How import duty, space constraint affect air cargo business – Fagbemi, NAHCO GMD
The exemption of ground handling companies from import waivers granted airlines for the importation of aircraft spare parts, inadequate warehouse space for cargoes, low charges paid by airlines are among the many issues negatively affecting the air cargo subsector.
But Group Managing Director of Nigerian Aviation Handling Company (NAHCO Aviance) Adetokunbo Fagbemi, who spoke extensively on the many challenges of the sector, said that even though some progress has been made in terms of export and import revenue generation, the country is losing out on huge income that could have been earned from transit flights due to inadequate storage facilities among others.
Insufficient warehouse space
If we want to run our system with the kind of IT services needed to optimise output, there are facilities that we would need to put in place. So we need more space to be able to function properly. When NAHCO started, export was not our focus but now, we see that export is growing but in the last one year, it has almost doubled. If we are also looking at upgrading our cold storage facilities such that when we are exporting oranges, we would need more space within our warehouse to enable taking them freshly packaged from the farm to the aircraft packaged for export.
We have different categories and temperature degrees of cold room storage, so when you put all that together, you would need more space in order to function effectively. If we have more space, we would be able to automate some of our processes because we already have the software but using them appropriately, would require being able to lay out our warehouse. We have very good software, but we can’t use some of them because of space constraints.
We have discussed this issue many times with the Federal Airport Authority of Nigeria (FAAN) and we also talked about having a larger apron so that when an aircraft lands, there would be enough space for them to park. If you say that you are into air cargo business, you need to add more space for the aircraft because you can’t tell them to hold on.
What FAAN does sometimes is to have this done at the international airport but the pressure it puts is that we are not as efficient as we should be because we are moving back and forth, and it slows down work. We learned that there are plans underway to complete the expansion of the cargo ramp so it can accommodate more aircraft.
If these things are put in place, we would have the capacity to do more, so it depends on how much we are given. Anyone coming in and wanting to invest comes to look at the facilities that we have. For instance, we have airlines who come to us and say they want to do business in Nigeria and have their hub for cargo here and to see how best we can do it but most times we can’t. If such a business comes into Nigeria, FAAN would make more money from landing and parking, NAMA would make more income and other agencies and businesses within the ecosystem would benefit.
Transiting cold chain stock through Nigeria is something that if we have more space, we will do because we have other countries around us that have agric exports, but they don’t have the big carriers coming to be able to service Europe within the six to 12-hour window. Even if it is a small aircraft that goes around that time into Nigeria, because it is coming on smaller aircraft, we would have to prepack them into bigger boxes very quickly and load the aircraft that normally comes to Nigeria. This is not import, it is transit.
These opportunities come from entities that come to us every day wanting to do such businesses but the space we have right now will not enable us to do it effectively. Any airline that is coming even on transit is a source of revenue for the entire industry. We may not have anything for customs because it is not imported, it is coming and going, but if you look at the Nigerian ecosystem, it will benefit everyone. That is why we need to look at the different elements and see how we can grow all, import, export and transit business.
We would like to have the same benefits that the airlines have. For instance, they can decide to sell their used aircraft or turn into cargo. But we don’t have such advantages. Once you buy and use equipment and you want to dispose of it, you stock it as scrap. So we need more support than the airlines. The airlines get import waivers on the aircraft. So, we need import waivers for our equipment as well because it is the same aviation business.
Problem with multiple charges
Almost everywhere in the world, there are different charges but what is usually done is that there is a single window where every charge is put together where you pay one lump sum, and it is shared between different agencies. But the key question is, why are the charges being raised? What would they be used for and what would they cover? Are the charges relevant?
The government needs to decide that it wants to invest in export and grow it. For instance, if you want to export one kilo of yam from Lagos and one kilo of yam from Accra and one kilo of Ugu from Lagos and one kilo from Accra to the same destination, from a national perspective, some economists can be able to say that if something is a commodity and you make a cent from it, because you are doing many tonnes, if this is your target in terms of income, perhaps making a few pesos might give you the same amount over making so much naira with less. You can then come back and say how do we achieve this and make sure that our export is competitive? It goes beyond the charges.
There are so many steps needed to be taken before you commence exportation of goods. I was speaking to someone who exports Ewedu from Ogun State to the UK and at one time, they said the Ewedu had infestation possibly because he was using cow dung as fertiliser. So, if you want to know about these issues and what you have to do before going into the exportation of agro products, you would be talking to the plant quarantine agency. If you want to start exporting plantain chips to England or any European country, there are specifications which you have to meet but first, you need to get NAFDAC certification for that product.
You have to make all these enquiries so that you don’t make mistakes. It’s just like a domestic airline that wants to start flying internationally, the first thing you have to do is to be certified by the Nigerian Civil Aviation Authority (NCAA) before you even think of flying abroad.
In NAHCO, we have a relationship with most of the relevant agencies because people come to for information of how to export, we would link them to the agencies to get it.
How local cargo business can thrive
The best people to speak on that are the airlines, I can’t speak for them. But I believe that there is business for some high value low volume goods and for highly sensitive and perishable goods. There are strawberries and all kinds of food being grown in Jos and they come by road. By the time they arrive the South, they are bruised and some of them get damaged. There has to be facilities like warehouse and storage put in place at the local airports and maybe some kind of incentive to make it attractive because it has to be a business that must be supported to grow. But I believe that if there is enough incentives and equipment is put in place, there is a market, but it has to be with the support of the Federal and State Government. If it is properly structured, it is a business that domestic airlines can benefit from. There are competing modes of transportation so as an airline, so, positioning yourself for those goods that need to move by air is something that every stakeholder in the ecosystem would have to sit and work out.
How NAHCO has fared
Between COVID1-19 and now, there have been some major difference. We are not yet where we want to be but what we have been able to do is to invest in our facilities as much as possible. We have invested and continue to invest in training our staff because they are the most important resource that we have. If you get to our training school, you won’t find space because there is very regular training going on. We had already trained all our staff on the COVID-19 protocols even before the NCAA directed that we should do so.
Also, we have a board that is very supportive and a lot of people that are very strategic and that is why we started with our five-year transformation plan which is built on digital transformation, operational excellence, people and culture transformation, organic and inorganic growth, and diversification.
We have up-to-date software and as much as we do not have space within our cargo shed, we are still scanning and using our equipment to the fullest. We also have a strong IT team that has been able to develop so many applications that we are using to drive customer service, resolve internal technical issues and other stuff.
In terms of our ground maintenance team, they have been able to build steps, canopies, and a lot of the equipment that for a long time were not working, they have been able to repair them, and they are working perfectly well. We have also seen immense revenue growth and the data can be easily assessed from our website. COVID-19 affected us a bit, but we have bounced back, and, in some instances, we are doing better that we did in 2019. We have a very dynamic team that took a lot of heat and made lots of sacrifices during COVID-19. It was very tough, but we survived. Now, all our stations are operating fully.