PAINS, ANGUISH OF FAAN CONCESSIONAIRES

By Mathew Adedayo I October 31, 2016

Lagos, Nigeria – It is an indisputable fact that the aviation industry in Nigeria is in dire straits.

This is a reflection of the inefficiency, lack of foresight, mismanagement and corruption in the Federal Airports Authority of Nigeria (FAAN), which have forced the Federal Government to demote, dismiss and asked many workers in the agency to refund some monies.




Also, the stifling economic recession that is forcing government to offer for sale some national assets, while some others have been marked for concessioning to private investors as a way of expanding government’s revenue base and make the assets much more efficient, is not helping the situation.

However, the decision to concession four of the country’s major airports in Lagos, Abuja, Port Harcourt and Kano has been generating a lot of interests in recent times.

While majority of the stakeholders agree that these four airports and others need to be taken away from the inefficient Federal Airports Authority of Nigerian (FAAN), which has been managing them, the modality for doing this is, indeed, the major bone of contention.

Precisely, the worry of many is the way FAAN mishandled the previous concessions in the aviation industry, which has led to series of litigations, primitive physical and psychological attacks on concessionaires and their agents, wasting of the concessionaires’ billions of naira borrowed from the banks and everything that is negative.

The pertinent questions are: Why is it that almost all the concessions carried out by this agency are enmeshed in controversies?

While it is a known fact that aviation is one of the most regulated sectors in the world with low profit margin, the inefficiency and mismanagement in FAAN have further contributed in no small measure to deal a terrible blow on investors, especially concessionaires, in the industry.

The ICRC Act 2005 defines infrastructure concession as “a contractual arrangement whereby the project proponent or contractor undertakes the construction, including financing of any infrastructure facility and the operation and maintenance thereof and shall include the supply of any equipment and machinery for any infrastructure and the provision of any services”.

So, in essence, when a concessionaire takes a plunge to assist the government, he or she is staking everything, including his/her reputation.

The behaviour of FAAN and many other government agencies is clearly an indication of how hard it is to do business in Nigeria. For instance, trust and adherence to agreements, which are the most important ingredients of any business, are absent in most of the agency’s dealings with its investors and concessionaires.

Agreements willingly signed that are supposed to be sacrosanct are flouted with impunity. Court judgements validly obtained are ignored in a demonstration of a slap on the face of the rule of law. Surely, no private investor will want to do business in such kind of hostile environment, especially with an agency like FAAN

There have been various concessions in the aviation industry, which either never saw the light of the day, or which were completed amidst serious controversy. This is inflicting a lot of pains and anguish on the concessionaires. For instance, the concession between FAAN and Messrs Maevis Nigeria Limited to shore up the authority’s revenue base through the Airport Operations Management System (AOMS) was a classic case of a concession gone awry.

In it, FAAN, using all the weapons in its arsenal and the might of a federal agency, and in the crudest of manner, messed up the concession, even after Maevis had invested billions of naira to buy and install equipment for the job.

Officials of the government agency went physical to eject those of Maevis from the Murtala Muhammed International Airport (MMIA), Lagos, after FAAN was floored in court, just to frustrate the concession.

In the same vein, the same agency engaged billionaire businessman cum politician, Chief Harry Akande’s AIC Hotels Limited in a battle of wits over a parcel of land leased to the company to build an international hotel around MMIA under a concession agreement in 1998.

And as usual, despite a court order, officials of the agency went physical with those of AIC to forcefully recover the land from the company. In fact, they chased away the company’s workers from the land and seized some of their tools.

All the concessions FAAN had embarked on, such as that of its car parks, promo world (adverts), toll gate at NAHCO, cargo terminal and others have ended in serious controversies and litigations where various courts have asked the agency to pay billions of naira in damages to the concessionaires.

But, one concession that has remained the most controversial of all till date is that of the Murtala Muhammed Airport Terminal Two (MMA2) between FAAN and Bi-Courtney Aviation Services Limited (BASL) signed on April 24, 2003.

Although MMA2 remains the first successfully executed concession in the country, the terminal has been battling for survival with its landlord (FAAN) since it began operation on May 7, 2007. In fact, the BASL concession has witnessed the highest number of court cases among all the concessions, all won by the concessionaire.

All the concessions FAAN had embarked on, such as that of its car parks, promo world (adverts), toll gate at NAHCO, cargo terminal and others have ended in serious controversies and litigations where various courts have asked the agency to pay billions of naira in damages to the concessionaires

However, despite all this, FAAN appears to have remained unreceptive to the participation of the private sector, as it has consistently reneged on all the agreements it signed with the concessionaire of MMA2 and other concessionaires in the aviation industry.

For instance, the authority has taken over the GAT, which was part of Bi-Courtney’s concession, and has been competing for passenger traffic with the concessionaires, while the airlines operating from there have been dealing exclusively with FAAN, despite the reaffirmation through various court judgements of the concessionaire’s claims by both the Federal High Court and the Court of Appeal.

Although dispute resolution mechanisms are important element in infrastructure concession and are always embedded in the various concession agreements in the aviation industry, FAAN always disregards the decisions of such arbitrators with impunity.

This is shaking the confidence of private investors (concessionaire, financiers and contractors) and will continue to discourage them from participating in concessions in the aviation industry. Because of this kind of attitude, it is obvious that disputes arising from signed agreements with FAAN and the Ministry of Aviation would not be resolved fairly and efficiently due to vested interest.

The behaviour of FAAN and many other government agencies is clearly an indication of how hard it is to do business in Nigeria. For instance, trust and adherence to agreements, which are the most important ingredients of any business, are absent in most of the agency’s dealings with its investors and concessionaires.

Agreements willingly signed that are supposed to be sacrosanct are flouted with impunity. Court judgements validly obtained are ignored in a demonstration of a slap on the face of the rule of law. Surely, no private investor will want to do business in such kind of hostile environment, especially with an agency like FAAN.

No wonder, the World Bank in its yearly report in which 189 countries’ economies are ranked on their ease of doing business, titled, “Doing Business”, ranks Nigeria number 169th this year. A high ease of doing business ranking means the regulatory environment is more conducive to the starting and operation of a local firm. But in Nigeria, almost all the indices needed to do business with ease are absent, an evidence of systemic failure and lack of capacity of government agencies.




In the ranking, Nigeria with its massive endowments is in the group of countries at the bottom of the ladder, including Eritrea (189th), Libya, South Sudan, Venezuela, Central African Republic (CAR), DR Congo, Chad, Haiti, Angola, Equatorial Guinea, Liberia, Guinea Bissau, Afghanistan, Congo, Syria, Bangladesh, Timor Lester, Cameroon, Djibouti, Yemen and Niger.

Sadly, most of these countries are war-ravaged and are already failed states.

So, for government to have a seamless concession of the four airports it is putting up for private investors, it must assuage the pains and anguish of concessionaires already bruised by the indiscretion of its agency and resolve all the issues cobwebbing the progress of the sector.

This is the only way to boost the confidence of would-be investors who are ready to do business with it despite the biting economic hardships in the country.

Adedayo, a quantity surveyor, sent in this piece from Benin.