AM EDITORIAL: Government’s New Revenue Drive In Nigeria’s Aviation Industry: For Better Or For Worse?
Because of the capital intensive nature of aviation business and activities, and the place of the sector as a gateway to national economic development, the practice in most countries where the aviation sector thrives has been the reinvestment of bulk of proceeds from the sector into the industry in pursuit of growth sustainability and national interest.
Infact, the International Civil Aviation Organization (ICAO) policies on charges (Doc 9082) requires that Member States “ensure that revenues generated by the civil aviation sector are re-invested in the sector.”
The International Air Transport Association (IATA) “strongly opposes any form of tax or fee where the resulting revenue is not reinvested in the aviation industry and is merely meant to increase general government revenues.”
Over the years, aviation agencies in Nigeria have had to remit 40% of their annual revenues to the coffers of the federal government, thereby constraining the capability of the agencies to live up to their herculean obligations. This explains the poor infrastructure state of the ever increasing number of airports that Federal Airports Authority of Nigeria (FAAN) manages, the protracted delays in delivery of modern air navigation equipment and calibration facilities by Nigerian Airspace Management Agency (NAMA), inadequate recruitment and training of the regularly increasing required number of safety personnel and professionals by the Nigerian Civil Aviation Authority (NCAA), inability to provide the desirable quality of staff welfare for aviation personnel by the agencies, electricity power problems in the sector and other constraints that this annual 40% remittance has either created or contributed to.
Annual compulsory contributions of the federal government’s revenue generating agencies to the federation account was initially 25%. It was increased in October 2012 to 40%. Even though some aviation agencies of recent, sent proposals to the federal government requesting a review of the annual 40% remittance and their possible removal from Treasury Single Accounts (TSA), a recent federal government circular further raised the TSA contribution from 40% to 50%. A circular from the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun dated December 28, 2023, has directed parastatals classified as “super agencies” which are self-funded, to remit 50% of their Internally Generated Revenues (IGR) to the government coffers. This also involves the 65 parastatals listed under the schedule to the Fiscal Responsibility Act, 2007, which includes NCAA, NAMA and FAAN.
Patriotic stakeholders believe that this development threatens safety of the industry and contradicts ICAO’s expectations that the agencies reinvest their surplus in safety critical projects. This dilemma created for the agencies, is very likely to compel agencies to multiply beyond reason, the already excessive number of charges, fees and tariffs paid by service consumers under the guise of revenue source expansion.
We have always maintained on this platform that aviation business is international in nature and operated based strictly on globally accepted best practices. If under the 40% revenue remittance regime, the aviation agencies merely struggled to meet their basic obligations to the sector, what would a 50% remittance regime do to the sector? Will it take the sector to a better or worse situation? We just wonder!
We therefore urge the federal government of Nigeria to consider exemption of aviation agencies from the intended 50% remittance from annual IGR. Going ahead to implement such policy may not be a wise idea and would obviously work against the interest of the industry, nay, Nigeria’s economic progress. AM