Home Uncategorized 5% TSC: Ojikutu alleges short-change of aviation agencies by NCAA….

5% TSC: Ojikutu alleges short-change of aviation agencies by NCAA….

Retired Group Captain John Ojikutu

By retired Group Captain John Ojikutu


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The Nigerian Civil Aviation Authority (NCAA) is a regulatory agency statutorily responsible for the oversight of the safety, security and economic wellbeing of the Nigeria civil aviation industry. By statutes in the Nigerian Civil Aviation Acts (CAA) 2006, the NCAA is tasked in the Part 12 (1) of the Act to collect on behalf of itself and four other aviation agencies, 5% charges on all the Airlines Passengers’ Ticket Sales, Air Chartered Services charges, Cargo Freight Charges etc. for the development and improvement of safety and security infrastructural systems, services and human capital development of related operations in the aviation sector.
Unfortunately, the manner the recordings of the earnings from these statutory charges had been handled by the NCAA and its Consultants in the last 10 years and still being handled today, nobody, not even the National Assembly in its oversight responsibility of the sector, cared to know the gross and net earnings from the statutory charges and the losses too through manipulation of figures; all of which run into billions of naira every year. The other four aviation agencies, viz: NAMA, AIB, NCAT and NIMET that share the earnings from the charges in the ratio of 23%, 3%, 7%, 9% respectively, appeared to be complacent and contented with whatever is given to them by the NCAA whose share is 58%. None of them appeared to have knowledge on how to assess the true or actual amount that is collected yearly from those charges. Yet they all have challenges of insufficient funds for developing and improving their infrastructures and the manpower needed to sustain their operations.
The consequences of the manipulation of the records figures and the exploitation of the earnings by those charged or contracted by the NCAA to collect the charges and the complacency of the major shareholders of the earnings are grave on safety operations activities and services of both the government and the private operators in the sector.
At a Press Conference in February, 2017, the NCAA released a report that showed earnings from Airlines Ticket Sales alone for the year 2015 and 2016 as N385 billion and N330 billion respectively. These figures were not broken down to elucidate the earnings for neither international nor domestic passengers but could implied that the 5% Ticket Sales Charges (TSC) from these earnings would be about N19.25 billion and N16.5 billion respectively for 2015 and 2016. These figures are misleading when compared with the records available at the NCAA DATR on the 5% TSC for the international and domestic airlines ticket sales alone especially from January to December 2016 which was N15.1bn in naira and $23.5m in dollar or a total of N23.3bn in naira. If N23.3bn was the recorded 5% TSC on the ticket sales alone in 2016 by the NCAA DATR, the Ticket Sales Earnings therefore cannot be N330bn as presented by the NCAA at the February 2017 conference but N466bn; a difference of N136bn.
At the same 2017 Press Conference, the NCAA recorded passengers traffic figures of 11.4m and `11.3m for 2015& 2016 respectively are also misleading when taken against the figures of 15.2m and 14.2m recorded respectively for the same periods by FAAN “the -passengers’ -gate – keeper” at all the national airports. The NCAA also recorded 3,272,331 for each of the same years, for international passengers while the FAAN figures were 4.30m and 4.20m respectively. Similarly, for the same period, the NCAA domestic passengers’ traffic figures were 8.1m and 8.0m respectively, while FAAN recorded 10.2m and 10.9m respectively for the same period.
The huge difference of over 4m between FAAN and NCAA on the overall passengers figure for each of the two years and in particular the difference of over 1m in the international passengers figure are gaps of holes that made the NCAA recorded Airlines Ticket Sales Earnings of N385bn and N330bn for 2015 and 2016 misleading and questionable. There are evidences also from government and private operators and from international organisation records in 2016 and 2017 that showed the earnings on international passengers ticket sales alone to be more than NCAA recorded earnings for the same years and in many other years . These earnings are generally more than 80% of the total airlines Ticket Sales.
For instance, if only the ticket sales earnings for 2015 and 2016 are taken into consideration and 2m of the international outbound passengers is taken into context for each year; if a flat rate of N300,000 is factored for each passenger without factoring the fares of the First and Business Classes passengers, the total earnings from passenger ticket sales for each of the two years would not be less than N600 billion. The 5% TSC on the earnings would therefore not be less than N30bn. Similarly, if the ticket sales of about N90 billion for just about 5 million each of the 5.5 million (2015) and 5.4 million (2016) domestic outbound passengers are considered and at a flat rate of N18, 000 per passenger is added, the total earnings on Ticket Sales would not be less than N690 billion for each of the two years. The total 5% TSC would also not be less than N34.5bn. If however, the actual passengers’ figures for the two years were used, and the First and Business Classes passengers’ fares were factored into the earnings, the total earnings would be more than N700 billion, possibly more than N800bn. The 5%TSC would therefore be N35bn or more than N40bn. The NCAA and its Consultants however, recorded less than N400 billion as passengers’ ticket sales with the same passenger figure for each of the two years thereby recorded loss of about N20 billion each year on the 5% TSC alone.
Secondly, recall that IATA reported in 2017, that commercial civil aviation contributed about $8.5 billion to the Nigeria GDP in 2016. If 25% of this amount was considered as Airlines Ticket Sales contribution alone and possibly the remaining 75% were contributed from Fuel Marketers Sales, Airport and Air Navigational, Ground Handling Services Charges, etc, the 25% of $8.5 billion ($2.25 billion) or N785.5 billion on Ticket Sales, could possibly have included the First and Business Classes fares; this was more than twice the figure of N380 billion and N330 billion in the NCAA Report, but closer to the N700 billion calculated earnings on FAAN passengers’ traffic figures that did not factor First and Business Classes passengers for the years 2015 and 2016.
Thirdly, in November, 2017 NANTA reported that the earning on Air Ticket Sales for 2017 by its members alone was $1.4 billion or N504bn at an exchange rate of N350 per a Dollar. This earning was for 3 quarters (Jan.-Sept) and only from the international carriers including 2 Nigerian airlines (Dana and Medview) that are on the IATA BSP. The figure did not include what the airlines themselves sold on their own; and also did not include the Cargo Sales, the Domestic Airlines Sales, Chartered Air Services Sales, etc. It is certain that if these earnings were added, the earnings for 2017 would be as much as the IATA figures of N785billion and more than twice the NCAA reported airlines earnings for 2015 and 2016.
The NANTA Air Tickets Sales earnings of N504bn in 2017 came at a time when the international outbound passengers and the domestic passengers as recorded by FAAN and NCAA Consumer Protection Unit (CPU) were 1,825,358 and 3,865,494 respectively; a decline of about 26% from the NCAA figures of 2015 and 2016. Relatively too, if we assume this same percentage decline in ticket sales, the earnings would have been N 681bn; still more than twice the figure of N 330bn in 2016.
The NCAA February, 2017 Media Conference also overtly or covertly did not provide any information or any figures for the volumes of the earnings on Cargo traffic. However, available records at the NCAA further showed patterns of misleading figures on the Cargo Sales Charges Earnings, similar to the passengers’ ticket sales earnings. The records on the 5% CSC annual earnings ranged between N290m in 2007 and N300m in 2016. Curiously, the cargo volumes that generated these earnings each year in 10 years were never captured nor recorded by those charged with the tracking of the cargo traffic movements and the collection of the 5% charges on the freight fares. Whereas the annual average cargo volume ranged between 40m/50m kg for export and 150m/180m kg for import in the last 5 years. While the average charge on export cargo freight rate is about N20/kg, the average charge on import is not less than 10 Cent ($0.10) or N35/kg.
The Export and Import cargo volume for 2015 as recorded by FAAN were 27m kg and 132m kg respectively. Therefore, at a flat rate of N20/ Kg for both export import, the earnings would respectively not be less than N0.540bn and N2.640bn, or a total of N3.180bn for the year. The NCAA recorded 5% Cargo Sales Charge for that year was just a little more than N300m; the highest in 10 years.
There were proposals and several efforts at formal and informal meetings towards helping the NCAA achieving a transparent methods of monitoring and reversing the losses in the TSC and CSC earnings, unfortunately, the body language of the responsible authority of the agency particularly the DATR, showed lack of transparency and patterns of convert accountability and possibly complicity in the manipulation of the passengers traffic figures, ticket sales earnings and therefore, the 5% TSC and CSC. The losses caused by the NCAA DATR and its Consultants in 2015 and 2016 respectively and in previous years need to be seriously examined to determine if the contract between them is after all still necessary. This is a task for the Ministry, NASS, EFCC and the FIRS.
The consequences of the exploitation of the earnings were probably the sources of the insufficient funds made available to some agencies from the share of the TSC/ CSC and possibly, the reasons why some facilities needed for assisting the landing of aircraft at night and in inclement weather were not calibrated. The non calibration of these landing aids that require periodic maintenance every 6 and 12 months, essentially, were the reasons for many flights cancellations in 2016 and 2017 during the inclement harmatan weather when these landing facilities were most needed.
The insufficient earnings from the sharing could also be the reasons why the manpower ratio of Air Traffic Controllers to airports has not improved and had not increased beyond the 300 it was in 2007 when they were manning 20 airports and remained same still manning 26 airports in 2017 as stated in the NCAA 2017 Press Conference. It could have also caused the Ministry of Aviation to direct FAAN to augment the AIB share to enable the agency review and release recently several aircraft investigation reports and serious Safety Recommendations that had been pending for over 10 years. The NCAA too cannot confidently say that its share of the TSC and CSC are adequate to tackle its deficiency in skilled manpower especially safety and security inspectors nor would the agency say it would not need funds for recurrency training for its inspectors that are responsible for carrying out the required mandatory periodic safety and security Inspection, Audits, Survey etc on all the operators in the various departments of the industry.
We are in March 2018, and FAAN (the airport gate keeper) has released the passengers traffic figures for 2017; NANTA has also released the earnings on international ticket sales for 2017, so has the NCAA Consumers Protection Department (CPD) on the security charges for 2017; but the NCAA is yet to release any figure even as it did for 2015 and 2016 in February last year neither has not disproved any of the figures released by IATA, NANTA, FAAN and its CDP
To create confusion of disparity in figures, and playing the devil’s advocate in the NCAA, NANTA, and FAAN 2017 passengers traffic figures, the National Bureau of Statistics (NBS) released of 13,394,905 as the international and domestic passengers figures for 2017; a difference of about 2.173m from the figures of about 11m presented few weeks ago by the NCAA and FAAN that was 26% less than the figures of 2016. This NBS conflicting figures with those of the industry’s must be thoroughly investigated not only by the NCAA, but by the Ministries of Aviation and the National Planning before the figures would become the basis for national planning.
The NBS had last year released similar conflicting figures that aviation was contributing less than 1% to the Nigerian national GDP, the figure most people in the industry considered absurd that could not have added up to the $8.5bn that IATA said last year, was the contribution of commercial aviation to the Nigeria GDP. That figure which was only for the international airlines contribution did not include the domestic airline contribution. The figures might come down to about $5bn (65%) if the ticket sales earnings of $3.5bn (35%) are repatriated to the home countries of the foreign airlines, but still greater than 10% of the Nigeria GDP.
If earnings are distorted or inconsistent with projections in traffic figures, the enforcement of the industry economic regulations could be jeopardized; and this could make the NCAA to be unable to guaranty the best practices for safe operations. Therefore, if the NCAA cannot accurately account for earnings collected on statutory charges, how could it be trusted with the oversight and enforcement of economic regulations on the airlines and other industry operators? Little wonder therefore why the deficiencies in the balance sheets of most domestic airlines are never detected until they go aground or get defunct under heavy debts owed to government and private services providers, to banks, insurance etc. Thank God, the economic regulations are not part of the seven critical elements for the ICAO and FAA audits.
The responsible authorities in the Ministry of State for Aviation, the Committees of the National Assembly on Aviation, Public Finance, Accounts and Appropriation, Concerned and Credible Government and Private Aviation Operators should begin the evaluation of the gross earnings and the level of exploitation of the 5% of all the various sales and charges listed in the Civil Aviation Act 2006 Part 12 (1) from 2015 to 2017. There is need also for the five shareholders to regularly meet, if they are not doing so now to evaluate and assess the TSC, CSC and other earnings before the sharing.
These entities should jointly or individually assess the gross earnings from the Airline Ticket Sales (both International and Domestic), Cargo Freight Sales (International and Domestic) Chartered Air Charges, Excess Baggage Charges etc; determine in particular, the percentage contribution, each of the Domestic and Foreign Airlines to the Tickets and Cargo Sales Earnings from 2015-2017; determine the 5% TSC and CSC due each, to NCAA and the 4 other shareholders viz NAMA, AIB, NCAT, NIMET
If government must justify its obligations to the Chicago Convention to ensuring the safety of the travelling public it must get to the root of the manipulation of figures and the exploitation of aviation statutory earnings. Government cannot continue to allow the exploitation of public funds consistently by those entrusted with it. Over N200bn would have been lost from the 5% earnings on TSC and CSC alone since 2010 through exploitation by some interests within the NCAA, the Consultants and their banks. If the war on corruption must be fought, it must not only be with a ‘bark’ but with a ‘bite’. Therefore, those involved in the exploitation should be made to account for the shortfalls or the losses on the TSC &CSC earnings from 2015 to 2017 especially, and for previous earnings before 2015 where possible.


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