Emirates Airlines has announced this month that its no longer servicing any route to or from Nigeria quoting a host of challenges in the country’s aviation industry. Problem number one is that Abuja, which has fixed its currency for years, suddenly decided to let the naira trade openly on the market. The currency collapsed faster than a thug hit with cosh. The worrying sign for South Africa which has observed its rand plunge by a third against the dollar in a year, is Nigeria’s negligible naira has led to Emirates announcing it can’t sustain costs flying into Africa’s second biggest economy.
The equivalent in Asia would be Emirates pulling out of Japan.
Ja, the idea is preposterous but gives credence to the belief that Nigerian Aviation authorities are a contradiction in terms. It’s also true to say that a long-standing tradition of corruption, mismanagement and pure greed has finally caught up with the country’s aviation sector.
The trouble in the aviation sector is long term, but this year the wings really came off particularly in June when the government said it would deregulate the naira and allow the currency to devalue naturally. And naturally it devalued immediately, plunging like a fatally wounded Stuka. Worse, the flow of dollars into the country dried up as traders became fearful of what the real value of the naira really was. Or in this case, wasn’t. The Nigerian currency shed 50% of its value by the start of the final quarter of 2016. The immediate effect was on the cost of jet fuel which doubled in a month. For a country that has oil reserves, the irony should not be lost on us, dear readers.
So by the end of September Arik Air announced it was suspending ops. Then Aero Contractors froze flights – which is a big story because its the oldest aviation company in Nigeria. First Nation Airways has also shut shop, followed by United Airlines, Iberia and Emirates in October.
Stung by regional guffaws, Nigeria’s politicians have sudden woken up and demanded that the Central Bank of Nigeria and the National Petroleum Corporation appear before the house of Representatives Committee on Aviation and explain themselves. The good news is Access Bank managed to raise $300 million via a Eurobond from the international bond market to fund fuel. But this is throwing a thimble of water at a blazing oil well.
Two more airlines this week said they could not offer flights – Dana Air and Medview. So let’s go over what this really means. Put it another way. Forty Seven Airlines have gone broke in 30 years.
- Investors stop flying into Nigeria and even charter flights slow down. This has an effect on sentiment and capital growth
- Medical evacuations are cut which means tourists think twice about traveling to the west African state
- Government officials are forced to fly by charter which increases the country’s transport bill – and angers locals who regard this as elitism
The fading relevance of Aviation in Nigeria is a shame, given the country’s massive oil reserves and its much vaunted importance to the African narrative. It’s not just the naira. Politicians in Nigeria have used aviation as a tax tool for years with the mistaken belief that its a goose that just will lay vast amounts of golden eggs. The broken system includes multiple taxation nodes, deviation from policy without notice, cost of renting apron space, and bribery and corruption. Its worse than bad, its shambolic, and symbolised by the country’s Airspace Management Agency charging dollars from domestic airline operations. That would be similar to the CAA in South Africa charging pilots in dollars to renew licenses. There would be an uprising.
Nigeria also charges VAT on the purchase of aircraft which is a 1950’s policy and punitive. Operators flying OUT of Nigeria are hit with levy’s which is lunacy. It’s what happens when people who are politicians and greedy at that, are given a small feudal pool in which to wade and then drain it for their own jacuzzi back home. But before you think I’m being a tad harsh, some additional facts.
Nigeria’s former Aviation Minister, Stella Oduah, faces charges of corruption after she was involved in the purchase of two bullet-proof BMW’s priced at a whopping $800,000 each during her time in office. The fact that the cars were actually a measly $300,000 means that half a million dollars each was pure profit for… someone. While Oduah remains out of jail and fighting for her political life, the story has come to symbolise Nigeria’s wobbly governance issues and its extremely tenuous aviation industry.
But when there’s weakness, there’s opportunity. I would hasten to Nigeria with a bag full of dollars in investment capital and buy up the logistics of the country if possible. Jet fuel supplies are vital to any nation, so come on all you capitalists. There’s gold awaiting in the hills of West Africa.