Sunday, July 29, 2012

Nigeria: Why foreign investment in aviation is elusive

Until the Federal Government creates an enabling environment by addressing some major challenges, its efforts to woo investors to the aviation sector, will remain sheer illusion. 

In an interview,the Chairman of Nigeria Aviation Safety Initiative  (NASI), Captain Dung Pam told The Nation that factors such as poor power supply and facilities account for why most investors from Europe, the United States and Asia prefer other destinations in Sub-Saharan Africa to Nigeria.

Pam, however, said the Federal Government, as part of its new drive to revolutionize the aviation sector, has designed the public-private partnership model, which is expected to drive infrastructure provision, given that the government does not have the financial muscle to bridge the gap in the facilities in the country’s over 22 airports.

He explained that until insecurity is addressed in some parts of the country; it would be difficult to attract the needed foreign direct investment, as most business players from the developed world would prefer to put their money where there is relative socio-economic stability.

Pam said the crisis caused by  Boko Haram has become a serious monster starring the nation and has robbed it of many multi-lateral offshore investments, as a report is not favorable to foreigners investing in some parts of the country.

Speaking against the backdrop of moves by a consortium of Chinese investors expressing interest to invest in infrastructure in four airports in the country, Pam explained that the Asian investors are skeptical about the safety of their investments given Nigeria’s penchant for lack of rule of law over concession contractual agreements.

He explained that inconsistencies in government’s policies, which tend not to protect private investments, remain a sore point as new investors are worried over the antecedents of other investors in the aviation sector.

Pam also noted that the high country risk classification of Nigeria in the finance and investment world accounts for the reluctance of many investors, who have to examine issues  before putting their funds into the aviation industry as opposed to situations in other countries.

He added that safety, which had become apparent after the two air crashes involving Dana Air and Allied Air Cargo, has raised insurance premium for investors who are considering investing in aircraft leases or rentals in the airspace.

Pam said: “ The government must act fast in tackling these issues, or else the expected inflow of foreign direct investment will elude us as a nation. Factors that investors take critical look at are political stability, personal security and the environment. If we must get the required investment into the aviation sector, it is high time the government acted fast in resolving a  lot of issues, not limited to the scourge of MEND, Boko Haram, power supply and the justice system.

“No foreigner will bring in his money when he is not sure of being protected by the justice system, if there is any violation of his contract or the terms of operations. The other issues include the high rate of inflation. Whereas in other countries in Europe and America, inflation oscillates between two and three per cent, in Nigeria it is about 12 per cent.

“Even, the interest rate on credit facilities, is relatively lower in some other countries. But it is not the same figure here in Nigeria. These are the reasons there is not much foreign investment in the aviation sector.” 


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