Federal Ministry of Transportation Nigeria Business Investor Forum Briefing on Aviation Sector Reform and Investment Opportunities By Senator Hadi Abubakar Sirika Honourable Minister of State Aviation 26th March 2016
OUTLINE 1. INTRODUCTION 2. OVERVIEW OF NIGERIA 3. OVERVIEW OF THE AVIATION SECTOR 4. NIGERIA AVIATION POLICY 5. NIGERIA AVIATION SECTOR REFORMS 6. INVESTMENT OPPORTUNITIES 7. ADDITIONAL INVESTMENT OPPORTUNITIES 8. CONCLUSION 2
1. INTRODUCTION The purpose of this brief is to apprise prospective investors on the aviation sectoral reforms and the investment opportunities in Nigeria. 3
2. OVERVIEW OF NIGERIA According to World Bank data, Nigeria has a population of 173million people and accounts for 47% of West Africa s population. Nigeria s GDP was $568.5 Billion as at 2014 An annual growth rate of 6.1% According to US department of Agriculture Projected GDP of $1 Trillion by 2030 4
Nigeria 2030 GDP projection According to the US Department of Agriculture s latest macroeconomic projections, Nigeria s GDP is expected to grow to 19 th largest in the World by 2030
3. OVERVIEW OF THE AVIATION SECTOR Twenty one (21) airports are owned and managed by the Federal Government of Nigeria (categorized into International and Domestic). These are spread across the country. Five (5) of these are designated International Airports open for 24 hours daily, providing regular international flight operations as well as domestic services for airlines and other operators. In 2014, the four major Nigerian Airports served ~13.6m passengers (Lagos, Abuja, Port Harcourt & Kano). The market is led by domestic operations, with a market size of ~8.7m passengers, or 64% of total traffic. Passenger traffic at the leading four airports has grown by Compound Annual Growth Rate (CAGR) 7.4% from 2005-2014. 6
..OVERVIEW OF THE AVIATION SECTOR 1. Nigerian airlines fleet sizes are small compared to their major competing countries and regions, especially the Middle East. 2. The belt of Africa covering west and central Africa has a population of over 600m, with Nigeria alone having over 170m. This should support establishment of a regional hub at the center, which is Nigeria. In 2014, the leading hubs for the 29.2m international itineraries that originated or terminated in Africa with a stop enroute were: i. No. 1 hub Dubai (3.6m PAX) ii. No. 2 hub Johannesburg (3.0m PAX) iii. No. 3 hub Paris CDG (2.4m PAX) iv. No. 4 hub Addis Ababa (2.0m PAX)
.. OVERVIEW OF THE AVIATION SECTOR In 2015 there were ~7m passengers at Lagos Airport and 4.2m passengers at Abuja Airport Emirates was the leading international airline with 5% share of seat capacity serving their Dubai hub. The major airports are linked to major international hubs such as New York, Atlanta, Houston, Dubai, Addis Ababa, London Heathrow, Frankfurt and Paris Charles de Gaulle.
4. NIGERIA AVIATION POLICY Some key policy objectives; 1. To continuously and consistently improve on safety and security 2. Development and upgrading of Infrastructure through Public Private Partnership (PPP) 3. Bilateral Air Service Agreement - currently there is Open Skies between Nigeria and the USA. 4. Promote the development of hubs 5. Development of Aviation-allied industries such as tourism. 6. Development of agro-allied industry to boost the growth of perishable cargo business. 7. The restructuring and streamlining of the aviation Agencies
5. NIGERIA AVIATION SECTOR REFORM 1. Review of 2006 Civil Aviation Act; removal of all regulatory powers from service providers and strengthening of the Nigerian Civil Aviation Authority as sole regulator. 2. Greater Autonomy for the Parastatals; service providers should have the managerial and administrative autonomy from regulating and planning agencies. 3. Private Sector Participation; the institutional structure should facilitate increase in private sector participation in the provision of services, while assuring proper regulation. 4. Safety and Security; Re-structure, re-organize and reposition the Aviation Security Department of Federal Airports Authority of Nigeria (FAAN), Aviation Security (AVSEC) to take the shape and form similar to that of Transportation Security Administration (TSA) of the USA. 5. Upgrade of NCAT into an ICAO Regional Centre of Excellence; Upgrade of Nigerian College of Aviation Technology (NCAT) into an ICAO accredited Regional Centre of Excellence
7. INVESTMENT OPPORTUNITIES Concession of Airports a. The predicted growth of passenger traffic, hub development and proposed national carrier will stretch airport facilities. Extensive private sector investments through PPP will be required to upgrade and develop new facilities and infrastructure to cope with the growing demands of the air transportation industry 11
INVESTMENT OPPORTUNITIES Establishment of a National Carrier With a population of 600 million in West and Central Africa, there is no major airline based within the region to exploit this huge market. In 2015, passenger traffic in Nigeria alone, was 14 million which is projected to grow at an annual rate of 5.1%. The proposed National Carrier will harness the potentials and opportunities of this market. It will offer world class service and convenient flight connections to a market of tens of millions of passengers within Africa and across the globe. It will be private sector driven. Development of Agro-Cargo Terminals Fresh produce potentials of Nigeria, with an annual trade of 800 million tonnes of vegetables, presents a unique opportunity for growth and development especially given the following statistics a. 84 million hectares of arable land (60 of which is under-utilized) b. 279 million cubic meters of surface water and vast potential for irrigable area of 3.14 million hectares c. Nigeria produced more Mangoes in 2011(795,000 Tonnes)than Kenya (636,585 Tonnes) and South Africa(52,318 Tonnes) d. Nigeria is the largest producer of tomatoes in Sub-Saharan Africa with 1,500,000 tonnes in 2011. 14th largest producer in the world 12
INVESTMENT OPPORTUNITIES Development of an MRO The lack of a major Maintenance, Repair and Overhaul (MRO) facility is a major cost driver and industry entry barrier to operators in West and Central Africa. Maintenance is normally performed overseas at high costs. The forecast growth of air traffic in Nigeria and proposed National Carrier makes the establishment of an MRO facility a worthy venture. This will reduce financial burden on airline operators and enhance industry stability. 13
INVESTMENT OPPORTUNITIES Establishment of an Aviation Leasing Company (ALC) a. Government plans to establish an Aviation Leasing Company (ALC) with private sector participation to strengthen and stabilize the air transportation industry. b. The ALC will acquire aircraft from manufacturers and major leasing companies for lease to operators. This will eliminate a major difficulty faced by local airlines. c. There will be ease of doing business for foreign lessors with Nigerian domestic airlines having a one-stop shop. Development of International /Regional Hubs a. The establishment of Abuja as a hub will drive the development and integration of domestic, regional and international airline network. b. It will be within seven hours flight to major African, European and Middle East cities. A convenient connection to North and South America. c. Only 3 out 10 major hubs handling Africa s international flights are based in Africa. None is based in West and Central Africa with a population of 600 million 14
Map of the World showing Nigeria as a potential hub 15
Map of Africa showing Nigeria as a potential hub Most of West & Central Africa is within a 3-hour flying time from Nigeria with no clear dominating airline present Western Sahara Senegal Gambia Guinea Bissau Sierra Leone Liberia Mauritania Guinea Ivory Coast Morocco Mali Burkina 1 ho ur Ghana Togo 4 hours Algeria 3 hours 2 hours Benin Equatorial Guinea Niger 2 hours 3 hours 4 hours 5 hours Cameroon Gabon Tunisia Congo Libya Chad Angola Namibia Egypt Sudan Central African Republic Rwanda Burundi Zambia Botswana Lesotho South Africa Democratic Republic of Congo Swaziland Uganda Malawi Zimbabwe Tanzania Ethiopia Source: McKinsey, Global research for the Aviation sector Presidental Retreat, March 2013 Nigeria Kenya Eritrea Djibouti Somalia Mozambique Madagascar Highest number of scheduled airline seats in the region Lagos Abuja Accra Luanda Abidjan Scheduled seats Millions, 2011 2.4 1.7 1.7 0.7 More international destinations Lagos Accra Luanda Abidjan Abuja 8 21 19 5.9 Number of destination countries 30 26 16
INVESTMENT OPPORTUNITIES Development of Airport Cities (Aerotropolis) The government of Nigeria is in the process of establishing Airport Cities (Aerotropolis) around the nation s major airports. This will take advantage of projected passenger traffic growth, proposed National Carrier and hub development as a catalyst for urban economic development. This project will be executed through Public Private Partnership (PPP). Hartsfield-Jackson Atlanta International Airport is the busiest airport in the world, serving some 250,000 passengers and moving almost 2,000 metric tons of freight each day. 17
8. ADDITIONAL INVESTMENT OPPORTUNITIES Hotels Convention Centers Duty Free Shops Independent Power Projects (IPP) Flight Catering Services Parking Facilities Flight Charter Services Advertisement and Media Services Approved Training Organizations IT Services Cargo Operations and Support Facilities Ground Handling and Support Services 18
9. CONCLUSION Nigeria with a population of 173 million, a market of 600 million (West and Central Africa), a growing middle income class and a projected GDP of $1Trillion in 2030, offers excellent opportunities for private investors in the aviation sector with a higher than normal return on investments (ROI) 34%. The strategic initiative of the Federal Government of Nigeria is to lay a foundation and create an enabling environment for a robust aviation sector that will contribute to sustainable national economic growth and development, principally through Public Private Partnership 19
THANK YOU 20