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Cancellation of Royalties: FG Loses $1bn Annually to Foreign Airlines

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Facts have emerged that the federal government loses about $1 billion annually from international airlines which pay royalties to cover their flights to Nigeria without reciprocity from indigenous carriers.

Government said it discontinued the collection of royalties from foreign airlines on the argument that Nigerian airlines are also flying into the countries of those carriers that also operate in Nigeria.

But investigations revealed that out of 27 foreign airlines that fly into Nigeria, Nigerian airlines only fly to London, United Kingdom, Johannesburg in South Africa and New York, in United States.

The Airline Operators of Nigeria (AON) and other industry insiders therefore posit that the decision by the Ministry of Aviation that foreign airlines should stop paying royalties and has not migrated to slot allocation was done to benefit the international carriers against Nigeria’s interest.

Royalties accrue from commercial agreements which used to be an offshoot of Bilateral Air Service Agreement (BASA) when two countries sign to determine air traffic between them.

For example, Qatar and Nigeria may sign BASA but because Qatar Airways fly into Nigeria and there is no corresponding Nigerian airline that operates in Qatar, the airline will pay royalties to Nigeria as agreed in the commercial agreement reached between the two countries.

A source from the Ministry of Aviation said that since royalties were banished last year, the Nigerian government earns nothing from the international airlines and many of them have increased their frequencies into the country, as government is yet to adopt slot allocation policy whereby airlines that fly into the country are made to pay for slots, as it is done in many other countries.

The source said what this means was that Nigeria allows itself to be ripped off by these airlines which are not into any kind of partnership with indigenous carriers and contribute nothing to the development of aviation in Nigeria, yet, they make multimillion dollars revenues from their operations in the country.
The CEO of Med-view Airline, Muneer Bankole, at the International Air Transport Association (IATA) annuall general meeting in Miami, United States lamented the huge losses incurred by government that failed to benefit from the operations of these foreign airlines like other countries.

“It is one of the regrets of today and I still feel so sad to say that Nigerian government needs to do a lot. We have almost 27 airlines coming into Nigeria and 70 per cent of them are from Europe and the Middle East. They are not bringing anything into the country; they are taking out of our economy.

“I stand to be corrected, Emirates alone operates three frequencies to Nigeria daily. In a month, that is about 90 flights and about 1,000 flights in one year. Etihad, does the same, so if you put all these together you can project 6,000 flights which they take out of our economy annually without contributing anything,” Bankole said.

He therefore advised that the Nigerian government and other leaders in Africa should work together to stem the influx of the Gulf and other airlines in other to develop local capacity and create jobs.

“Government has stopped the commercial rights it had signed with the airlines so it no more collects royalties from these airlines, which means that Nigeria gets nothing from these airlines. So what government should do is to support the local carriers which create jobs. As I am now I have about 350 people that are on my payroll and that is bringing people out of the streets, so what is expected from government is to support me, but instead of supporting me they are giving the local operators double taxation.

“Commercial agreement between airlines and nation’s in Bilateral Air Service Agreement is the prerogative of every government to reciprocate the frequencies it has given to an airline. Government should charge for unreciprocated frequencies operated by these airlines and government should use these monies to support the local carriers and develop aviation industry,” Bankole said.

It is believed that if government adopts slot allocation as policy, it will be generating over three times what it used to earn from royalties.