New Telegraph

GDP: Nigeria trails SA, Egypt, others despite $1.7bn growth

Nigeria’s aviation size

How big is Nigeria’s aviation industry? About three years ago, the International Air Transport Association (IATA) recognized that the country’s air transportation sector has contributed over $1.7 billion in addition to the provision of well over 240,00 jobs. Airlines, airport operators, airport on-site enterprises (restaurants and retail), aircraft manufacturers, and air navigation service providers are said to employ 20,000 people in Nigeria. In addition, by buying goods and services from local suppliers the sector supported another 35,000 jobs. On top of this, the sector is estimated to support a further 16,000 jobs through the wages it pays its employees, some or all of which are subsequently spent on consumer goods and services. Foreign tourists arriving by air to Nigeria, who spend their money on the local economy, are estimated to support an additional 169,000 jobs. In total 241,000 jobs are supported by air transport and tourists arriving by air. The air transport industry, including airlines and its supply chain, is estimated to support $600 million of Gross Domestic Product (GDP) in Nigeria. Spending by foreign tourists supports a further $1.1 billion of the country’s GDP, totaling to $1.7 billion. In total, 0.4 percent of the country’s GDP is supported by inputs to the air transport sector and foreign tourists arriving by air.

$1.7 billion growth

Gross Domestic Product simply means the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health. The country’s $ 1.7 billion aviation contribution to GDP is not only paltry but brings to the fore the general state of the country’s aviation industry despite purported growth bandied by experts and some stakeholders considering the country’s over 200 million population. The economy of any nation determines how buoyant such an economy is and the amount of disposable income at its disposal. The clearest indication is that the sector is not growing the way it should be in spite of the steady growth in the number of carriers processing Air Operator Certificates (AOC) while some others have already been issued with the all-important AOC.

Comparative analysis

It would be very unfair to compare Nigeria’s economy to that of the United Kingdom. It would also amount to put side by side the strength of the UK’s aviation with that of Nigeria considering that the UK has a far lesser population compared to Nigeria. The air transport industry, including airlines and its supply chain, is estimated to support $86 billion of GDP in the United Kingdom. Spending by foreign tourists supports a further $34 billion of the country’s GDP, totaling $120 billion. Taking a closer look and comparing it with some African countries puts Nigeria’s aviation at a very low rung of the ladder. The air transport industry, including airlines and its supply chain, is estimated to support $5.2 billion of GDP in South Africa. Spending by foreign tourists supports a further $4.3 billion of the country’s GDP, totaling $9.4 billion. Morocco’s entire aviation value chain supports the economy with $9.7 billion. The air transport industry, including airlines and its supply chain, is estimated to support $3 billion of GDP in Egypt. Spending by foreign tourists supports a further $4.1 billion of the country’s GDP, totaling $7 billion. In total, 2.1 percent of the country’s GDP is supported by inputs to the air transport sector and foreign tourists arriving by air. Ghana’s aviation and tourism industry in 2018 contributed $2.5 billion to the country’s GDP. According to IATA, aviation accounts for 4.6 percent of Kenya’s GDP, but to ensure consistent development, the nation must improve infrastructure, connectivity, safety, and technology. IATA identified improved air transport infrastructure to accommodate the future growth of air traffic in collaboration with users, implement the Single African Air Transport Market (SAATM), improved safety, and adoption of innovative technology as four areas where government action can promote aviation’s growth and bring even more value to Kenya:

Closing the gap

The wide gap in figures between aviation in England, South Africa, Morocco, Egypt, Algeria, Kenya, and Nigeria raises questions on rather slow growth in the latter as a result of the poor state of infrastructure on offer, efforts of regulatory bodies, and personnel, the health of local carriers and impact of government’s policies on the local industry. Notwithstanding the huge capital outlay of over N200 billion in airport remodeling and other huge amounts invested thereafter, none of the aerodromes to date rivals the likes of Kotoka International Airport in Accra, Ghana; Cape Town or Johannesburg International Airports both in South Africa or even the Eyadema Airport in Togo and Leopold Sedar Senghor International Airport in Dakar, Senegal. A former Minister of Aviation, Hadi Sirika had four years ago admitted the deplorable state when he lamented that no Nigerian airport today is fit for aviation hub services that the country used to be in the days of Nigeria Airways. “We cannot grow with our airports in the current state,” he submitted. “No way! You cannot create a hub with Murtala Muhammed International Airport, Lagos, or Nnamdi Azikiwe International Airport, Abuja, as they are, or the ones in Port Harcourt and Kano. “Some of the recent high-capacity airplanes that are flying around the world like the Airbus 380s and Boeing 777s and so on are just too sophisticated and too large to be handled by our airports at the moment. The atmosphere within these airports is not anything to talk about. It is really difficult for us to attract passengers to them.”

Potential for growth

The African aviation market probably has the most potential for growth out of all global regions. This is because it is a young industry with a large and increasing population. However, this potential may not be fully translated into real air traffic growth. According to the International Civil Aviation Organisation ICAO) long-term traffic forecasts, passenger traffic for the Africa region is expected to grow by around 4.3 percent annually up to 2045, slightly faster than world total growth. Africa, accounting for 18 per cent of the world’s population, currently represents only 2.1 per cent of global air transport activities. To close this gap, the continent was advised to create opportunities for Africa to benefit from aviation’s connectivity, jobs, and growth potential.

Willie Walsh, Director General of IATA, highlighted the limited infrastructure, high costs, lack of connectivity, regulatory hurdles, slow adoption of global standards, and labor shortages as factors hampering the viability and sustainability of African airlines. Promoting the liberalization of intraAfrican market access through the Single African Air Transport Market (SAATM) is expected to enhance connectivity within the continent, fostering economic integration and development, just as the acceleration of the implementation of safe, efficient, and cost-effective financial services and modern commercial standards would enhance the financial viability of African airlines and streamline distribution channels.

The Director-General of Nigeria Civil Aviation Authority (NCAA), Capt Musa Nuhu, said while there is no doubt that there are no challenges they had faced, he admitted that the sector is beset with myriads of surmountable challenges. “However, challenges bring opportunities. The cynics have once expressed views that growth in the aviation sector could only double after 15 years but the reverse is the case. Rather we are seeing steady growth in the domestic sector with more airlines processing their Air Operator Certificates (AOCs) and the rate of connections among cities increasing. We are witnessing Nigerian airlines embarking on aggressive, but strategic expansion in regional connectivity and route strength as well.

“In spite of the numerous challenges, Nigeria’s air transport is making progress. The International Air Transportation Association (IATA) in a recent study recognised that Nigeria’s air transportation sector has contributed over $1.7 billion in addition to the provision of well over 240,00 jobs. “As our traffic figures doubling so is the number of young airports increasing with the old ones embarking on massive infrastructure upgrade, expansion, and equipment modernization for safety, security, safe air navigation, weather observation, and forecasting,” he added.

Last line

For aviation to deliver economic growth, it has to be delivered at the right cost. If the costs of infrastructure are high, project owners try to recoup by loading the costs, which airlines and passengers have to pay.

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