Five years after commencing full operations, the Federal Airports Authority of Nigeria, FAAN, and the ministry of aviation mount obstacles in the way of the Murtala Muhammed Airport 2, Lagos, thus frustrating the country’s model public private partnership
Murtala Muhammed Airport 2, MMA2, was conceived as a model airport, which dwarfs even the Murtala Muhammed (International) Airport, Lagos. When it was built five years ago, there were hopes, not only within aviation circles, but all over the nation, that it would be a model upon which the country’s infrastructure deficit would be addressed. But controversies, deception, lies, amongst others, trailed the MMA2 project, which is the first build, operate and transfer, BOT, experiment in the country.
Since the commencement of operations at MMA2 by BiCourtney Aviation Services Limited, BASL, five different law suits have been instituted against the concessionaire by the federal government, through the attorney general’s office; Ojeimai Holdings, which claimed to be Arik Air’s landlord; Federal Airports Authority of Nigeria, FAAN; Arik Air; and some unions in the aviation industry, challenging the tenure of the concession.
Stella Oduah, aviation minister, recently alleged that the concessionaire had broken several clauses in the agreement on the specification of the MMA2 infrastructure and remittance of funds to government. “What puts you and I in relationship is that agreement that assigns responsibility and says as long as you do yours and I do mine, we are in it together. But when you have contractual obligations that you unilaterally decide not to comply with, then there is something wrong with the relationship that I have with you,” Oduah explained.
George Uriesi, managing director, FAAN, said that as far as he is concerned, the agreement over the tenure of MMA2 stands at 12 years, not 36 years. The FAAN boss also said the concession agreement allowed the investor or the concessionaire to invest N3.9 billion in the terminal under a BOT arrangement for 12 years, and wonders how the concessionaire now claims that he invested N39 billion.
Uriesi and Oduah maintained that the concessionaire has not remitted to the government concession fee or rent for the space occupied by MMA2 as stipulated in the agreement because the general aviation terminal, GAT, was not released to BASL, which believes that the GAT is part of the concession agreement. Uriesi explained that the concession to BASL is of a space, insisting that GAT was not part of the concession. Oduah was also emphatic that GAT was not part of BASL’s contract. “GAT is FAAN’s property; GAT is FAAN’s airport owned by the Federal Government of Nigeria. It is not Bi-Courtney’s and was never given to Bi-Courtney,” the minister explained.
Efforts by the magazine to get a copy of the agreement from FAAN in the past two weeks have so far proved abortive. However, a copy of the agreement obtained by the magazine last week, revealed that FAAN and indeed the minister of aviation, might have been economical with the truth concerning the concession agreement over MMA2 with BASL. For instance, on the issue of tenure, FAAN actually offered the concessionaire the 36-year period. A specific memo written on FAAN letter head with reference number FAAN/1300/BD/402A/Vol.1, dated October 12, 2006, and addressed to the managing director of Bi-Courtney Consortium Limited, titled: “Re: Tenure of New MMA Domestic Terminal By Messrs Bi-Courtney on BOT Business Arrangement,” stated that on the basis of the KPMG report which recommended 36 years as the tenure for the concession, “FAAN is offering BCC Limited a concession period of thirty-six (36) years on the new MMA domestic terminal, Ikeja, being developed by Messrs BCC Limited on build, operate and transfer business arrangement. Please, formally indicate your acceptance, or otherwise, of this concession tenure so that we may conclude the formalisation of the documentation of the project.” Jaiye Oyedotun, then director of commercial and business development of FAAN, signed the letter.
Furthermore, investigations by the magazine in relation to the ceding of the GAT to BASL, revealed that FAAN and the ministry of aviation are in breach of the agreement. On May 17, 2007, Femi Fani-Kayode, then aviation minister, vide a letter signed by Garba Mamman, of the federal ministry of transportation (air transport), actually ceded the GAT to the concessionaire. The letter with reference number T. 4464/S.35/C.2/T3/49, titled Re: Formal notification of the use of the apron area of the current domestic terminal (the GAT area), and addressed to both director general of the Nigerian Civil Aviation Authority, NCAA, and the managing director of FAAN, reads: “I am directed to forward herewith a letter from BiCourtney Limited on the above subject and to inform you that the honourable minister of state 1 (air transport) has approved the company’s request as follows: (i.) The continued use of the old terminal’s parking space to park planes before they are ferried to the new apron for boarding; (ii.) To ferry passengers from the new terminal to the parking area for boarding.”
Dipo Kehinde, head, corporate communications, BiCourtney Consortium Limited, BCL, told the magazine that right from the beginning of the concession it was clear that the GAT was to be used by the MMA2 since it was part of the planning. Kehinde explained that based on the fact that the concessionaire had to use GAT, it was instructed by FAAN to build a new temporary apron for all disused aircraft. That effort cost BASL N594 million, which eventually moved all the disused aircraft there to enable the company take over the GAT. In addition, BASL directed to expand the link road between MMA2 and the GAT, and it responded promptly and built the road. “These two facilities were inspected by NCAA and approved; these two facilities were also shown to IATA when they visited the country to ensure that we are of good status. In law, these two actions alone are enough for BASL take over GAT, apart from the fact that the agreement so provided that you can take it over,” Kehinde argued.
Yet, going by further provisions of the agreement, the current remodelling work on the GAT being executed by the aviation ministry runs contrary to the concession agreement. The MMA2 agreement is very clear on the GAT as the entire concession was premised on certain rights, the most important being that MMA2 will be responsible for processing all domestic traffic in and out of Lagos. This is contained in Clause 2:2 of the agreement. According to this section, “save as otherwise provided for in Article 17:4 and 20:2, the concession granted to the concessionaire pursuant to this agreement is exclusive. The Grantor shall ensure that no part of the concession shall be granted to any other party unless the concessionaire is in breach of any of the obligation under the agreement that would give rise to a right of termination by the Grantor under Article 17 or is in breach of Nigerian law in relation to the concession.”
Furthermore, the agreement stated that, “the Grantor guarantees and assures that it would not build any new domestic terminal in Lagos State and that no existing terminal will be materially improved throughout the concession period that would compete with the concessionaire.” The agreement also provides that the concessionaire shall have a right of first refusal in the event that passenger traffic during the concession period necessitates an expansion of the terminal and the first right of consideration if FAAN and the federal government elect to build a new domestic terminal in Lagos State.
Importantly and worthy of note is that the contract guarantees and assures that all scheduled domestic flights in and out of FAAN’s airports in Lagos State shall during the concession period operate from the domestic terminal. FAAN further guarantees that it shall not, during the concession period, cause or authorise the development of a shopping mall or any facility within 200 metres from the perimeter of the site capable of impeding and of threatening the concession’s revenue generation; and in the event that the government decides to privatise or otherwise dispose of FAAN, or the terminal, the concessionaire shall have the first right of refusal to acquire the terminal or any other issue of ownership or right created by privatisation process under the public enterprises privatisation and commercialisation act or any other enabling status.
Further investigations by the magazine revealed that claims by both the aviation minister and Uriesi that the concessionaire did not meet the specification of MMA2, were baseless. FAAN and James Cubit and Co., lead consultant to the project, nominated by FAAN and the ministry of aviation, monitored everything about the project from scratch to end. It, therefore, means that if there is any non-compliance, it must have been with the consent of FAAN and the ministry. On the contrary, the original specification initially given to BASL to build was just a shed, which could not satisfy needs of the sector and would, indeed, have been a shame on the country. Realising this, BASL was said to have appointed a South African firm to redesign the whole project, which was approved by FAAN and the ministry of aviation. “If our offence was that we did better than what was expected, well, we plead guilty to Nigerians but we don’t think that would have been an offence because modifying the design is provided for in the agreement and once it is done in accordance with the agreement, then it is valid,” Kehinde explained.
On the cost of MMA2, contrary to Uriesi’s claims that the agreement stipulated N3.9 billion, investigations revealed that there was actually no fixed cost to the project, since it depended on what was to be constructed. A document at the instance of FAAN as at November 10, 2005, two years to completion of the project, had issued a document acknowledging that BASL had spent N15, 084, 926, 176: 51, on the project which it claimed represented works done on the building at 45 per cent completion; multi-storey car park building, 75 per cent. On February 21, 2007, the concessionaire engaged the services of Messrs Knight Frank, a firm of estate surveyors and valuers, to ensure proper documentation and valuation of the project and by March 26, 2007, the firm submitted a report valuing the airport at N39, 742, 684, 000. This represents physical assets and the economic value of operations.
Another controversy over the agreement is the issue of remittance of fees on the part of the concessionaire to FAAN and the federal government. But Kehinde stoutly said BASL was not in any way indebted to FAAN. Rather, he argued that from day one, FAAN chose to breach the agreement by depriving BASL of most of its revenue under this agreement. By setting up GAT, and allowing airlines to fly from there, FAAN, he explained, robbed BASL of its revenue base. He said FAAN was collecting passenger service charge, PSC, fuel surcharge, adverts revenue, revenue from cargo, and rentals – revenues that BASL would otherwise have been entitled to from domestic airlines.
Another instance is the basis of approval of the project that BASL will earn N3,000 per ticket, which was approved by both FAAN and the ministry. But because there was competition next door, BASL could only charge N300 as PSC, and the effect of this was a colossal loss of revenue by BASL. Wale Babalakin, chairman, BASL, at the fifth year anniversary of the company, disclosed that because of FAAN’s breach of contract, the revenue is so low that the running of the facility has had to be subsidised by N12 million monthly.
Determined to resolve the matter, and as provided for in the agreement, BASL went into reconciliation through a Coordination Committee. Under the agreement, if there is any dispute between the parties, the dispute was to be referred to the Coordinating Committee as contained in Clause 22:1:2 which states that “the coordination committee shall be responsible for resolving disputes in accordance with Article 22:1, concerning but not limited to construction, commissioning, operation and management of the terminal. This matter shall include the coordination of respective programmes and procedures of the parties for the construction, commissioning and operation of the terminal; the discussion of the steps to be taken on the occurrence of Force majeure affecting the construction, commissioning and operation of the terminal; appointment of experts for the resolution of the dispute; and any other matters mutually agreed to by the parties.”
On June 20, 2008, BASL sent a letter to the office of the attorney general of the federation and minister of justice, notifying him of existence of disputes in respect of the agreement and subsequently requested for the constitution and inauguration of the Coordinating Committee as stipulated in the agreement.
By September 10, 2008, the attorney general inaugurated the committee in line with the provisions of the agreement of three members each from both the side of the government and the concessionaires. The committee held seven meetings between September 10, 2008 and Friday, October 10, 2008, when it submitted its report and resolved that: FAAN was in breach of the agreement and that it should immediately stop operating from the GAT and hand over GAT to BASL for development in line with the agreement, as contained in Clause 2:2. It ruled that all the monies collected on this must be returned to BASL.
Months after the report of the committee, BASL went to court to compel FAAN and the aviation ministry to honour the agreement and refund all the monies. The company sued the attorney general and on March 3, 2009, a federal high court ruled in favour of the concessionaire that it be refunded all monies due to it and handed over GAT immediately. The court ruled that the ministry and agency of the federal government should desist from further acting in breach of the agreement. “Based on this, it was clear that it is the ministry and FAAN that were owing BASL money, and not BASL owing the ministry money. The Grantor refused to render any account and as we speak, the court has pronounced a monetary judgement against the ministry and FAAN running into billions of naira,” said Kehinde. But the federal government has so far not complied with the rulings and judgements.
The court has also restrained FAAN and the ministry from executing a revocation of the Hotel and Conference Centre project BASL is handling. Uriesi is convinced that the matter would be resolved in a way that is good for the country, and not for individuals anymore; but certainly, the federal government and its agencies have been lying to Nigerians on the status of the MMA2.