Airspace Agency suspends plans to raise charges
The deduction of internally generated revenue from its aviation parastatals has created a severe nancial strain, crippling the agencies’ ability to execute their strategic plans and undermining their operational effectiveness. The revenue remittance into the Consolidated Revenue Fund is in line with Section 22 of the Finance Act 2020. The Muhammadu Buhari administration doubled the remittance rate from 25 per cent to 50 per cent two years ago, a move that has had far-reaching implications. The government agencies in all sectors of the economy are expected to submit the designated payment annually. Industry insiders, speaking on condition of anonymity, expressed outrage and disappointment at government’s indifference to the struggles of some agencies, which are still unable to meet their obligations to the aviation industry despite generating revenue. They noted that while some agencies are reporting impressive figures from the IGR, driven by the volatile nairaFarouk MD, NAMA Capt. Umar Ahmed Prof. Charles Prof. Charles Anosike Anosike DG, NIMET dollar exchange rate, they are simultaneously struggling with soaring operational costs, overheads and other expenses, which are offsetting their revenue gains. Burdened by the weight of their statutory responsibilities and the hefty 50 per cent IGR remittance, the Federal Airports Authority of Nigeria, Nigerian Airspace Management Agency and the Meteorological Agency, sources hinted, have petitioned the government multiple times, requesting relief in terms of an exemption or a significant decrease in the revenue deduction. Before the Finance Act’s implementation in 2020, the agencies had requested a four-year tax exemption period to allow them to prepare for the policy’s introduction and its potential impact on the industry. The agencies also ramped up their political lobbying efforts, targeting top government officials, including the Office of the Accountant General of the Federation, National Assembly members and Office of the Chief of Staff to the President to advocate for a more lenient and exible implementation of the relevant Finance Act provisions.
The government has remained unresponsive to their repeated pleas and appeals, ignoring their concerns and request for relief. According to the Managing Director of NAMA, Alhaji Ahmed Farouk, the agency is experiencing significant financial hardship due to the implementation of the 50 per cent revenue deduction, which has substantially reduced its financial resources. Farouk revealed that the deduction has had a devastating impact on the agency’s revenue, slashing it by over 50 per cent at a time when investments in infrastructure and personnel development are increasingly urgent. He lamented to aviationmetric.com. He added, “The 50 per cent revenue deduction hinders our ability to maintain and upgrade critical infrastructure, such as our obsolete surveillance systems, which are over a decade old and urgently need replacement. Without adequate funding, we cannot meet the high costs of procuring and maintaining essential equipment or ensuring the continuous training of our technical staff, which is vital for maintaining safety standards.” The NAMA boss also expressed disappointment with the current revenue-sharing formula in the industry, which he believed unfairly favours other agencies, leaving NAMA with only 22 per cent of the five per cent passenger service charge, contract, charter, and cargo sales charges. The arrangement, he regretted, did not take into cognisance NAMA’s significant capital investment needs and overwhelming responsibilities, as it strives to meet its national and international obligations. He continued further, “Restoring the full revenue allocation to NAMA is quite essential. Doing so will enable us to address the critical needs of our infrastructure, enhance operational efciency, and ensure the continuous training of our safetycritical personnel. With adequate funding, we can fulfill our mandate to provide safe and reliable air navigation services across Nigeria’s airspace. “By reversing the 50 per cent revenue deduction, we can significantly enhance air safety, ensuring that Nigeria’s skies remain safe and maintain high safety standards. We urge all stakeholders to support this necessary change for the future of our aviation sector and the safety of the flying public.” In an effort to alleviate its difcult circumstances, NAMA on July 26, 2024 announced its intention to significantly increase en-rounte navigational charges for flights from N2,000 and N6,000 to N18,000 and N54,000. Additionally, the agency raised the fee for extending hours of service to airlines from N50,000 to N450,000, a staggering 800 per cent increase. If the Agency’s plans go ahead, the new charges will come into effect on September 1, 2024, inevitably leading to an increase in airfares as a direct result of the hike. The Minister of Aviation and Aerospace Development, Mr. Festus Keyamo, however, on July 29, 2024 directed NAMA to suspend its plans, citing the current economic challenges faced by Nigerians. The Minister emphasised the need for further consultation before implementing any changes. It is déja vu in FAAN. According to a reliable source close to the Authority’s headquarters, the agency has disbursed nothing less than N60bn to the government since the start of 2024, as part of the revenue sharing agreement. This has led to considerable financial constraints on the agency’s operations and development projects. The deduction, as the source pointed out, is severely impacting the resources of FAAN responsible for managing 22 state-owned airports and overseeing all aspects of airport operations. The agency is grappling with numerous challenges, including rising overhead costs, infrastructure deficits in some airports, security and safety concerns, inadequate training and manpower shortages, all of which require substantial funding. “The deduction is disrupting some plans of FAAN, both aeronautical and non-aeronautical. How will the government achieve its vision of transforming the country into a regional and continental aviation hub with the present state of infrastructure? Not that we have not made some landmarks in the industry, but much needs to be done, without fnancial distractions, to achieve our dreams,” the source added.
The reality on ground gives credence to the claim. While the international airports in Lagos, Abuja, Port Harcourt, Kano and Enugu have shown remarkable growth, FAAN needs to invest heavily in technology and enhance passenger experience at its other managed airports to unlock their potential. The endeavour will require signicant funding running into billions of naira. Presently, the Authority’s revenue is dominated by income from aeronautical activities such as landing fees and passenger service charges, which account for about 74 per cent of its revenue. Unfortunately, only the airports in Lagos, Port Harcourt and Abuja have been featuring well on the Authority’s revenue record and contribute largely to the sustenance of FAAN. The Managing Director of FAAN, Mrs. Olubunmi Kuku, conrmed on July 9, 2024 that only three of the 22 airports the Authority manages are protable. She said FAAN is crosssubsidising the other 19 airports and will continue to do so for some of the new airports being developed. “We also have about six or seven airports that are either owned by state governments or private individuals or entity which we also support with either aviation security or fire service and rescue services,” she added. To enhance the viability of the airports, Kuku disclosed that FAAN is engaging with international organisations like the International Air Transport Association and the Ministry of Aviation and Aerospace Development, to develop new routes and make some of the airports transit hubs. The strategy aims to optimise existing infrastructure and leverage them for trade facilitation and economic growth. However, looking at the magnitude of work to be undertaken at the airports, Kuku said the N23.1bn recently allocated to the Authority by the government for rehabilitating and repairing airport facilities nationwide is grossly insufficient. While still striving to survive under the precarious situation, the remittance of 50 per cent to the coffers of government, Kuku said is a major challenge. She is, however, optimistic that something positive will be done to alleviate the problem as the Authority is in discussions with various arms of government to seek some relief. Although the Olubunmi Kuku’s management has called all hands on deck to put the agency on a solid nancial foundation and meet its obligations, the 50 per cent revenue deduction may jeopardise the Authority’s short-term and long-term plans, potentially derailing its immediate and future goals if drastic measures are not taken by government to remedy the situation. Aviation experts also urged the government to conduct a comprehensive review of the burdensome revenue cut, considering the interest of all stakeholders and the overall well-being of the aviation industry. They further cautioned the government against viewing airports and the aviation industry as revenue sources or cash cows. Instead, they advocate for allocating sufficient resources to ensure safety, security and facility upgrades to international standards, engendering seamless operations and facilitations for all stakeholders in the industry, including air travellers. The effort will further unseal the full potential of the sector and that of tourism, attracting foreign investment, creating jobs, and driving economic growth.
The deduction is disrupting some plans of FAAN, both aeronautical and non-aeronautical. How will the government achieve its vision of transforming the country into a regional and continental aviation hub with the present state of infrastructure? Not that we have not made some landmarks in the industry, but much needs to be done, without financial distractions, to achieve our dreams.
