The
suspension of Arik Air’s operations on Tuesday, September 13, 2016 is
more evidence of how the Muhammadu Buhari administration is destroying
the aviation industry, and the Nigerian economy.
It is the third major Nigerian airline
that is suspending operations in the past month and and one of a string
of airlines affected by the business conditions of the aviation industry
in the past 15 months.
It is very telling that since the
commencement of this administration, the aviation industry has been
plagued by low passenger traffic, scarcity of aviation fuel (high prices
of aviation fuel where it is available) and heavy taxes.
Arik Air’s suspension of operations, due
to an inability to renew its aircraft insurance, is an indication of
the cumbersome processes that mar the aviation industry and various
other aspects of doing business in Nigeria.
It is important to note that some of
these processes pre-date this administration. However, Nigeria currently
wallows in the middle of a recession into which this administration has
plunged us and as such it bears the responsibility of resolving issues
relating to these processes.
Indeed, several of these issues are
within government’s control and it can take several steps to mitigate
the effects of these issues. It will be in the best interest of the
aviation industry, and of all Nigerians, for government to resolve these
issues as a step towards boosting passenger traffic and reflating the
aviation sector.
One of such issues relates to the heavy
taxes imposed on airlines plying the various local and international
routes in Nigeria. For instance, as at 0700hrs this morning, the
cheapest flights available on the Abuja-Lagos route were:
– Airline: Dana Air
Date/Time: 1955Hrs, 14/09/2016
Price: NGN 23,400 (7,759)
Taxes: Vat N732
Sales Tax N732
Govt Surcharge N6295
Representing 33.1% of the total cost of the ticket
– Airline Medview Airlines
Date/Time: 1400hrs, 14/09/2016
Price: N24650
Taxes: N13150
The airline did not give a breakdown of what constitutes these taxes.
Representing 53.3% of the total cost of the ticket
On the cheapest flight on the popular Lagos-London route:
– Airline: Arik Air
– Airline: Arik Air
Date/Time: 1200hrs, 15/09/2016
Price: N 299,726
Taxes N 91,622
The airline did not give a breakdown of the components of these taxes
Representing 30.5% of the total cost of the ticket
(This is based on the assumption that
Arik Air can resolve its issues in time to enable it conduct this flight
according to schedule).
These examples of ticket prices show how
high the taxes levied on airline operators in Nigeria are and show that
these taxes contribute significantly to the skyrocketing costs of
flights on local and international routes in Nigeria.
Another issue is the high cost of
aviation fuel. The “devaluation of the Naira” has led to an increase in
the price of aviation fuel from N110 per litre to as much as N400 per
litre.
When combined, these issues have
resulted in high ticket prices which have in turn resulted in low
passenger traffic as people seek alternative means of transportation
elsewhere.
In this situation, it would be wise for
the Buhari administration to consider implementing a number of reforms
designed to increase passenger traffic which would in turn increase
spending within the sector which will in turn reflate the sector. These
include:
– A reduction in the number and
percentage of taxes imposed upon airlines in the sector. Ghana has
implemented a reduction in taxes in a bid to take advantage of the
Nigerian situation and drive traffic towards Ghana. This has resulted in
several airlines moving their operational bases to Ghana.
– Working with oil marketers to ensure
the availability and lower prices of aviation fuel. A reduction of these
costs would enable lower costs of operations which would in turn result
in lower prices and increased consumer spending within the sector.
Again as an example, Ghana has just reduced prices of aviation fuel. As a
result several airlines fly to Nigeria via Accra where they refuel for
flights into and out of Nigeria.
The Buhari administration may also
consider the option implemented by the Obama administration in the
United States in 2008/09 where the US government gave financial bailouts
to airlines reeling from the negative effects of a global financial
crisis. If it decides to take this option, the Buhari administration
must clearly stipulate conditions for accessing such bailouts which must
include tenor of the loans and conditions for payback.
In conclusion, the Buhari administration
can no longer sit back and watch our aviation sector crumble the way it
has sat back and watched much of our economy crumble.
It bears the responsibility of putting
together a significant set of reforms that make it easier and cheaper to
conduct business in Nigeria than elsewhere in the region. Only the
implementation of systemic reforms, and not lip service, would ensure
that we bounce back from this recession.
God bless Nigeria.
Deji Adeyanju is director of Social
Media of the People’s Democratic Party. He is also a former aide at the
Presidency. He tweets from @adeyanjudeji.
The opinions expressed in this article are solely those of the author.
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