FG’s airport concession plan stalls over N120bn debt

By Chinelo Obogo            [email protected] 09051862508

Ongoing plans by the Federal Government to concession four international airports may not be actualised before the administration of President Muhammadu Buhari elapses, as aviation unions have mandated the Federal Government to clear pension arrears of former and present staff of the Federal Airport Authority of Nigeria (FAAN).

The aviation unions which have strongly opposed the concession even with the Outline Business Case (OBC) recently made open to the public, expressed disappointment at the type of concessioning envisioned by the Transaction Adviser.

An industry source revealed to Daily Sun that leaders of the Air Transport Senior Staff Association of Nigeria (ATSSAN), the National Union of Air Transport Employees (NUATE) and the Association of Nigeria Aviation Professionals (ANAP) have resolved to ‘speak with one voice’ to insist that the rights of workers must be protected before any concession is implemented.

Union leaders met recently with the Minister of Aviation, Hadi Sirika in Abuja, where they tabled their demands, which include that severance benefits for all FAAN staff must be paid along with pension arrears owed former and present staff of the agency currently estimated at over N120 billion must be cleared.

An agency source disclosed that this figure does not include accrued rights from 2017 to date which, if valued, may raise the total amount to N150 billion.

Daily Sun gathered that FAAN generates an average of N70 to N75 billion annually and remits an average of N1 billion monthly into the Federation Account while monthly salaries for the agency’s 8000 staff currently stands at over N2.3 billion..

Daily Sun also gathered from industry sources that at the inception of the Pension Reform Act in 2004, the accrued rights of staff stood at N28.3 billion. But the agency didn’t transit to the scheme at the time because it didn’t have the funds. The implication of this is that all current staff of FAAN have no pension in their accounts unlike their counterparts in other aviation agencies since their deductions were not remitted into their PFAs.

When the remittance of the Contributory Pension Scheme (CPS) started in 2007, the agency still didn’t transit but continued paying retirees about N500m monthly from its Internally Generated Revenue (IGR), which violates the Pension Act. By 2012, however, PENCOM insisted that FAAN should carry out another accrual valuation and when it was done, the amount had increased from N28.3 billion to about N84.3 billion. And in 2015, it rose to N103.5 billion as more staff had been employed, people were promoted and salaries were increased.

Aviation road map

The aviation roadmap was approved by President Muhammadu Buhari on October 18, 2016 and it includes the establishment of a National Carrier, Airport Concession, Maintenance , Repair and Overhaul Center ( MRO), Aviation Leasing Company, Agro- Allied Cargo terminals , as well as Aerospace University, etc. The roadmap projects are being undertaken through Public Private Partnership (PPP) and the Ministry has been working very closely with Infrastructure Concession Regulatory Commission (CRC) to ensure we have a credible and transparent process.

Among the terminals up for concession are the international and domestic wing of the Nnamdi Azikiwe Airport, Abuja and Aminu Kano Airport, Kano. The international wing of Port Harcourt Airport, Omagwa, Mallam and Murtala Muhammed Airport, Lagos including the cargo section.

Already, preferred and reserved bidders for Abuja, Lagos and Kano have been selected but before then, Sirika had facilitated trips for some of the union leaders to countries like Brazil and Turkey to understudy how their airport concession and privatisation worked. While the unions are insisting that pension arrears be paid off and all staff of FAAN be paid severance benefits, Daily Sun gathered that the ministry is proposing to pay off workers currently working at the specific airports to be concessioned.

One of the major reasons the unions gave for insisting on these demands is because the airports to be concessioned are the major money spinners for FAAN and in the OBC, the concessionaire is expected to take 60 percent of revenue generated, while the agency would be left with 40 percent to cater for its over 8000 staff. Out of the 40 percent, the agency is still expected to pay 25 percent of its IGR to the Federal Government.  However, a sore point for the ministry is the lack of funds to pay pension arrears and the Minister is said not to be confident that the Federal Executive Council (FEC) would approve the sum needed to offset the debt.

During one of their congresses at FAAN headquarters in Lagos, Secretary General of NUATE, Ocheme Abah, who spoke on behalf of the unions, said that for inexplicable reasons none of the minister’s projects has been delivered up till now and that for that, he is presently in a frenzy in an effort to deliver these projects, being that this administration is at its twilight. He said this rush to deliver at all cost has caused suspicion and a plethora of missteps which he said if not corrected, will spell doom for the aviation industry. The unions alleged that they unearthed several booby traps, outright falsehoods and deliberate manipulation of facts to skew the transaction against the interest of Nigeria, which they insisted they made known to the Minister of Aviation.

They said some of the loopholes they found include:  Extending the scope of the concession to the surroundings of the terminals, up to FAAN housing estates without taking such into account in the assets valuation; arbitrary fixing of profit sharing ratio (60:40) in favour of the concessionaire; laying the ostrich in connection with existing concessions and plethora of live litigations over the airports to be concessioned; being silent on labour issues.

Due to these issues that were raised, FAAN management set up a management/Unions Committee to scrutinise the objections of the unions but they said the Committee, which consisted of representatives from Ministry of Aviation, the ICRC, the management of FAAN and the unions failed to offer any pragmatic solution and that not even the Transaction Adviser himself could explain the OBC.

The unions said it has become imperative for them to take action to safeguard the interests of their members. They asked the Federal Executive Council to halt further approvals on the airports concession programme and any other Aviation Road Map project, pending a comprehensive forensic audit of the projects undertaken up to this point. They said it is their firm belief that such audit will expose the activities to be wasteful of public funds, and to be tilted away from national good. They also said it is the least the Council can do in order to redeem itself, in the face of the accusation that the Federal Executive Council has so far been railroaded into giving consent to bad deals for the country.

“While stating that the terminals require no further investments for the envisaged period of the concession, yet without any real basis determined humongous investment budgets for intending concessionaires. There is also the issue of overlooking the wiser choice of going for management contract option instead of concession, considering that the airports in question are all brand new; Overlooking the very serious implication of handing such important national security assets over to foreigners.

 “Following the stalemate, another approach was proffered which brought about visitations to international airports in other countries being operated under concession. Since our return from the visitations, we have been clamouring for the reconvening of the joint committee to afford the ventilation of the experiences garnered from the visits, but to no avail. Instead, the Minister has now quickened the tempo of the implementation of the concession while remaining under the umbrella of the obnoxious OBC, thereby leaving the Unions and FAAN staff/pensioners in limbo.