Two weeks ago, the Federal Airports Authority of Nigeria (FAAN) sacked Maevis, the Nigerian air travel logistics concessionaire, from the Murtala Mohammed Airport (MMA) and replaced the firm with the South African affiliate of the Swiss data firm, Societe Internationale de Communication Aeronautic (SITA). SITA was awarded a management contract to take over operation of the equipment installed at the MMA by Maevis as part of its obligations under a Build, Operate and Transfer (BOT) contract.
There is need for a background story here. On October 1, 2007, the federal government, through FAAN, entered into a concession agreement with Maevis. Under the 10-year concession, Maevis was to improve the system for managing passenger and aircraft handling. It invested N7 billion, sourced from Nigerian banks, in acquiring and operating an Integrated Airport Operation Management System (AOMS), Common User Self-Service System (CUSS), Flight Information Display System (FIDS), and Airport Pricing and Billing System from international IT vendors such as Cisco and Dell.When FAAN failed in its obligations to provide the uninterrupted power required to operate the sophisticated data relay system, Maevis was compelled to invest in a clean power centre and extensive cable laying to operate its data room, the boarding gates, and 62 check-in desks in the airport. Thus, it had been possible to process passengers and transfer their data to airports all over the world even when the MMA generators failed. The airport was thus certified to be in compliance with AITA Simplifying the Business (StB) classification. A key outcome of the investment in automation is that loopholes for corruption are being blocked.
FAAN had been at loggerheads with Maevis almost from the inception of the concession. It frequently stopped the concessionaire from required construction and deployment of new automation equipment that would further take away capturing data and invoicing for services such as aircraft landing and parking from human control. Maevis went to court when FAAN threatened to cancel the concession outright. The cases on this matter have not been decided yet. There is indeed a subsisting court injunction on the matter.
FAAN, on its part – similar to virtually all the concession agreements between it and private sector companies under President Olusegun Obasanjo – claims that the contracts were skewed in favour of Maevis and considers the benefits inconsistent with the resources of the federal government. This means that the sharing of the benefits that accrue from the improvement in services at the airport disproportionately favours Maevis.
While this claim may be true or false, the manner in which FAAN has pursued its case has left much to be desired. Oftentimes, government agencies such as FAAN think there are no broader implications to their actions, but the present action of FAAN surely has broader implications for the attraction of investment.
Considering that attraction of both domestic and foreign investment is very critical to the achievement of President Jonathan’s transformation agenda, the presidency, the minister for Aviation, the minister for Finance and coordinating minister for the economy, and the minister for Trade and Investment should ask FAAN some key questions.
First, why take an existing PPP contract and give it to another company without going through the Infrastructure Concession Regulatory Commission (ICRC), the Bureau for Public Procurement, and Federal Executive Council, despite written advice from the presidency to consult with these institutions in terminating the contract, and despite court injunction to cease/desist and maintain status quo?
Second, is FAAN exempt from relevant regulations and policies on awarding/managing infrastructure concessions and public procurement?
Third, SITA to which the contract has been awarded is reported to earn a fee of $1.40 on each passenger. This translates to $16 million a year and $160 million if the contract lasts over ten years (based on estimate of 12 million passengers a year). What is SITA investing to justify this income? What calculations did FAAN make to decide that this is adequate or inadequate level of compensation? What will happen to the equipment that Maevis has invested in and which is still in place at the airport?
Fourth, how does the FAAN action in sacking Maevis promote investment in Nigeria and President Jonathan’s transformation agenda?
Finally, to grow the Nigerian economy, we must attract investments. While not all investments may be optimal in the long run, the manner and method in which investors are treated often encourages or discourages other investors. For a government that is relying extensively on PPP for public infrastructure, the manner in which the case of FAAN and Maevis has been handled is at best highhanded and unsatisfactory. This case surely requires review at the highest level of government.
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