LAGOS — The Federal Government’s recent decision to raise the contribution of aviation agencies to the Treasury Single Account (TSA) from 40 to 50 percent has sparked significant unrest within the Nigerian aviation industry.
The move, aimed at improving fiscal discipline and transparency, has been met with fierce resistance from stakeholders who argue that it jeopardizes the financial stability and operational effectiveness of key aviation bodies.
Rising Tensions Over TSA Policy
The TSA policy, which initially required cost recovery agencies to remit 25 percent of their Internally Generated Revenues (IGR), was later increased to 40 percent.
The recent adjustment to 50 percent has intensified concerns among industry experts and operators.
Critics argue that the policy’s new requirements could have severe implications for the Federal Airports Authority of Nigeria (FAAN), the Nigerian Airspace Management Agency (NAMA), and the Nigerian Civil Aviation Authority (NCAA).
In a circular dated December 28, 2023, Finance Minister Mr. Wale Edun mandated “super agencies,” including those in the air transport sector, to remit 50 percent of their IGR.
Edun stated that the policy was designed to enhance revenue generation, fiscal discipline, accountability, and transparency in the management of government resources.
However, the aviation sector’s reaction suggests that the policy’s unintended consequences may threaten the industry’s operational capacity.
Impact on Key Agencies
Federal Airports Authority of Nigeria (FAAN)
FAAN, responsible for managing 22 airports across Nigeria, is facing severe financial strain under the new TSA policy.
Managing Director Mrs. Olubunmi Kuku expressed grave concerns about the sustainability of airport operations with 50 percent of their earnings diverted to federal coffers.
FAAN’s operations are heavily reliant on substantial funding for capital-intensive projects, such as terminal upgrades, airfield lighting, security equipment, and runway maintenance.
The agency’s ability to fulfill these critical functions is increasingly jeopardized by the new remittance requirements.
Nigerian Airspace Management Agency (NAMA)
Engr. Farouk Ahmed, Managing Director of NAMA, has repeatedly called for a reversal of the TSA contribution increase.
He highlighted that the agency’s ability to maintain and upgrade crucial safety equipment and recruit skilled personnel is severely hampered by the policy.
NAMA’s infrastructure, including outdated surveillance systems, is in dire need of modernization, and the current financial model undermines its capacity to meet both local and international safety standards.
Nigerian Civil Aviation Authority (NCAA)
The NCAA, tasked with overseeing aviation safety and regulation, is also feeling the impact of the policy.
While Acting Director General Captain Chris Najomo has not publicly commented on the issue, NCAA’s Director of Public Affairs and Consumer Protection, Mr. Michael Achimugu, has raised concerns about the agency’s ability to effectively monitor the industry.
With only 28 percent of recovered costs remaining after remittance, the NCAA struggles to perform its regulatory duties adequately.
Industry Reaction and Expert Opinions
The growing discontent among aviation professionals is evident, with unions planning protests in response to the policy.
Mr. Ahmadu Illitrus, National President of the Air Transport Services Senior Staff Association of Nigeria (ATSSSAN), has criticized the policy for placing undue financial pressure on FAAN, NAMA, and NCAA.
He argues that the agencies’ operations, including personnel training and airport surveillance, are suffering due to insufficient funds.
Economic and Operational Implications
Sindy Foster, Principal Managing Partner at Avaero Capital Partners, questioned the policy’s impact on Nigeria’s aviation reputation. She noted that aviation service providers globally operate on a cost recovery basis and are expected to generate their own revenue.
The increased TSA contributions could lead to higher operational costs for airlines and airports, potentially reducing passenger numbers and overall revenue. This, in turn, could exacerbate the financial challenges faced by the aviation agencies.
Group Captain John Ojikutu (rtd), former commandant of Murtala Mohammed International Airport, Lagos, argued that mandating a 50 percent remittance without considering the agencies’ financial viability is unreasonable.
He emphasized the importance of ensuring that agencies have adequate funds for safety operations and infrastructure maintenance before imposing such high remittance requirements.
Government Response
In response to the growing concerns, Mr. Tunde Moshood, Special Assistant on Media and Communications to the Minister of Aviation and Aerospace Development, Festus Keyamo, assured that safety remains a top priority.
Although NCAA, NAMA, and FAAN have requested exemptions from the TSA policy, the minister is exploring other avenues to enhance the agencies’ financial stability.
Keyamo’s office is actively engaged in discussions with the government to address these issues and ensure that aviation safety standards are not compromised.
Conclusion
The decision to increase the TSA contributions from 40 to 50 percent has thrown Nigeria’s aviation sector into turmoil, with potential repercussions for the industry’s operational effectiveness and safety standards.
As stakeholders grapple with the policy’s impact, the government faces mounting pressure to reconsider its approach and find a balance between fiscal responsibility and the sector’s financial sustainability.
The outcome of ongoing discussions and potential adjustments to the policy will be crucial in determining the future stability of Nigeria’s aviation industry.
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