By Jide Akinsemoyin
Out of the five international airports currently operating in Nigeria, Murtala Muhammed Airport is the number one performer in terms of revenue, contributing 60% to the total income of the Federal Airports Authority of Nigeria (FAAN). It is also number one in terms of passenger traffic. According to the Air Traffic Performance Report for Africa 2022 (published by Airports Council International), Murtala Muhammed Airport handled annual passenger traffic of 6.5m, closely followed by Nnamdi Azikiwe Airport Abuja with annual passenger traffic of 5.9m. However, when compared to the rest of Africa, both Nigerian airports were positioned at 8 and 10 respectively. Cairo International Airport in Egypt was at number 1, with passenger traffic of 20m, followed by Johannesburg’s OR Tambo International Airport in South Africa, with passenger traffic of 14.8m.
Airport revenue is largely a function of an airport’s passenger traffic, which in itself is driven by the frequency and number of airlines using the airports facilities. What the report therefore implies is that Murtala Muhammed International Airport is seriously underperforming in revenue terms, given Nigeria’s position as Africa’s largest economy and most populous country, and Lagos’s position as Africa’s fifth largest economy and third most populous city. Addressing the underlying reasons why passenger numbers at Nigeria’s leading international airport lags that of African rivals serving cities and countries with smaller economies and populations, is therefore key to increasing the airports revenue.
A major reason why passenger traffic at Murtala Muhammed airport is so low relative to comparable airports in Africa, can be put down to the cost to airlines of flying to the airport. According to the International Air Transport Association (IATA), Murtala Muhammed and Nnamdi Azikiwe international airports are the most expensive airports in Africa in which to operate, in terms of airline, passenger and cargo levies, multiple taxes and other related charges (including insurance and fuel costs that are amongst the highest in the world). A report by the Guardian newspaper reveals that these multiple taxes and charges cost airlines between 38% to 65% of revenue and act as significant contributors to the airport’s Aeronautical revenue (i.e., income derived directly from airlines and their passengers). Whilst this may be good for FAAN’s revenue, it stifles growth in Nigeria’s aviation sector, because of the impact such levies and charges have on the profits of local and foreign carriers (in a recent statement by the aviation minister Festus Keyamo, he declared that over 100 airlines had collapsed in Nigeria in the last 25 years). It also conflicts with the establishment of an enabling environment (which is a necessity for growing the aviation sector) that allows existing local airlines to survive and compete with rivals outside the country, encourages foreign carriers to fly to the country and makes the Nigeria Aviation sector an attractive investment destination.
There are also problems outside the direct control of FAAN that impede growth in passenger numbers, and which require the direct intervention of government. One is the issue of airline blocked funds due to FX scarcity, which has led some airlines to reduce flight frequencies and capacity to Nigeria. As of January 2023, the amount of blocked funds in Nigeria stood at $743m, up from $543m in December 2022. The other major problem is the cost of Aviation fuel at Nigerian airports which can be as much as five time more than what airlines in Europe and the Middle East are paying. Ultimately, the bulk of the high costs associated with flying to Murtala Muhammed Airport, is passed on to passengers in the form of higher ticket prices, resulting in an overall decline in passenger traffic.
Whilst government must do its part in addressing the issues in the aviation sector that only it can fix, including excessive government bureaucracy that results in multiple taxes for airline operators, FAAN must also play its part by reviewing downwards, exorbitant airport levies and charges under its control, to align with global norms. Although this would enable Murtala Muhammed airport to become more competitive, it would be at the cost of a corresponding reduction in aeronautical revenues. To replace lower aeronautical revenues, FAAN would need to focus on increasing non-aeronautical revenues from commercial activities such as retail, food and drink, advertising, parking and lounges. Any drive to increase non-aeronautical revenue, would also need to come with increased investment in airport infrastructure, to support the projected increase in passenger traffic. Additionally, there would need to be staff re-orientation programmes, to create a customer friendly, service orientated culture (particularly amongst immigration staff) that is the opposite of what exists now.
Other measures FAAN could take to boost passenger traffic, include the relaxation of restrictions on airport access, currently limited to departing and arriving passengers only. Extending airport access to designated areas of the airport terminal, for those seeing travellers off and those picking up new arrivals, could significantly increase the customer base for the ramping up of commercial related services. For departing passengers, new systems should be introduced that significantly reduce the amount of time spent passing through immigration and security procedures, so that more time is available for passengers to spend money at the shops, restaurants, café’s, bars and lounges in the departure lounge, before boarding flights.
The final consideration for FAAN is the question of just how many passengers it should be targeting to build capacity for at Murtala Muhammed International Airport. The airport itself was built in 1979 with an original capacity of 300,000 passengers per annum. Today it is doing well beyond that number after numerous remodels and refurbishments, with passenger traffic of 6.5m per annum as at Q4 2022. The newly built Terminal 2, opened by President Buhari in March 2022, has a capacity of 14 million passengers per annum, notwithstanding design flaws that mean it lacks sufficient apron space to accommodate wide body aircraft. This makes a total existing capacity of 20.5 million passengers per annum at the airport. Meanwhile, the Federal Government has approved the construction of a new international airport in Lekki by the Lagos State government, with a projected capacity of 5 million passengers per annum (to add to the existing 20.5 million at Murtala Muhammed airport). Will this be sufficient given the fact that Cairo International Airport and OR Tambo International Airport both have current capacities of 28m passengers per annum? If the objective is to grow the Nigerian economy into a trillion-dollar economy by 2026, then at the very least we should be aiming to significantly exceed the current passenger traffic capacity at the airports of our main rival economies in Africa. The fact we are lower suggests that today’s total existing ad projected capacity of 25.5 million passengers per annum may not be sufficient to support Nigeria’s current economic ambitions.
