NIGERIA: FG Blamed For N1.825trn Annual Loss To Offshore Aircraft Repairs

Stakeholders have blamed the Feder­al Government for the annual loss of at least $2.5 billion (about N1.825 tril­lion) in the maintenance of aircraft to foreign MRO facilities.

They are also worried that two years after the Federal Government announced the selection of A J Wal­ters Aviation Limited, Egypt Air Maintenance & Engineering (EGME) and Glovesly Pro-Project Limited as the preferred bidders to establish the maintenance, repair and overhaul (MRO) centre, the details of the proj­ect have remained sketchy.

The players in the industry also accused the government of being the major challenge confronting the establishment of MRO in the country, saying that the government through its policies was scaring away potential investors.

Sen. Hadi Sirika, the Minis­ter of Aviation, had in October, 2015 unveiled a six-point agenda of the Federal Government to the stakeholders in the Nige­rian aviation sector, among which was the establishment of MRO facilities for airlines in the industry.

Sirika had said that the selec­tion of the three companies as preferred bidders followed the evaluation of the proposals sub­mitted by bidders in response to the request for proposals for the MRO centre.

The minister said agree­ments would be signed between the preferred bidders and the Federal Government of Nige­ria and implementation of the projects were expected to com­mence by the third quarter of 2021.

Sirika had stated that Egypt­Air Maintenance & Engineer­ing (EGME) was a leading MRO in the Middle East and Africa offering maintenance, repair and overhaul (MRO) services to commercial aircraft, engines and components, with a cus­tomer base of over 81 airlines, while the Glovesly Pro-Project Limited was an indigenous and integrated company incor­porated under the laws of the Federal Republic of Nigeria.

The company, he had said, had the capacity and the capa­bility to contribute to the chal­lenging and growing require­ments in the aviation industry, communication, power sector, building construction, civil en­gineering, road construction and general procurement.

The minister in January 2021 had promised that the MRO facility would be sited at the Nnamdi Azikiwe Interna­tional Airport, Abuja, adding that it would also run through public private partnership (PPP) using the build, operate and transfer model.

According to him, the facil­ity would have the capacity to service both narrow body (jet and turboprop) and wide body aircraft.

But, almost eight years after the promise by the minister, the project is yet to take-off.

Stakeholders in the sector in an interview with Daily Inde­pendent emphasised that about $2.5 billion capital flight would have been saved if the country had MRO facilities that could adequately cater for all aircraft types operating in Nigeria.

This loss includes taxes to government’s agencies, man­power development and em­ployment generation.

To carry out C-check on Boeing 737 aircraft or its cate­gory, airlines expend at least $1.8 million. The C-check is carried out on aircraft every 18 months.

The stakeholders insisted that Nigeria’s potential and capacity in the global air trans­port industry was being grossly underutilised and blamed it on the Federal Government in al­most eight years.

Capt. Samuel Caulcrick, the former Rector of the Nigerian College of Aviation Technolo­gy (NCAT), Zaria, said that the Nigerian economy supports the sustainability of the airline business, but regretted the lack of suitable and capable local MRO for retaining the resourc­es in the country.

Caulcrick explained that due to the lack of capacity at home, the Nigerian airlines export the heavy maintenance of their equipment to foreign countries, thereby creating businesses, employment and revenue generation to those countries.

He noted that the absence of the facility in Nigeria also put more pressure on foreign ex­change by local airlines, leading to the dwindling value of naira against most currencies.

He added: “So, it is better to let it stay within the economy. That is one argument by which the MRO supports the economy. This economy should not lose to other economies after creating that business.

“Also, MRO supports the naira in the pockets of all of us. Once the aircraft is taken out, there is the cost of labour that would be paid by the air­line. Instead of the airlines to save that it earned in Nigeria, the airlines go to the foreign exchange market and start looking for dollars.

“The manpower too is no longer local and the airlines go to the foreign exchange market, looking for dollars, thereby fur­ther putting additional pres­sure on the naira. This affects our economy and the Nigerian market. Now, let us look at the personnel themselves, being a formal employment that means it is pay as you earn (PAYE). This means locating the MRO in Nigeria, the government earns personnel tax, which another country would now earn. This is why the MRO is very key to any economy.”

Caulcrick was, however, re­luctant to put a figure to annual loss of revenue by the Federal Government on the absence of indigenous MRO, but said billions of naira may be lost to this yearly.

For instance, he said Nige­ria was robbed of local labours, personnel, tax revenue and experience by the technical experts.

He, however, said that Ni­geria could attract foreign and local investors in the MRO business through policy for­mulation.

“For instance, the Nige­ria Civil Aviation Authority (NCAA) can say it would not renew an existing air operator’s certificate (AOC) or issue an AOC to an intending operator without a local MRO identified in the application form. The government can give them a timeline because this could take up to three years to accomplish.

“Once you do that, just leave it to the private investors because they know there is an investment created for them. Once an investor knows that his business is being protect­ed, then, they will be willing to invest in the industry. A policy will naturally create a market. That is how China developed today through policy and law,” he said.

Besides Mr. Olumide Ohu­nayo, the Head, Research and Corporate Travel, Zenith Consult and Travels, said the planned MRO project failed due to the inflexibility of the Federal Government.

According to Ohunayo, the Federal Government perceived the project as exclusive, while also wanting to participate and invest in it.

He said that this approach made the project fail like sev­eral other projects the govern­ment had planned to embark upon in almost eight years.

He said: “Once you are com­peting, there is every tendency for you to sacrifice objectivity, just as it has happened with the Nigeria Air project where the government gave some in­vestors 15 years moratorium taxes, which means the inves­tor would sell tickets in the do­mestic market without paying taxes.

“The government should simply stand down and accept that it has not done well in this aspect of the industry. I know about two or three private in­vestors that made intentions to be part of the MRO, but were frustrated by the government with unbelievable demands and requests.”

He explained that some func­tions of NCAA had been ceded to the Minister of Aviation, arguing that this was responsi­ble for some of the delays wit­nessed in project developments in the sector over the years.

Ohunayo advised the gov­ernment to expunge itself from policies made for the industry, while allowing investors to in­vest in the sector.

He lamented that Nigeria was losing forex, manpower development, taxes and failure of other operators to bring in their aircraft for heavy main­tenance and technical stop­over in the country to other nations, especially within the continent.

“I think we are losing a huge sum of money and this could run into billions of dollars, if you put the entire value chain together, considering the tax­es that would be paid to the agencies and other sectors of the country, the Nigerians that would be employed, infra­structure that would have been developed in manpower from the scratch, the machinery that would be brought in and built upon, we are looking at billions of dollars that would have in­creased our country’s Gross Do­mestic Product (GDP)”, he said.

Grp. Capt. John Ojikutu (rtd.) said that the plan to build an MRO depot by the govern­ment has been on the cards since the 1980s, but policy sum­mersaults had not made it come on stream.

Ojikutu emphasised that almost 10 years ago when the energy for a new MRO was renewed by the government, nothing tangible was on the table on the project.

He expressed skepticism that the project would be real­ised without the government restricting itself to the regula­tions of the aviation services alone and allow for full private operators or partnership with private operators.

Ojikutu maintained that the failure of the government to establish an MRO for the coun­try despite the many promises indicated that the government lacked the proper understand­ing for the policy.

“Cost of aircraft offshore maintenance is and has always been exorbitant. It ranges be­tween $500,000 and $2 million operating on the required level of maintenance. If you imag­ine about 50 aircraft in a year for whatever level and at an average of $500,000 to $1 mil­lion for an aircraft, you might be looking at a total average of $25 million to $50 million,” Oji­kutu said.

 

 

Source: independent.ng