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Business News of Tuesday, 17 January 2023


Nigeria’s airplane Maintenance, Repair and Overhaul project fails to take off 8 years later

Aeroplane in hangar Aeroplane in hangar

The Federal Government has failed to fulfil its promise of delivering efficient Maintenance, Repair and Overhaul (MRO) facilities for Nigerian airlines almost eight years into President Muhammadu Buhari’s administration.

This is despite the government’s selection of A. J Walters Aviation Limited, EgyptAir Maintenance & Engineering (EGME) and Glovesly Pro-Project Limited as the preferred bidders to establish the MRO centre.

Three years after the successful bidders were selected in January 2020, the details of the project takeoff have remained sketchy.

The failure comes with losses: Meanwhile, the failure of the government to midwife a successful MRO facility is costing Nigerian airlines about $2.5 billion annual loss, according to stakeholders in the industry.

The loss includes taxes to government agencies, manpower development and employment generation.

For instance, to carry out C-check on Boeing 737 aircraft, airlines expend at least $1.8 million. The C-check is carried out on aircraft every 18 months.

The stakeholders insisted that Nigeria’s potential and capacity in the global air transport industry were being grossly underutilised and attributed this blame to the Federal Government for almost eight years.

FAAN corroborates losses: The Managing Director of the Federal Airports Authority of Nigeria (FAAN) had recently told journalists that Nigeria was losing about $2.5 annually to the loss of the facility in the country.

Aviation expert weighs in: The former Rector of the Nigerian College of Aviation Technology (NCAT), Capt. Samuel Caulcrick said that the Nigerian economy supports the sustainability of the airline business. He, however, regretted the lack of suitable and capable local MRO for retaining the resources in the country.

Caulcrick explained that due to the lack of capacity at home, Nigerian airlines export the heavy maintenance of their equipment to foreign countries, thereby creating businesses, employment and revenue generation for those countries.

He noted that the absence of the facility in Nigeria also put more pressure on foreign exchange by local airlines, leading to the dwindling value of the naira against most currencies.

“So, it is better to let it stay within the economy. That is one argument by which the MRO supports the economy. This economy should not lose to other economies after creating that business.

“Also, MRO supports the naira in the pockets of all of us. Once the aircraft is taken out, there is the cost of labour that would be paid by the airline.
Instead of the airlines saving that they earned in Nigeria, the airlines go to the foreign exchange market and start looking for dollars.

“The manpower is no longer local and the airlines go to the foreign exchange market, looking for dollars, thereby further putting additional pressure on the naira. This affects our economy and the Nigerian market. Now, let us look at the personnel themselves; being formal employment means it is Pay As You Earn (PAYE). This means locating the MRO in Nigeria, the government earns personnel tax, which another country would now earn. This is why the MRO is very key to any economy,” he said.

Caulcrick was, however, reluctant to put a figure on the annual loss of revenue by the Federal Government on the absence of indigenous MRO, but said billions of naira may be lost to this yearly.

Instead, he said that Nigeria was robbed of local labours, personnel, tax revenue and experience by technical experts.

He, however, said that Nigeria could attract foreign and local investors to the MRO business through policy formulation.

“For instance, the Nigeria Civil Aviation Authority (NCAA) can say it would not renew an existing Air Operators Certificate (AOC) or issue an AOC to an intending operator without a local MRO identified in the application form. The government can give them a timeline because this could take up to three years to accomplish.

“Once you do that, just leave it to the private investors because they know there is an investment created for them. Once an investor knows that their business is being protected, then, they will be willing to invest in the industry. A policy will naturally create a market. That is how China developed today through policy and law,” he said.

The back story: Aviation Minister Hadi Sirika had in October 2015 unveiled a six-point agenda of the Federal Government, which included the establishment of MRO facilities for airlines in the industry.

He later disclosed that the selection of A J Walters Aviation Limited, EgyptAir Maintenance & Engineering (EGME) and Glovesly Pro-Project Limited as preferred bidders followed the evaluation of the proposals submitted by bidders in response to the request for proposals for the MRO centre.

The minister added agreements would be signed between the preferred bidders and the Federal Government of Nigeria and implementation of the projects were expected to commence by the third quarter of 2021.