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Despite Poor Infrastructure, FG Rakes in N45bn from Aviation Agencies

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  • Despite Poor Infrastructure, FG Rakes in N45bn from Aviation Agencies

Revenue generating agencies in the aviation industry remitted over N45 billion to the federal government between 2015 and 2018, amid poor airport infrastructure, absence or obsolete landing aids and inadequate manpower development, findings have revealed.

These revenue generating agencies include the Federal Airports Authority of Nigeria (FAAN), the Nigerian Civil Aviation Authority (NCAA) and the Nigerian Airspace Management Agency (NAMA), which are mandated by law to pay 25 percent of their gross earnings to the federal government’s Consolidated Revenue Fund (CRF).

Data obtained from the aforementioned agencies showed that while in the last three years, NCAA remitted about N17 billion to government; NAMA paid N15 billion, while FAAN paid N13 billion.

While NAMA and the NCAA refused to make available full details of remittance to the government, payments by FAAN showed that in 2015, FAAN paid N4,151,496,255. 29; in 2016 it paid N2,565,736,042.80; 2017 it also paid N3,511,824,344.60 and in the first three quarter of 2018, it paid only N2,034,849,312.27, making it a total of N12,943,905,954.96.

Reacting to these payments, the President of Air Transport Service Senior Staff Association (ATSSSAN), Mr. Ilitrus Ahmadu, called for a review of the 1999 Constitution as amended such that the funds would be deployed for the development of airport infrastructure, provide navigational aids and modernise airport terminal facilities, saying when the funds are paid to government they are never used to fund any project in the industry.

He said, “I think there are infrastructural issues begging for attention in the industry, which this money could be used to solve, so why ask FAAN to remit this money to the government? If government allowed FAAN to use this money to provide essential facilities it can monitor if the agency is judiciously utilising the money. This is not excess generated funds that government is demanding from these agencies; they are mandated to pay 25 per cent of their budgeted revenue to government.

“NCAA needs a lot of money for human capital training and establishment of some facilities, including the Nigerian College of Aviation Technology (NCAT), Zaria which needs funds to upgrade its facilities to the global standard as the International Civil Aviation Organisation (ICAO) recognized it as excellence training centre.

“For now the school is not conducive for training, it needs more money to upgrade it to top training institution it ought to be.”

However, a senior FAAN official said that it is only in Nigeria that airport agencies are meant to pay money to government, saying that in other parts of the world, airports use the money generated to develop the airports.

The source said, “In other parts of the world, airports do not collect money to pay to government; that is why our situation is pathetic. Our model of airport management is different from any other in the world. Most of the money we earn we use to bribe government officials at the ministry just for them to approve the projects we want to do to improve the airports.

“They are not interested in the maintenance of the airports. Sometimes they order for irrelevant projects to be done at the airports but you cannot question them. That is how bad it is.”

Furthermore, the FAAN official said airport facilities would improve if the ministry could allow FAAN to use 20 per cent of its revenue to develop the airports.

“The people who manage the airports are not held accountable for what happens at the airports because they are not the ones that take the decision on how the facilities are run. If FAAN is given financial autonomy it will improve the airport infrastructure and become innovative like other airport management companies around the world,” he said.

The Managing Director of Aviation Consulting Company, Mr. Tayo Ojuri, lamented that government does not give the agencies subvention; yet it collects 25 per cent of the revenues the agencies pay into Single Treasury Account (TSA).

According to him,“In a situation where the government decides to cut the budget all the time, it means the government hasn’t realised yet that aviation is an economic catalyst. There is never enough money. But I believe commercialising these airports will drive inflow and being able to input that money that is realised from the airport to develop capital projects within the airport. This will actually be revenue generating.

“Ghana Airport Company Limited is a commercial entity, it is free from government interference as it can take a loan and do anything it wants to. FAAN is still tied too much to the government. Management of the airports is still tied to government bureaucracy and this is where the challenge is. So, moving forward, we need to commercialize the airports and it will function in line with best international practices.”

An official from NAMA also said that government has judiciously been removing agencies’ monies “and NAMA does not spend any money that has not been budgeted. We strictly follow the rules but we don’t talk about the money they take from us.”

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

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Crude Oil

Oil Rises as Threat of Immediate Iran Supply Recedes

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Oil prices rose on Tuesday, with Brent gaining for a fourth consecutive session, as the prospect of extra supply coming to the market soon from Iran faded with talks dragging on over the United States rejoining a nuclear agreement with Tehran.

Brent crude was up by 82 cents, or 1.13%, to $73.68 per barrel, having risen 0.2% on Monday. U.S. oil gained 91 cents, or 1.3%, to $71.79 a barrel, having slipped 3 cents in the previous session.

Indirect discussions between the United States and Iran, along with other parties to the 2015 deal on Tehran’s nuclear program, resumed on Saturday in Vienna and were described as “intense” by the European Union.

A U.S. return to the deal would pave the way for the lifting of sanctions on Iran that would allow the OPEC member to resume exports of crude.

It is “looking increasingly unlikely that we will see the U.S. rejoin the Iranian nuclear deal before the Iranian Presidential Elections later this week,” ING Economics said in a note.

Other members of the Organization of Petroleum Exporting Countries (OPEC) along with major producers including Russia — a group known as OPEC+ — have been withholding output to support prices amid the pandemic.

“Additional supply from OPEC+ will be needed over the second half of this year, with demand expected to continue its recovery,” ING said.

To meet rising demand, U.S. drillers are also increasing output.

U.S. crude production from seven major shale formations is forecast to rise by about 38,000 barrels per day (bpd) in July to around 7.8 million bpd, the highest since November, the U.S. Energy Information Administration said in its monthly outlook.

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Oil Prices Rise as Demand Improves, Supplies Tighten

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Oil prices rose on Monday, hitting their highest levels in more than two years supported by economic recovery and the prospect of fuel demand growth as vaccination campaigns in developed countries accelerate.

Brent was up 53 cents, or 0.7%, at $73.22 a barrel by 1050 GMT, its highest since May 2019.

U.S. West Texas Intermediate gained 44 cents, or 0.6%, to $71.35 a barrel, its highest since October 2018.

“The two leading crude markers are trading at (almost) two-and-a-half-year highs amid a potent bullish cocktail of demand optimism and OPEC+ supply cuts,” said Stephen Brennock of oil broker PVM.

“This backdrop of strengthening oil fundamentals have helped underpin heightened levels of trading activity.”

Motor vehicle traffic is returning to pre-pandemic levels in North America and much of Europe, and more planes are in the air as anti-coronavirus lockdowns and other restrictions are being eased, driving three weeks of increases for the oil benchmarks.

The mood was also buoyed by the G7 summit where the world’s wealthiest Western countries sought to project an image of cooperation on key issues such as recovery from the COVID-19 pandemic and the donation of 1 billion vaccine doses to poor nations.

“If the inoculation of the global population accelerates further, that could mean an even faster return of the demand that is still missing to meet pre-Covid levels,” said Rystad Energy analyst Louise Dickson.

The International Energy Agency (IEA) said on Friday that it expected global demand to return to pre-pandemic levels at the end of 2022, more quickly than previously anticipated.

IEA urged the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, to increase output to meet the rising demand.

The OPEC+ group has been restraining production to support prices after the pandemic wiped out demand in 2020, maintaining strong compliance with agreed targets in May.

On the supply side, heavy maintenance seasons in Canada and the North Sea also helped prices stay high, Dickson said.

U.S. oil rigs in operation rose by six to 365, the highest since April 2020, energy services company Baker Hughes Co said in its weekly report.

It was the biggest weekly increase of oil rigs in a month, as drilling companies sought to benefit from rising demand.

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Crude Oil

FG Spends N197.74 Billion on Subsidy in Q1 2021

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The Federal Government has spent a total sum of N197.74 billion on fuel subsidy in the first quarter (Q1) of 2021, according to the Federal Account Allocation Committee (FAAC) report for May.

The report noted that the value of shortfall, the amount the NNPC paid as subsidy, in the March receipts stood at N111.97 billion while N60.40 billion was paid in February.

In the three months ended March, the Federal Government spent N197.74 billion on subsidy.

The increase in subsidy was a result of rising oil prices, Brent crude oil, against which Nigerian oil is priced, rose to $73.13 per barrel on Monday.

The difference in landing price and selling price of a single litre is the subsidy paid by the government.

On May 19, the Nigerian Governors Forum suggested that the Federal Government removed the subsidy completely and pegged the pump price of PMS at N380 per litre.

The governors’ suggestion followed the non-remittance of the NNPC into the April FAAC payments, the money required by most states to meet their expenditure such as salaries and building of infrastructure.

However, experts have said Nigeria is not gaining from the present surge in global oil prices given the huge money spent on subsidy.

Kalu Aja, Abuja-based financial planner and economic expert, said “If Nigeria is importing Premium Motor Spirit and still paying subsidy, then there is no seismic shift.”

“Nigeria needs oil at $130 to meet the deficit. In the short term, however, more dollar cash flow is expected and with depreciated Naira, it will reduce short term deficit.”

Adedayo Bakare, a research analyst, said that the current prices do not really mean much for the country economically.

He said, “The ongoing transition away from fossil fuels and weak oil production from the output cuts by the Organisation of Petroleum Exporting Countries will not make the country benefit much from the rising oil prices.

“Oil production used to be over two million barrels but now around 1.5 million barrels. We need OPEC to relax the output cuts for the naira to gain.”

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