deals;
  • Some foreign investors have been attracted by the country’s population and GDP size, and a growing Middle Class;
  • However, union resistance to the process remains strong and corruption is amongst several issues that will likely put many potential investors off.

Transaction advisers were initially appointed from Jan-2017 and the Minister of State for Aviation also intimated that the government planned ultimately to offer all state owned airports to investors. At the time the government stressed that the concessions were not a sale of the airports, only management rights, which did not appear to go hand-in-hand with the requirement to be able “to finance and construct large airports.”

A swathe of Nigerian trades unions have consistently opposed the privatisation procedure and continue to do so. Their position is that it would take several years to deal with all the issues, particularly that of job losses.

Supporters include the existing privatised operator of Terminal 2 at Lagos Murtala Muhammed International Airport – the only private one – Bi-Courtney Aviation Services, which claims the option of first refusal for airports under the proposed concession.

CHART – Terminal 2 at Lagos Murtala Muhammed Airport (as Terminal D) is used by local and African carriers and handles more than half of the scheduled movementsSource: CAPA – Centre for Aviation and OAG

In Sep-2017 the Federal Executive Council approved the concession of the Lagos and Abuja airports, saying it would be “conducted in a transparent manner” and that the Government would provide “adequate” time for carriers to prepare themselves, while ensuring Nigerian workers are given priority in the aviation sector. The government reiterated that it does not have resources available to fund necessary infrastructure improvements for Nigeria’s 22 airports.

But while union resistance remained rock solid, it has nevertheless become apparent that some foreign investors have taken an interest in these airports, including those from Turkey, Saudi Arabia and Qatar. Turkey’s TAV Airports was reported to have decided to submit a bid for concession tenders at all four of the main airports.

Presumably what attracts these investors is the country’s huge population, now verging on 200 million, the fact it is the world’s 30th biggest economy by GDP, and a burgeoning Middle Class. What would not attract them are power supply difficulties or the ubiquitous concerns about corruption, which refuse to go away.

This exercise looks set to drag on as long as the infamous Yamoussoukro Agreement, which was supposed to liberalise Africa’s skies.  Western investors may well be discouraged by the unrelenting opposition of the trades unions and associated bodies and the need to appoint a plethora of consultants to examine the transparency of the deals and what they would mean for workers’ rights.

At the beginning of Oct-2018, the Minister of State for Aviation reaffirmed the government’s plans to concession the country’s four major airports under a public-private partnership (P3) and for a maximum period of 30 years.  He said; “We don’t believe that government can run these facilities very well. We must hand them over to the private sector”. The airports concerned are Port Harcourt, Lagos Murtala Muhammed, Kano Mallam Aminu and Abuja Nnamdi Azikiwe.

The Blue Swan Daily analysis shows none of them are particularly large: the biggest by demand being Lagos with 6.4 million passengers. While Lagos will attract most interest, new facilities at Port Harcourt and Kano should open before the end of Oct-2018 and the first Airbus A380 is expected to land in Nigeria by 1Q2019.

TABLE – All four of Nigeria’s largest airports lost traffic in 2017, but have regained it, and much more, in 1H2018 as the country exits recession and commodity prices recoverSource: The Blue Swan Daily and CAPA Airport Profiles