Last week, Nigeria launched a national airline – ‘Nigeria Air’.
The Nigerian government annoys me daily perhaps even hourly but I cannot remember when last a government decision irked me so much as this news did. I am angry because this is an unnecessary gamble done for nothing-else than political expediency – to fulfil an ill-informed campaign promise. It has nothing to do with its stated goals of stimulating competition in the airline industry; creating jobs or restoring national pride, that’s all BS. We do not NEED this, for a country with the highest number of people living in extreme poverty, our focus should be on lifting people out of poverty and creating wealth rather than a grandiose and ill-informed $300 million white elephant project. Follow me and let us unpack the reason why this yet another money down the drain.
1. We simply do not need this: In Economics, there is a concept known as ‘opportunity cost’ which simply means that if you decide to spend $1 on let’s say bread, the true cost of that purchase is not the $1 itself but the other things you could have bought with it i.e. coke, rice etc. In other words, the opportunity cost of this $300 million airline project is the myriad of other more meaningful and impactful projects it could have been invested in. It is not rocket science for our leaders to know that for a country as poor as ours, our investments should be targeted towards those at the bottom of the economic pyramid. For every $1 dollar the government spends, their key question should be whether it can generate the maximum returns for the poor. I could tell you 100 things the government could have invested in – electricity, education, healthcare, transport, security etc. the point is the government should be more aggressive about promoting pro-poor policies rather this sham of a project.
Let’s discuss this tweet above, it shows how much tomatoes go to waste daily as a result of a broken supply chain, what the tweet does not immediately tell you is the immense benefits of fixing this problem. Imagine the multiplier effect of investing that $300 million to solve this, that is building road, storage and transport infrastructure – these poor farmers would have money in their hands which they can use to feed themselves, provide education and healthcare for their children. Jobs would also be created -from farm labour to those managing storage facilities to those running the transport facilities. All things being equal, this could lead to an improvement in employment, literacy and life expectancy rates as well as a reduction in poverty and infant mortality rates. Ladies and gentlemen, this is how a government helps its poorest people.
Please note, I am not advocating for the government to start buying and selling tomatoes but my broader point is for the government to focus on the provision of public goods i.e. infrastructure and pro-poor policies which enables the poorest of us live a decent life.
2. The Nigerian government has a track record of failure in business: From the Ajaokuta Steel Mills to Nigerian Airways, history is replete with examples which show that the Nigerian state is too weak to successfully run any business enterprise. Let’s even look at the now defunct Nigerian Airways, it was characterised by corruption, nepotism, inefficiency, plane crashes, poor maintenance and general Nigerian anyhowness. It’s failure was so bad that as at when it folded up its total debt was over $500 million, in fact, the aircrafts were constantly impounded in various countries due to its poor safety records and failure to pay requisite fees. I am sure a similar story can be told for other state-owned businesses. So pray tell! What has fundamentally changed in the Nigerian state that all of a sudden some of you actually believe that this would be an exception, The same government that cannot provide education and healthcare, administer taxes or even implement simple biometric visa-on-arrival is the one you believe can successfully run an airline. Please let us be serious and respect ourselves.
3. Airline business is not
beans for the faint-hearted: It is so cost-intensive that you need to be highly efficient and disciplined to be able to generate sufficient returns to cover the costs much less make any decent profits. It often helps to learn from the experiences of other before embarking on any new adventure, better known flag carriers on the continent that are relatively well run are still struggling to break-even, much less make profits. According to this FT article:
“Kenya Airways, which is 26.7 per cent owned by Air France-KLM, has reported losses for the past three years, including $252m in the year to March 2015, the largest in Kenyan corporate history. It has blamed rising competition, terrorist attacks in Kenya and hedging losses for its woes…………..South African Airways, which is dependent on government loans and guarantees, has had seven chief executives in three years amid losses that totalled $300m for the three years to March 2014. It has delayed publishing its annual report for the year to March 2015 as it awaits the finalisation of a government guarantee”
Airline business struggle is not peculiar to African by any means even Etihad, Abu Dhabi’s national airline and the second largest in the UAE continues to struggle. Here is an excerpt of their current challenges:
“Over the last two years, Etihad has racked up losses of more than $3.5bn – $1.52bn for 2017 and $1.95bn in 2016. Last week Etihad drew a line in the sand, announcing new management appointments, structure and strategy…..three rounds of job losses have seen more than 4,000 employees also depart in the last 18 months, according to an executive who spoke to Middle East Eye on condition of anonymity”
The point is if relatively functional national airlines with sound corporate governance and solid infrastructure and facilities like Etihad are struggling, How do you think Nigerian Air which will most likely have neither but come with the added baggage of nepotism, corruption and incompetence will cope?
Everyone keeps touting ‘Ethiopian Airlines’ as a model but conveniently fails to acknowledge that it is an outlier in a continent which has had more failed state airlines than successful ones some of which include Ghana Airways, Gambia Airlines, Air Angol, Botswana Airlines, Congo Airlines, Air Djibouti among others. It is not difficult to see why all these enterprises have failed – the business is simply difficult!
In fact, the success of Ethiopian Airlines is based on factors such as – a clear strategic vision; frugality; non-interference from politicians; aggressive investments in infrastructure and capacity-building and merit-based hiring: all of which are arguably impossible to replicate in Nigeria. In addition, their government subsidises their labour and finance costs and does nor compel them to pay dividends. But you know Nigeria, the government will balloon its costs buy awarding in-flight catering and fleet maintenance services to their inefficient cronies and ensuring that their friends, family and fans are able to fly for free.
4. Nigerian Aviation Industry has serious needs: and building a national airline is certainly not a top priority. See, if our government has all of a sudden become passionate about the aviation sector, they should strengthen its regulatory role and provide infrastructure for the industry. Air travel in Nigeria is the worst I have experienced anywhere and a huge part of this problem is that private operators are not properly regulated, flights are delayed for absolutely no reason other than sheer incompetence and passengers lives are put in harm’s way on several occasions with absolutely no penalty. I expect the government to ensure that private players deliver optimum service and ensure that their Aircrafts are safe for use. They should enforce strict penalties on those who fail – that is their role as regulators! So far regulatory oversight in the aviation sector has been sub-par and this is what the government should instead prioritise.
Beyond this, airport infrastructure remains a huge mess; zero aesthetic appeal, outdated facilities with limited functionalities, regular power outages, spoilt carousels, poor security etc. It is no surprise therefore that Nigeria constantly features in the list of Worst airports in the world. Given how first impressions matter, I expect the government’s intervention in aviation to be focused on building world-class airports that provides first-time visitors and Investors with the best first impression of our country.
The government’s work in aviation is clearly cut out, that is why the decision to invest $300 million in a potential white elephant project is highly questionable; the opportunity cost even within the sector is too significant to ignore.
5. Stay woke and kill bad ideas: The idea that a national carrier will somehow restore our national pride is a silly narrative that needs to be countered vehemently! By this line of thinking, Americans should be ashamed seeing as they do not have a national airline. Similarly, many on social media have started using religion and patriotism to guilt-trip Nigerians into supporting this ill conceived project – please refuse to be bullied and ask the hard and right questions as it is our commonwealth at stake.
Rwanda is arguably the current pride of Africa not because of Rwanda Air (heck, not even sure its doing well) but because of the massive gains they are making in healthcare education, tourism, technology and economic growth. For a country that was ravaged in a bloody genocide only 24 years ago, they have done remarkably well in changing the narrative of their country and building a nation all of Africa is proud of.
I hope Nigeria learns a few things from them.
The signs of incompetency already showing……….
…..a public announcement without securing a domain name
…….a public announcement while the remaining 95% private sector Investors are yet to be identified.
………The government, a supposed 5% stakeholder is the one leading talks for airline purchase and yet they are not supposed to be involved in running the business
……..Nigeria Air supposed to create jobs yet the horrible Logo was outsourced to a Bahrain firm