I wish to congratulate you Mr. President and the government for the unique honor of hosting this 3rd ICAO World Aviation Forum.
The African Development Bank is delighted to be a partner with ICAO and Nigeria for this Forum.
The hosting of this global forum here in Abuja is a clear mark of confidence in Nigeria. Let me use this opportunity to commend you and the government on the Economic Recovery and Growth Program, to build a more resilient economy.
The African Development Bank strongly supports Nigeria and has confidence in the ability of Nigeria to deliver on its policy commitments.
As you know, we provided $600 million to support the government to address its budget deficit challenges and stand ready to continue to fully support the government as it embarks on efforts to diversify the economy and raise the revenue profiles and productivity of the non-oil sectors.
I would also like to congratulate the Minister of State for Aviation for his great efforts to improve the state of aviation in Nigeria.
The aviation sector is especially important as it opens up doors to investors. Very few invest where it’s difficult to travel to. That’s why ease of access via air travel is strongly correlated to economic growth.
Air transport promotes trade, investments andtourism, and boosts economic growth. Today, Africa’s aviation industry adds $73 billion to the continent’s annual GDP and employs about 7 million people – an average 130,000 people per country in Africa. And that’s a lot!
With rapidly increasing population, urbanization and income growth for the middle class, the aviation industry is projected to grow by 5% annually for the next 20 years. From serving 120 million passengers in 2015, the industry will triple and serve over 300 million passengers by 2035. That’s the good news!
However, on the flip side, the cost of air travel in Africa remains exorbitantly high and is 200% more than costs in the European Union and 250% higher than in India for similar distances. A big part of this is the very high taxes, fees, and levies that are charged in Africa. For example, it costs $128 to fly between London and Rome, but $597 to fly between Abidjan and Niamey, a shorter distance. And just to go from Johannesburg in South Africa, to next door neighbor Lilongwe in Malawi, the cost is $406. Again, a much shorter distance than from London to Rome. If you require another example of this serious imbalance, consider for a moment that taxes paid for a Lagos to Kinshasa ticket amounts to $397 which is 300% higher than the total air travel costs between London and Rome. And that’s just the taxes alone!
You can begin to understand why this is a challenge and a burden for the passenger, for businesses, and ultimately the growth and development of the aviation sector! Aircraft departure fees alone in Africa are 30% above the global average, while taxes, fees and charges are 8% higher. Given lower per capita incomes in Africa, high fares essentially tax the poor out of the air! We may have an open sky policy, but then end up with empty skies!
Africa’s aviation growth is held back by very restrictive regulatory environments which limit market size, profitability, and drive up costs. A study by IATA shows that liberalizing aviation markets through open skies for 12 African countries alone will increase annual GDP by $1.3 billion and create an additional 150,000 jobs. Essentially, open skies mean more jobs and increased trade and investments!
Also, Africa needs safe skies. Africa is the riskiest of skies to fly in. While Africa accounts for only 3.4% of all flight departures, it represents over 9% of all air accidents and 37% of total global air fatalities. Among the 200 airlines blacklisted by the EU, more than 50% are African! These are shocking and non-acceptable numbers.
The reasons are several: old, poorly maintained and inefficient aircrafts, poor safety standards, weak navigation systems, traffic management and generally weak inspection and oversight, and non-compliance with safety audits.
These must change! Air travel must be safe – and safety should never be compromised!
We need to develop airport terminal capacity to expand passenger growth, develop regional aviation hubs to improve connectivity, and upgrade air navigational services and air traffic control to improve safety. Modern and cheaper technologies such as the satellite based air navigation services now preclude the need for ground infrastructure, and make it possible to serve remote areas with radars. We must also develop within Africa, aircraft maintenance services and strengthen regional and sub-regional aviation safety agencies.
Obviously, we can’t travel by camels! So, I pose the question: of what use are nice looking airports with modern navigational instruments, if there are no planes on them?
Africa needs to procure about 970 jets and 700 turboprops over the next 20 years. Financing needs will exceed $150 billion! African aviation needs fleet modernization, efficiencies, better connectivity and much improved quality of services for an exponential growth in the number of passengers.
The fact is, Africa faces much higher costs for aircraft purchases due to the relatively small size of most airlines, weak balance sheets for corporate loans, a lack of access to export credit agreements, higher insurance costs, inability of commercial banks to provide long term financing, and very high interest rates when they do. Africa also does not have any aircraft leasing markets, and therefore has to lease planes at much higher costs, sometimes 100% higher than developed economies. There is a compelling need to address market failures in aircraft financing.
Availability of aviation infrastructure varies across Africa. North, East and Southern Africa have established hubs in Cairo, Addis Ababa, Nairobi and Johannesburg. West Africa on the other hand, lacks a major and effective hub, something Nigeria, Côte d’Ivoire and Togo should help build. As the largest economy in Africa, Nigeria should lead the effort and be the integrator for regional air travel.
Africa faces huge infrastructure challenges which affect the aviation industry, including airfields (runways, taxiways and aprons), high cost of jet fuel due to a poor supply infrastructure, poor airfield ground lighting which limits the time for operations, further affecting safety and airline economics. In many instances, African pilots have ingeniously learnt how to land airplanes at night without electricity, even with flash lights! Therefore, we must do all possible to light up and power Africa.
This is why the Bank is investing $12 billion over next five years in the energy sector, to leverage $45-50 billion from the private sector to into energy projects. Our goal is universal access to power within 10 years. Nigeria is a major focus for the Bank on energy. Within the context of this presentation, may I suggest that to take off, aircrafts cannot operate in the dark. Likewise, African economies cannot get off the ground in the dark.
The Bank has invested $20 billion in infrastructure over the past 10 years, with over $1 billion in the aviation sector. Our investments include building modern airports and terminal extensions in Senegal, Morocco, Kenya, Ghana, Egypt, Cape Verde and improving airport navigation systems in the Democratic Republic of Congo. We’ve supported aircraft fleet expansion programs for Ethiopia and Côte d’Ivoire. We’ve also supported regional efforts for improving aviation safety and capacity building.
Africa must implement the 1990 Yamoussoukro agreement for open skies. While 20 countries have signed on, the 27-year old accord still faces implementation challenges. Rigid bilateral air service agreements have made it difficult to liberalize the regional aviation markets. We must make regional aviation markets competitive and drive down costs, raise efficiencies and improve connectivity and convenience.
Mr. President, congratulations on the ICAO certification of two airports in Nigeria (Abuja and Lagos) as a consequence of meeting global standards. This makes Nigeria the only country with 2 airports ICAO certified in West and Central Africa. The objective of the Bank is to support the ICAO safety and security standards certification of 20 African airports by 2019.
The Bank is committed to supporting the Nigerian government’s efforts to revitalize the aviation sector, with its focus on national airline development, aviation leasing companies, maintenance, repair and overhaul facilities, the development of an aeropolis, and cargo terminals for agricultural produce for exports.
As the aviation sector improves, Nigeria’s ease of doing business will improve further. You will build on your already remarkable achievements on the ease of doing business. So again, Mr. President, and Mr. Vice President permit me to say congratulations, as you continue to drive greater investments to Nigeria.
The African Development Bank will soon be going to our Board with a new aviation sector framework to support the revitalization of the aviation industry in Africa.
We look towards working with other partners on establishing facilities to de-risk financing for aircraft acquisition, upgrading of airports, expansion of regional navigational and air safety, and deregulation of the aviation industry to be more competitive and efficient.
In closing, let me say that from Abuja, a new voice must arise: Africa’s aviation time has come! And for this Mr. President, your voice and leadership will be critical. Together, let’s open up the skies of Africa, and together let’s integrate Africa. By so doing, we will build stronger and more resilient economies!
And what a great Africa that will be!
Comments are closed.