TSA: Fresh panic as FG demands 50% of aviation agencies revenue

The decision of the Federal Government to increase the contributions of aviation agencies to the Treasury Single Account, TSA, from 40 to 50 per cent has triggered fresh panic among operators.

Before now, there had been intense debates among experts over the government’s motive to force cost recovery agencies in the air transport sector into the TSA policy that demanded a 25 per cent deduction from their proceeds that later rose to 40 per cent.

Currently, the uproar over another 25 per cent increment in their remittances has taken an unprecedented twist, leading to panic among industry stakeholders.

Early this year, Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, in a circular dated December 28, 2023, had directed parastatals classified as “super agencies” to remit 50 per cent of their Internally Generated Revenues, IGR.

Edun stated that the development was to improve revenue generation, fiscal discipline, accountability, transparency in the management of government financial resources and the prevention of waste and inefficiencies.

Barely six months after the policy became effective, Vanguard findings reveal that air transport may be under threat as the Federal Airports Authority of Nigeria, FAAN, Nigerian Airspace Management Agency, NAMA, and Nigerian Civil Aviation Authority, NCAA, were possibly cash-strapped and the long-term implications could be dire.

The development has even created a restive situation among unions in the industry, as they have resolved to embark on protest on the issue tomorrow.

FAAN

Recently, Managing Director of FAAN, Mrs Olubunmi Kuku, lamented that though the agency is saddled with the responsibility of managing 22 airports across the country, the unviability of a whopping 19 airports and the current structure of contributing 50 per cent of its earnings into federal coffers is a major challenge to FAAN’s operation.

Checks by Vanguard also revealed that capital-intensive projects, like upgrading of terminals, provision of airfield lighting, acquiring of security equipment and periodic runway maintenance among others are not only critical to the smooth running of airports in line with the stipulations of the International Civil Aviation Organisation, ICAO, but requires a vast amount of money. With the paucity of funds, it may be a herculean task for the country’s airport manager to consistently execute.

NAMA

On countless occasions, Managing Director of NAMA, Engr Farouk Ahmed, had appealed for a reversal of the 50 per cent deduction, saying the agency’s ability to maintain advanced safety-critical equipment, recruit and train personnel to meet local and international safety standards as outlined by ICAO were hugely dependent on the resources at its disposal.

Not long ago, Farouk, who spoke at the agency’s headquarters in Abuja, bemoaned: “The safety of our airspace is paramount, and the current financial model is unsustainable. 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.”

According to him, the current practice and net estimate of IGR are insufficient to cover recurrent and capital expenditures of NAMA.

NCAA

Although not much has been heard from the Acting Director General of NCAA, Captain Chris Najomo, on the issue, Director of Public Affairs and Consumer Protection of the NCAA, Mr Michael Achimugu, had called for the agency’s exemption.

Achimugu, who termed the 50 per cent remittance worrisome, stated that it is affecting NCAA’s ability to effectively oversee the aviation industry.

According to him, the NCAA shares funds with other entities after remitting to government, leaving it with only 28 per cent of recovered costs, hindering its ability to oversee safety oversight and regulation.

What do experts say?

Worried by the litany of complaints springing from these agencies, National President of Air Transport Services Senior Staff Association of Nigeria, ATSSSAN, Mr Ahmadu Illitrus, told Vanguard that a lot of damage is being done to FAAN, NAMA and NCAA as they are struggling to meet overhead costs.

According to him, operations, training of personnel and surveillance of airports among others are in distress and require urgent attention.

Illitrus said: “We are in the business of providing services for civil aviation to enable its development in Nigeria. Most of our services are based on cost recovery. So, it’s not really about profit-making. That is why we have written that aviation agencies should be exempted.

Mishap

“NAMA needs money for procurement of air navigation facilities to enable safe navigation of flights into and outside of Nigeria. We need a lot of resources to procure and maintain these facilities. FAAN needs a lot of money to invest in airport infrastructure.

“If government can give exemptions to other institutions in Nigeria, why not civil aviation? You’re talking about safety and security of passengers. Once the aircraft is in the air, if anything happens, nothing can be done. Nobody prays for any mishap.

“That is why countries have taken up the decision to massively fund their civil aviation authorities and institutions so that they can render the best services to both domestic and foreign operators. Today, Nigeria is in category two of the ICAO Council.

‘’The reason Nigeria is in Category Two is the fact that it contributes massively to civil aviation infrastructure in the African region and the rest of the world.

“A lot of aeroplanes fly over Nigeria. Without these infrastructures in place, air navigation, which is the global aim of harmonising or providing seamless infrastructures to support the industry, will not be achieved. The government has not considered all this and is taking the money that should be ploughed back into the development of infrastructure for the industry, training of qualified personnel.

Aircraft falling off skies

“The common saying is that what goes into aviation should stay in aviation so that you continue to develop infrastructure that will support modernization and new technologies that come into the industry. Why are they taking money from aviation into other places? Financially, they are putting the agencies in harm’s way.

“The government should reconsider its decision because a lot of these agencies’ operations are suffering, one of which is surveillance. It is suffering. Although government will continue to see nothing wrong until things start going wrong. Nobody wishes for us to get back to the days when aeroplanes were falling off the skies. I think we should be proactive enough to prioritise or attach importance to certain industries.”

Unique practice

Commenting, Principal Managing Partner at Avaero Capital Partners, Sindy Foster, argued that it might have battered Nigeria’s reputation in aviation, noting that she had never heard of the practice anywhere in the world.

Foster told Vanguard that aviation industry service providers such as airports, regulators and air traffic control typically provide services on a cost recovery basis.

She said: “Regulators are meant to be independent of government and as a result are required to generate their own revenue. Airports globally generate revenue from passengers and non-travelling customers who frequent the non-aeronautical airport facilities at departures and at arrivals.

“In Nigeria, the primary customers of the agencies are air service operators, both scheduled and non-scheduled operators, who in turn will pass on increased costs to their passengers. They are also likely to target vendors at the airports with increased charges, who will all pass on additional costs to their customers.

Operating costs

“Due to the elasticity of demand when prices increase, this will likely result in fewer passengers travelling overall, which means less revenue for airlines, airports and eventually the agencies.
So, in the end, the entire system will suffer. Reduced revenue (the minus 50 per cent, plus the loss of revenue due to fewer overall passengers), will mean less money available for operating costs such as maintenance, salaries and employee benefits among others.

“All the agencies should reduce unnecessary overheads, waste and duplication to reduce the excessive cost burden on airlines and passengers. More transparent financial reporting and financial accountability will be beneficial.

“If no restructuring is done, the burden will fall back on the Federal Government to fill funding gaps which will appear for maintenance and repairs, as well as capital investment for end-of-life replacement of critical infrastructure.

“It is hard to imagine Nigeria’s aviation reputation getting worse than it currently is. We had a positive opportunity with the clearing of blocked funds, but things have since got a lot worse for Nigerian airlines. As we are already in a hole, it’s not a good time to start digging.”

Earnings

Former commandant of the Murtala Mohammed International Airport, Lagos, Group Captain John Ojikutu, retd, stated that no agency should be mandated to give 50 per cent of what they were earning without taking into account how much they generate.

Speaking to Vanguard, Ojikutu said: “If you take 50 per cent of their earnings, will the balance of 50 per cent be sufficient to sustain operations? Don’t forget that they are into safety operations.

If I don’t know you are getting a million naira and I say I need 50 per cent of your earnings, it makes no sense. You must be sure that the agencies’ balance is sufficient to do what they want to do before you deduct from their proceeds.

“If you can ascertain how much they earn, then the 50 per cent can even drop to as low as 10 per cent or increase. If you don’t know their earnings and you make demands, it will impact them and the implications are always there. For instance, FAAN is supposed to be doing regular periodic maintenance and we also don’t have a security fence in Lagos airport, what we have is a perimeter fence.

Investigation

Aviation needs to be investigated. NAMA, on its part, deals more with safety than any other agency. And unlike other agencies, NAMA is a 24-hour job. They are at the control towers and they have more safety equipment to manage than anybody.

“For instance, the radar and radio that are used in staying in contact with the aircraft from take-off to landing. They need money to sustain safety, which is why government must find out how much money they make before asking for remittance. Safety is neither short-term or long-term, it is standing. It’s a standing law that should be abided by every day and every minute.”

Air transport not in danger — Keyamo

Reacting, Mr Tunde Moshood, Special Assistant on Media and Communications to Minister of Aviation and Aerospace Development, Mr Festus Keyamo, noted that safety is one of Keyamo’s five-point agenda and will not be compromised, despite the 50 per cent TSA policy.

Moshood said: “NCAA, NAMA and FAAN have appealed to the government to remove them from the TSA policy.

Aside from that, the agencies are exploring other means of increasing their fortunes. The minister is trying to speak to the government to exempt these agencies. Once there is an update on it, everyone will know. He is also intensifying efforts to ensure that the fortunes of the agencies are upgraded by all means. Safety is first in the minister’s five-point agenda, it remains sacrosanct.”