THE announcement by the Osun State Government that it is seeking private investors for its dead duck airport project reopens the debate on appropriate priorities for the country’s fiscally fragile states. With the inevitable failure of the first concession arrangement, Governor Adegboyega Oyetola said, though the state would no longer commit funds to build the airport, it would hand it over to private operators to “build, operate and transfer.” Given the state’s fiscal fragility, however, its weak economic activities and absence of robust investment-friendly policies, he, like many of his peers, is merely building castles in the air.
To climb out of bankruptcy, stimulate job creation and attract investors, Osun and other similarly misguided states need instead to focus on leveraging their agricultural, mining, tourism and human resources to build investment-friendly destinations; not white elephants like airports that serve only the vanities of officials. Except for Lagos, and potentially Kano, among the non-oil producing states, none currently has an economy vibrant enough to support an airport or attract capable investors, having neither adequate passenger traffic demand nor thriving domestic tourism and hospitality business sectors to draw visitors.
Significantly, Osun’s forlorn search for new concessionaires followed the termination of the first Build-Operate-Transfer contract signed in October 2012 with AWOL Group of Companies, initially for N4.5 billion, but later reviewed to N69 billion. Its failure to attract a reputable investor with proven track record in such ventures is a pointer to its non-viability. But Osun is not alone in the airport craze; Benue State Governor, Samuel Ortom, has just announced a plan to build one at N11 billion to be completed within two years. Bizarrely, he said it would be financed with internally generated revenue. Yet, here is a state that generated only N12.13 billion from January to June 2019, according to the National Bureau of Statistics with a monthly wage bill of N7.9 billion.
Ekiti is one of the 17 states declared in 2017 to be insolvent going by the ratio of IGR to federal allocations; its meagre N6.4 billion IGR in 2018 has, however, not deterred Governor Kayode Fayemi from forging ahead with plans for an airport. Other states enamoured of airports ownership include Ogun, Zamfara, Nasarawa, Anambra, Abia and Bayelsa whose ambitions have either failed or have been abandoned at various stages. Gombe built one which, like 20 of the 22 owned by the Federal Airports Authority, has not paid its way.
Osun’s case of misplaced priorities is typical, but by no means the worst; instead of according priority to agriculture, tourism and services, its natural advantages, it has wasted the last 16 years on ruinous policies that have plunged it into debt, joblessness and a broken public service. Hopefully, its just-concluded three-day Economic and Investment Summit where it signed an MoU with a Canadian firm on mining should mark the return of a more scientific approach to governance in the state.
No reputable investor will put his money in an unviable airport project. Airport infrastructure is a business and significant employer of labour in the aviation and tourism value chain. Traditional consideration of airports as public utility providers has changed dramatically over the past four decades as liberalisation has injected the dynamics of competition and private capital into the air transport system. The Air Transport Action Group says the air transport industry generates 29 million jobs globally, with the airline and airports employing 4.3 million directly. Airports Council International warns that airports “are asset-intensive businesses that require many years to recover investments” and therefore requiring expertise and private sector investment.
Osun generated only N10.2 billion in the first half of 2019, but had total domestic debt of N148.1 billion in 2018, the seventh highest debtor state by NBS data and the second highest in the South-West region. It ranks 35 out of 36 in the Fiscal Sustainability Index says BudgIT, a non-profit. Now that Osun has belatedly realised that an airport is the last thing it should be spending its meagre revenue on, it needs to confront the hard truth that it is simply not a viable project that can attract the right investor with funds and technical ability. The demand created by a thriving economy is absent. Nearby is the loss-making Ibadan airport with passenger traffic of 92,100 in 2018 and is just about 100 kilometres from Osogbo, the state capital.
Of the 15.2 million passengers that transited through its airports in 2018, FAAN said the Lagos and Abuja airports recorded 5.7 million and 4.6 million passengers respectively, while Port Harcourt, Kano and Owerri recorded 1.14 million, 567,537 and 510,546 passengers respectively. Passenger traffic through the others was too low to turn in any meaningful profit. Indeed, the Bureau of Public Enterprises admits that only the Lagos and Abuja airports are currently commercially viable. Ortom’s poor judgement is obvious: only 556 passengers passed through FAAN’s Makurdi airport in 2018. It hosted none in the months September to December, recording a monthly highest of 163 in February of that year! Between Akure airport in Ondo State that receives an average of 5,000 passengers monthly and Ado Ekiti, the Ekiti State capital, is a driving distance of only 50 kilometres. This renders an airport venture in Ekiti patently misplaced.
States should become self-sustaining economic units. Osun, for instance, can pursue its mining policy with fervour as well as similarly partnering reputable foreign firms to drive its cocoa industry. It has gold, talc, granite and kaolin. Massive benefits in jobs, tax revenues and investment would have been derived if the state had ploughed resources into reviving cocoa production; the state is reputed to have been the take-off of this cash crop production in Nigeria.
Oyetola needs to scrupulously avoid the mistakes of his predecessors in opting for grandiose spending projects, develop human capital, a major asset of the state, by building low budget neighbourhood schools, providing agric extension services, providing basic infrastructure in the rural areas and cutting down unnecessary expenditure and the bureaucracy.
END
Be the first to comment