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By Chinelo Obogo [email protected]
In the last four years, precisely from the first quarter of 2020 to the third quarter of 2024, Nigeria’s aviation sector has seen a 3.32% growth, a figure that accentuates both progress and ongoing challenges.
Daily Sun’s analysis delved into the forces behind the low growth, examining the role of government policies, industry investments and external factors that have shaped the sector’s trajectory.
A glaring point is that the sector faced turbulence during the period in review, which was caused by the COVID-19 pandemic in addition to the long years of inadequate infrastructure, aircraft shortage, forex scarcity, high cost of Jet A1, inconsistent policies, multiple taxation and insurance challenges.
The industry experienced a sharp decline in passenger traffic and revenue in 2020, with the most contractions observed in the second and fourth quarters. The first quarter of 2020 saw a contraction of 5.68%, followed by a decline of 57.38% in the second quarter.
However, despite a little recovery in the third quarter, it contracted again by 38.9% and by the fourth quarter, it was still struggling with a 51.69% contraction.
The economy of the sector began to improve gradually in 2021 as airlines resumed operations. In the first quarter of 2021, the sector still recorded a negative growth rate of -11.78%, but by the second quarter, there was a positive growth rate of 4.98% which continued in the third quarter, with a significant growth of 33.3%, largely supported by a bailout fund from the Federal Government. By 2022, the sector had almost fully recovered, although the third quarter saw a slight decline.
In the first quarter of 2023, the sector experienced a robust growth of 19.45%, followed by a more modest increase of 5.2% in the second quarter.
However, though the growth rate slowed in the third quarter, it still contributed significantly to the transport GDP. Despite a contraction of 11.47% in the second quarter of 2024 due to higher airfare costs and decreased politically-motivated travel, the overall average growth rate of the sector from 2020 to 2024 was calculated to be approximately 3.32%.
Daily Sun calculated the average growth rate from Q1 2020 to Q2 2024 by summing up the given quarterly growth rates (49.78) and dividing it by the number of quarters with specific figures provided by the NBS (which is 15 quarters), which brings the average growth rate of the sector within the time frame to approximately 3.32%.
Daily Sun had previously analysed Nigeria’s GDP report from Q1 2022 to Q3 2024 as released by the NBS and it showed that the transportation sector (which includes, air, road, rail, water transport, post and courier services), has not been among the top contributors to real GDP growth since Q1 2022. This suggests that while transportation is crucial for economic activity, its direct contribution to GDP growth has been limited. Real GDP is the value of a country’s goods and services produced in a specific period, adjusted for inflation or deflation. It is an important indicator of a country’s economic health.
The contribution of the transportation sector to Nigeria’s GDP declined in Q2 2024 compared to both the previous year and the previous quarter. It contributed 1.05 percent to nominal GDP, a decrease from the 1.35 percent recorded in the corresponding period of 2023, and lower than the 1.66 percent recorded in the first quarter of 2024. While the nominal growth was not adjusted for inflation and was less negative compared to the previous year, it was still below the positive growth rate of the previous quarter. For the real GDP, the sector contributed just 0.74 percent in the same quarter (Q2 2024), lower than the 0.89 percent recorded in the preceding year and lower than 1.18 percent recorded in the first quarter of 2024. This negative growth rate indicates a decline in output adjusted for inflation
Quarter-by-quarter analysis of Nigeria’s air sector’s growth from 2020 to 2024
Q1 2020: The air transport sector was significantly impacted by the onset of the COVID-19 pandemic, leading to a sharp decline in passenger traffic and revenue and contracting by 5.68%.
Q2 2020: The impact of the pandemic continued, with international and domestic flights being severely restricted, causing growth in the sector to decline sharply by 57.38 percent from 5.68 percent in Q1 2020. According to NBS, the decline was largely attributable to significantly lower levels of both domestic and international economic activity during the quarter, which resulted from nationwide shutdown efforts aimed at containing the COVID-19 pandemic.
Q3 2020: Some recovery was observed as restrictions began to ease, but the sector remained below pre-pandemic levels, contracting by a staggering 38.9%.
Q4 2020: The sector continued to recover slowly, with increased domestic flights and gradual resumption of international travel. However, it contracted by 51.69% in the fourth quarter of 2020, compared to its pre-pandemic average quarterly growth of over 10% as the COVID-19 virus continued to constrain its growth.
Q1 2021: The recovery trend continued, with more airlines resuming operations and an increase in passenger numbers. However, the real Gross Domestic Product growth rate of air transport in the first quarter of 2021 was -11.78%.
Q2 2021: The sector saw further improvement as vaccination campaigns began and travel restrictions were further relaxed, this helped the industry to record an increase to 4.98% from the Q1 contraction of -11.78%.
Q3 2021: Air transport activity picked up significantly, with airlines reporting higher passenger loads and increased revenue, pushing its growth to 33.3% after the Federal Government approved a N4.0bn bailout fund for the industry.
Q4 2021: The sector continued its upward trajectory, with airlines expanding routes and frequencies.
Q1 2022: The growth trend persisted, with airlines reporting strong performance and increased profitability. The sector also grew by a whopping 50.68 percent compared with a growth of -11.78 percent in Q1 21 and a contraction of 5.68 percent in the first quarter of 2020.
Q2 2022: The sector maintained its positive momentum, with continued growth in passenger traffic and revenue. It grew by 22.45% in the second quarter of 2022, a significant increase from the 4.98% growth rate in the same quarter of 2021 but lower than the 50.68% increase in the first quarter of 2022.
Q3 2022: The sector experienced robust growth, with airlines expanding their fleets and increasing flight frequencies2. Despite this achievement, it recorded a decrease of 35.1 percent, from 22.45 percent recorded in Q2, to 14.58 in Q3 2022.
Q4 2022: The sector continued to perform well, with airlines reporting strong financial results and increased market share and contributing N117 billion to the national GDP, which was about 4% of the GDP for that quarter
Q1 2023: The sector saw steady growth, with airlines focusing on enhancing operational efficiency. It saw a 19.45% growth compared to the same period in 2022 and this growth was driven by an increase in both domestic and international passenger traffic, with airlines airlifting 3,662,367 passengers during the quarter.
Q2 2023: The sector maintained its positive trend with a growth rate of 5.2% compared to the same period in 2022. This growth was driven by both domestic and international passenger traffic, with airlines onboarding 4,012,345 passengers during the quarter.
Q3 2023: The sector experienced a 4.37% year-on-year growth, contributing 13.8% to the total transport GDP. But despite this growth, it was the slowest among the transportation sub-sectors in this quarter, with rail and water transport growing at higher rates.
Q4 2023: In this quarter, the sector grew by 7.38% compared to the remarkable 26.23% growth it recorded in Q4 2022.
Q1 2024: The air transport sector facilitated exports valued at N55.32 billion, indicating significant growth and contribution to the economy and representing 0.29% of the total value of N19.167 trillion.
Q2 2024: In this quarter, the sector contracted by 11.47% and this was due to higher cost of airfares and a decrease in politically-motivated travel, which was more common in Q2 2023 during the general election. The country’s entire transportation sector also contracted in Q2 2024, contributing 1.05% to nominal GDP, down from 1.35% in Q2 2023.
