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Hurdles for Local Carriers as Foreign Airlines Dominate Lagos



Foreign Airlines
  • Hurdles for Local Carriers as Foreign Airlines Dominate Lagos

Local carriers operating on the international route are faced with fresh hurdles as fellow African airlines now have dominance in the Lagos market.

The entry of the likes of RwandAir, Asky and Ethiopian airlines into the Lagos market, the heart of air travel in Nigeria, opens Arik Air, Air Peace and Med-View to competition right at their hub.

While fear has since gripped the local airlines over lack of competitive advantage, Nigerian passengers may witness great times enjoying more attractive offers, better onboard services and competitive fares from the foreign airlines.

Some experts have, however, faulted the development, describing it as indicative of government’s failure to protect its own flag carriers, airlines and the market.

The Guardian learnt at the weekend that the patronage of some local flights to Accra and South African routes has slightly dipped with the attendant drop in revenue in the last one week. The hint was given at a time International Air Transport Association (IATA) recorded a 7.1 per cent traffic growth among African carriers, compared to the traffic a year ago.

It was learnt that the national carrier of Rwanda, RwandAir, last month gained the approval of the Ministry of Aviation in Nigeria to ply Lagos-Accra route on a direct flight. The approval widens competition with Arik Air, Med-View, Air Peace and Ghana-based Africa World Airlines (AWA) on the route.

The fastest growing carrier in East Africa said the new addition was part of its consolidation on the African market.

RwandAir Country Manager, Nigeria, Ibiyemi Odusi, said the direct flight between the two West African cities was a result of the “fifth freedom right” the carrier secured from the Nigerian government.

The “fifth freedom of the air” is the right or privilege, in respect of scheduled international air services, granted by one state to another state to put down and to take on, in the territory of the first state, traffic coming from or going to a third state. The rights were packaged in the United States several decades ago.

RwandAir has been running the Lagos-Accra flights since March 23, 2017, creating more travel options for passengers on the route with the state-of-the-art Airbus 330 and Boeing 737.

Similarly, Asky Airlines has commenced its non-stop flight on the Lagos-Lome-Johannesburg route, giving already troubled Arik Air and South African Airways a challenge.

The Lome-based airlines in Togo have Ethiopian Airlines as its parent company and partner. Ethiopian Airlines, with at least 16, 787 dream liners, uses the Lome airport as transit hub for its Lagos-U.S. flights.

A keen observer of the industry, Group Captain John Ojikutu (rtd), was alarmed by the development, saying that the government should investigate officials that signed such agreements.

Ojikutu said: “RwandaAir flies direct Lagos to Accra! Who signed this patrimony of ours out again in the name of commercial agreements? How can the domestic airlines develop their capacities when the markets on the national exclusive routes are being mortgaged to foreign airlines?”

The Nigerian Civil Aviation Authority (NCAA) explained that it was a legitimate commercial agreement that would give government more revenue.

The spokesman of the apex regulatory body, Sam Adurogboye, said there was nothing untoward about the approval, claiming it was within the ambit of aviation regulations.

Adurogboye said the commercial agreement was signed with some conditions, which include certain royalty that the airlines must pay.

On its effect on the local airlines, he said that they were not running the routes as they should and needed to put their houses in order instead of complaining.

The ability of local airlines to withstand competitions with African leading carriers on the local route, however, worries more industry watchers.

The Chairman of Airlines Operators of Nigeria (AON), Capt. Nogie Meggison, said such agreements were possible where officials did not put Nigeria first.

He said: “Nobody does fifth freedom anymore. It is like giving your own away to develop others. Those countries are developing their economies at our own expense, just because our own people fail to put Nigeria first to grow our local airlines.

“Cape Town Convention was signed in South Africa, but South Africa is not a signatory to the agreement. You don’t operate an open sky when you are the one that has the advantage. The people struggling to sign open skies have just one airport, compare to yours that is 22. Seventy per cent of West Africans reside in Nigeria. So, why are you throwing yourself and your economy to others to prey on?”

Other experts have little sympathy for the local airlines. A source, who craved anonymity, said they got what they deserved in the matter, given their usual habit of blocking other airlines from plying the route they are not ready to take.

“Nigeria currently has many Bilateral Air Service Agreements (BASA) that are open to airlines to explore. Besides, Yamoussoukro open-sky agreement is there for African airlines to freely explore and Nigeria signed into it. Why are our airlines not exploring it?

“They don’t want anyone to call them weak, yet they are not ready to do anything. They are the same group of people that will be making noise that government is giving their market away. But the world has changed and far gone is the era of holding tightly to a market, that it is all yours. The passengers want options, authorities want streams of income and the market is ready for multiple players that are serious and ready,” the top official said.

The President of the ART, Gbenga Olowo, earlier raised concern that the domestic airlines had consistently rejected the option of merger and partnership to come out stronger and be in a position to compete with the foreign carriers dominating the African airspace.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.


Gold Advances to Three-Month High on Virus Woes, Inflation



Gold - Investors King

Gold rose to the highest in more than three months as concerns over the pace of a global recovery crept back in following a flareup in coronavirus cases in parts of Asia.

The pandemic is wiping out “entire families” in villages in India, where more people are saying the scale of the crisis is much bigger than official numbers reveal. The World Economic Forum is canceling the annual meeting it was planning to hold this August in Singapore, while cases in Thailand have surged.

Investors will turn to the minutes from the Federal Reserve’s April meeting due Wednesday for potential clues to officials’ views on the recovery and how they define “transitory” when it comes to inflation. Fed Vice Chair Richard Clarida said Monday that the weaker-than-expected U.S. jobs report for April showed the economy had not yet reached the threshold to warrant scaling back the central bank’s massive bond purchases. Meanwhile, Fed Bank of Dallas President Robert Kaplan said supply and demand imbalances and base effects will contribute to elevated inflation this year, but he expects price pressures to ease in 2022.

Gold’s rebound puts it close to erasing this year’s declines, with recent inflows into bullion-backed exchange-traded funds signaling a boost to investor sentiment. Expectations for further increases in consumer prices could start to bolster demand for gold as a hedge.

“It seems inflation fears are finally translating into higher precious metals prices,” said John Feeney, business development manager at Sydney-based bullion dealer Guardian Gold Australia. “ETF investors are starting to swing into net-buyers again, after the recent consolidation, and it makes sense for the metals to play catch up to the recent moves higher in other commodities. We also have a lot of uncertainty with Covid-19 strains and mutations in the Asia-Pacific region that would be leading to safe haven buying.”

Spot gold rose as much as 0.4% to $1,873.82 an ounce, the highest since Jan. 29, and was at $1,868.01 by 12:16 p.m. in Singapore. Silver and palladium gained, while platinum steadied. The Bloomberg Dollar Spot Index fell 0.1%.

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Hamburg’s German African Energy Forum to jumpstart Africa’s Economic Transformation



green energy - Investors King

The African energy sector continues to solidify partnerships with German investors and technology with the aim of leading energy businesses from Germany, Europe and across the African continent. From upstream to downstream, Africa’s energy sector must accelerate its transition to net-zero, continue to adopt new technologies and start to embrace digitization and decentralization over the next decade.

The 14th German African Energy Forum in Hamburg hosted by Afrika Verein continues this dialogue and pushes for investment with a clear focus on highlighting the entire African energy mix, together with economic cooperation between Germany and Africa.

As stated by Afrika-Verein, “the economic impacts of the COVID-19 pandemic, climate change and the ongoing digital transformation of economies need a green, smart and quick response from the energy sector. Power generation is still one of the main enablers for inclusive economic growth in Africa.” With this said, the African Energy Chamber strongly endorses and supports the 14th German African Energy Forum in Hamburg in its efforts to do so.

In the same manner, there is a strong need for German and African businesses and policymakers to support policies that create an enabling environment for investment in a fair and evolving industry. Germany’s march to net-zero transition can’t be met if Africa is behind. The African energy sector’s ability to support the rapidly increasing demands for electricity, the deployment of smart infrastructure to manage energy more effectively, gas monetization, combating energy poverty and the approach we take to financing Africa’s clean energy transitions in a post Covid era makes this forum more important than ever.

The 14th German African Energy Forum is set to provide key market insights, trends and opportunities over the next decade as the energy sector prepares to support a global green economy.

“Year after year, Afrika Verein has been consistent in keeping Africa at the center of German foreign policy and energy policy. Their ability to bring together key stakeholders from Africa and Germany to work on energy matters including Germany and Africa is inspiring” stated NJ Ayuk, Executive Chairman of the African Energy Chamber.

“We are going to need a real net-zero transition that takes into consideration policy, regulation, innovation, technology and investment in Africa. A disorderly transition creates a stronger impulse for job losses, geographic inequity and a deterioration in inequality. In return, economic disenfranchisement can reduce public support for environmental policies over time Germans and Africans need to work together to avoid it.” Concluded Ayuk.

The Africa Energy Chamber believes Hamburg will be a great place for energy investors, project developers, policy makers and innovators to share insights and expertise on key transition trends and opportunities in Africa.

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Crude Oil

NNPC Closes Direct Sale and Direct Purchase Deals With 26 Firms



NNPC Nigeria

The Nigerian National Petroleum Corporation (NNPC) has picked 26 foreign and local companies as well as 12 countries to lift the country’s crude oil for the next two years.

The crude term contracts, expected to run from 2021 through 2023, would see the firms and the selected nations, which would operate on a Government-to-Government (G2G) basis to purchase the commodity from the national oil company.

The deal is coming less than a week after the corporation chose 16 oil and gas consortia for its new crude-for-fuel swap contracts for one year starting in August.

The contracts, known as Direct Sale, Direct Purchase (DSDP) are high-stakes agreements used to supply nearly all of Nigeria’s petrol needs as well as cover some of its diesel and jet fuel consumption.

However, in the fresh crude oil term agreements, it was observed that the names of majority of the companies involved in the DSDP deal also appeared in the list of those picked by the national oil company for the crude term contracts.

The list sighted by the media showed that the preferred companies included Sahara Energy Resources Limited, Oando, Duke oil (an NNPC subsidiary), Petrogas, AA Rano, MRS, Mercuria and Vitol.

Other oil and gas concerns which scaled the NNPC selection hurdle were Oceanbed Trading Limited, Levene Energy, Bono Energy , Mocoh Energy, BP Oil, West Africa Gas Limited, Litasco SA, Emadeb, Hyde, Matrix and Brittania-U.

Other names listed by the NNPC as having qualified for the contracts included Masters, AMG, Casiva, Barbedos, Trafigura, Hindustan and Patermina.

NNPC has its own equity share of crude oil from its Joint Ventures (JVs), usually shared on a 60 to 40 basis and thereafter appoints companies and issues licences to lift its share of the oil on a Free on Board (FOB) basis.

The companies and countries nominate ships that transport the crude which is sold in the international market. Sometimes, the NNPC also awards contracts to governments to carry out the business.

In the document approving the qualified countries, China, Niger, Cote D’voire, Ghana, India, Togo, South Africa came tops, while Sierra Leone, Liberia, Turkey, Senegal, and Fujaira also made the cut.

Typically, entities qualified to take part in the contract bid are divided into four categories, namely a bonafide end user who owns a refinery and or retail outlets that can process Nigerian crude oil grades.

For the government to government contracts, or what is termed “bilateral relationships”, with what the corporation terms “high energy consuming nations”, bidding nations must provide proof that the entity is wholly owned by the relevant country or provide evidence of a bilateral agreement with the designated nation.

The third category is the internationally established and globally recognised large volume crude oil traders, while the fourth classification are indigenous companies engaged in Nigeria oil and gas downstream business activities.

In addition, qualifying foreign companies must demonstrate a minimum annual turnover of $500 million or the naira equivalent and a net worth of not less than $250 million or the naira equivalent for the previous financial year.

For indigenous firms, they are required to have a minimum turnover of $200 million or the naira equivalent and a net worth of $100 million for the preceding financial year ending.

Bidders are also to show their ability to handle supplies of crude and must list facilities and products processed or sold over the last three years, in addition to disclosing links to NNPC or the Bureau of Public Procurement (BPE) and confirming that directors have not been convicted of fraud or financial impropriety.

As with all Nigerian tenders, NNPC also highlights that the local content law must be strictly adhered to in terms of, among others, the use of Nigerian shipping companies, insurance and banks where possible.

In the past, Civil Society Organisations (CSOs) in the country’s oil and gas space had argued that G2G contracts with smaller, non-refining countries have high governance risks and low policy benefits for Nigeria.

For instance the Nigeria Natural Resource Charter (NNRC) has asked that term contracts should be carried out through a transparent and competitive tender process that includes robust pre-qualification standards and an end of sales to smaller non-refining countries unless NNPC can publicly explain the deals’ policy benefits.

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