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The Federal Government would no longer enter into any fresh concession agreements at the country’s airports.

Henceforth,
it would rather undertake a comprehensive review of the existing ones
and plug the loopholes in revenue generation system in the aviation
sector.

The
minister of aviation, Fidelia Njeze, told reporters in Abuja yesterday
that all the existing concession agreements with the Federal Airport
Authority of Nigeria (FAAN) have issues that needed to be sorted out to
get them right.

According
to her, on assumption of office, studies of the agreements had revealed
that all of them needed to be reviewed, as their terms, which were
structured to assist the sector grow its revenue base, were “highly
skewed against government.”

“All
the existing concessions are not adding value to the aviation sector.
It is as if the aim of having them in place has been defeated. There
was need to take a critical look at the agreements and review them
thoroughly, so that it would be in line with the objectives of having
them, Mrs. Njeze said.

Getting things right

Mrs.
Njeze, who noted that she is the only minister in the history of the
ministry not to have entered into any concession agreement within one
year in office, said, “I want to review all the existing ones to get
things right. I have refused to enter into any new one, because all the
ones in existence have issues. But it is high time we started getting
things right. Somebody has got to do it someday, somehow, somewhere.”

Alluding
to the raging controversy between FAAN and one of the concessionaires
(Mevis) over alleged breach of terms of agreement, the minister said
that government is determined to get to the root of the issues
involved, because “an employee can never act like the employer.”

“It
has never been heard that one can engage a company to come and help
enhance revenue yield, yet one is not privy to what the company is
doing, because the company has turned to become a monster that cannot
even be managed,” she said.

According
to the minister, FAAN engaged the concessionaire to help boost revenue
generation, but the relationship reportedly turned sour after it was
alleged the concessionaire reneged on the terms requiring it to open
two dedicated accounts for all generated revenues.

It
was gathered that the agreement had benchmarked Mevis revenue
collection against the N700 million it generated in 2007, from where it
was entitled to 2 per cent as commission, while every revenue
enhancement effort was to fetch it additional 35 per cent commission.

Though
the concessionaire reportedly opened two dedicated accounts in two new
generation banks (Skyebank and Zenith) for its operations, it was
gathered that it had gone ahead to open a platform account, where it
lodged all revenues generated before transferring same to the dedicated
accounts, contrary to the concession agreement.

“FAAN
is meant to be paying Mevis, but Mevis is paying FAAN. From the
platform account, Mevis would transfer money to FAAN’s account after
deducting all its interests. Nobody knows what is happening in the
contentious Platform account,” the minister further said.

Fairness to all

“The
issue in question is not about money missing. All the money the company
has made has been paid into FAAN’s account. The issue is for government
to review the concession agreement to favour all parties. We want to
know the activities going on. The most important thing is that we want
to get things right,” the minister stated.

Though
the National Assembly committees on aviation described the concession
agreement with Mevis as fraudulent, and advised government against
keeping it, it was gathered that Mevis has resorted to the courts to
restrain government from going ahead with the planned review.

“Mevis
is only doing well on the international routes, because the revenues
are collected by International Air Transport Association (IATA) and
remitted to it. In the domestic route, Mevis is not doing well, because
the airline operators say its operation is fraudulent, and that they
are not going to pay money to it,” the minister said.

Reviewing
her activities in the past year, Mrs. Njeze said projects are ongoing
in five critical areas, including critical safety equipment, systems
upgrades, emergency response systems, travelers’ comfort, and
rehabilitation of infrastructures at the airports to meet international
standards.

“A
lot of training is ongoing. We are overhauling operations, without
compromising safety, by ensuring that all the airlines undergo
re-certification, to determine the state of the aircrafts that fly the
country’s airspace. This is one way to promote business and encourage
more investors to come into the country’s aviation industry,” she said.

When I read the
IMF’s public information notice on its executive board’s conclusion of
the Article IV consultation with Nigeria, Thursday, two weeks ago, I
thought it was a pretty decent report. It just about covered all the
bases on the economy: strong output growth on the back of “a recovery
in oil production and continued strong growth in other sectors”. It
also dwelt on government’s rationale for continuing the fiscal stimulus
last year in spite of this strong growth, and growing concern over
rising inflation. Apparently, the Fund also noted, consolidated public
spending rose last year by 37 percent, after having risen by 10 percent
the previous year. Thus, in 2010, according to the boffins at the IMF,
“the non-oil primary deficit increased by 5 percentage points to 32
percent of non-oil GDP”.

Given that none of
this stuff is new, the fury of the domestic response to the Fund’s
position has been baffling. This has ranged from the usual knee-jerk
“anti-imperialist” twaddle about the “immorality” of the Fund dictating
to a sovereign government through analysts who argue that government’s
over-spend is necessary to compensate for the nation’s infrastructure
dearth, to the CBN governor’s strident riposte over the value of the
domestic currency. The first of these concerns is easily met, and given
space constraints, properly ignored. Concerning fiscal excesses, again,
the arguments are well met, but slightly harder to discountenance.

Indeed, the most
touching bit of the president’s 2010 budget speech to the joint session
of the national assembly in December last year was the contrition
expressed on the budget over-spend. From a deficit-to-GDP ratio of a
little over 5 percent in 2009, government hopes to force the deficit
down to 3.62 percent of GDP in the 2011 fiscal balance. Although the
president had earlier in the same speech alluded to the “challenges
posed by the huge infrastructure deficit” confronting the country, and
his government’s intention “to give greater focus to optimising capital
expenditure to bridge the gap”, it is significant that last year’s
budget deficit was the “result of the exceptional outlays to meet wage
increases granted to civil servants, as well as some other exceptional
items such as the INEC voters registration exercise”. After the same
fashion, the deficit this year is the consequence of “the recent public
service wage increases”.

Moral of the story?
Plenty of money spent, but not on infrastructure. We do need fiscal
consolidation. And Aso Rock agrees! Is the naira over-valued? Sterile
debate! The key point is that there was a cost to keeping the naira
within the CBN’s reference band over the last one year. The “loss in
international reserves”, as the IMF delicately puts it, is the most
obvious such cost. Between December 2009 and December last year, we
spent about US$10bn from the balance on the nation’s gross external
reserve largely to keep the naira afloat. One account lays the blame
for increased demand pressure at the foreign exchange markets on the
repatriation of profits by multinationals doing business in the
country. Another blames it on the activities of speculators taking
“one-way bets in the foreign exchange market”.

Either way, the
Excess Crude Account was also wound down within this period – about
US$18bn of it. In between, crude oil prices for the Bonny Light blend
averaged around US$75 per barrel (pb) last year. The budget benchmark
for 2010 stood at US$58pb, yielding a net accretion to the domestic
economy, of some US$17pb of crude oil sold. Add to this, the fact that
domestic crude oil production also rose last year from around 1.8
million barrels per day (mbd), to circa 2.1mbd. The arithmetic that
follows is quite simple. An additional 300,000 barrels per day was
available at the new price.

Whichever way we look at it, therefore, the country must have spent
a prince’s ransom last year just to keep the naira “strong”. What were
the benefits to the larger economy? By keeping the naira “virile”, we
held imports up; and in an economy as dependent on imports as ours,
this is might just be highly estimable. Against this benefit we must
hold the fact that all of the revenue in question is from a wasting
asset with a trans-generational dimension; in addition, the dollars
earned are too important a resource to fritter away on maintaining our
appetite for imports.

It’s nice to have a decent steady salary
at last. Now it’s time to think about what to do with that income. For
most young people, the idea of saving and investing seems like a
lifetime away; most people don’t start thinking about saving or
investing for their financial future until they are well into their 30s
and even later. It is important to realise that the choices you make in
your twenties as you start to earn play a critical role in your future
financial security.

Build your knowledge of investing

Investing successfully has much to do
with knowledge. Unfortunately, personal finance is not part of the
curriculum in schools and colleges and young people step out into the
real world for the first time without the skills and knowledge to manage
the money that they earn. Indeed, they are just trying to acquire the
most basic financial skills when they need them the most.

Many young people ignore the financial
papers and as a result, they do not get to learn about investments or
money. Whether you take professional advice or not, you need to educate
yourself about money matters and become “financially literate.” Enhance
your knowledge by reading; there is a plethora of information out there,
in newspapers, books, magazines, and on the Internet.

Establish your short, medium and long-term goals

The first step in financial planning is
to identify your goals. Your short-term goals might include: Going back
to school, planning a wedding, buying a car, or taking a vacation. Think
about medium-term goals, such as, owning your own home and financing
your children’s education, whilst your long-term goals may include
planning for your retirement.

Live within your means

It is very tempting when you first start
earning, and particularly where you have few financial
responsibilities, for you to spend excessively on mobile phone bills,
clothes, accessories, gadgets and entertainment. Critically review your
income and expenses and create a budget so that you can see exactly
where your money is going and then make adjustments where necessary.

Manage your Debt

Once you start earning a regular salary,
you are likely to have access to some credit. Be cautious about
borrowing; it is better to borrow for things that have lasting value
such as your education or your first home rather than for consumables
such as the latest smart phone or clothes. Start to build a solid credit
history from now by paying your bills on time and systematically
reducing any expensive debt. The way you handle your debt from now will
be important when you need to borrow more significantly in the future.

Pay yourself first

Most young people feel that they don’t
earn nearly enough to even consider saving. Regular investing is the key
to building lasting wealth and even small amounts add up surprisingly
fast if you invest on a regular basis. Even when money is tight, try to
save at least 10 percent of your monthly salary. Your aim should be for
you to have enough cash to cover at least three to six months of your
expenses so that you have something to fall back on to take care of
unexpected expenses such as car repairs or other bills. These savings
should be kept in certificates of deposit or money market accounts to
meet short-term goals such as buying your first car or planning towards
your wedding.

Start investing to meet your goals

What will you do with your money? Will
you start a small business or commit to buying a small plot of land?
Have you been thinking about investing in stocks but don’t quite know
where to start? Perhaps you don’t have the time or know how to select
your own stocks and don’t have that much money to spare. If you are
young and do not make much money but want to start investing, a stock
market mutual fund may the ideal investment to meet your medium and
long-term goals.

Mutual funds usually set relatively low
minimum amounts for initial and subsequent subscriptions. In Nigeria,
you can invest from as little as N10,000 which makes it affordable for
smaller investors. Historically, the stock market has out-performed any
other type of investment over time, but it should be considered
carefully as it comes with greater risk.

It is important to spread your
investments over different asset classes, so that a loss in a particular
investment may be minimised by gains in another. Mutual funds offer
such diversification and help you spread your risk. Buy into an
established scheme that has an experienced fund manager and good
performance record. You need more knowledge and usually a larger amount
to invest directly in stocks and still build a diversified portfolio to
reduce your risk. But, whether directly or through mutual funds, the
important thing is to get a large portion of your investments into the
stock market as early as possible as you have the time to ride any
short-term volatility.

Start planning for your retirement

It may seem odd to talk about retirement
when you have barely got started with work. Naturally, you are more
concerned about your job and not the end of your working life eons away.
As soon as you start work, you will be eligible to contribute 7.5% of
your pre tax income to a Retirement Savings Account (“RSA”) with your
Pension Fund Administrator (“PFA”) this will be matched by your
employer. You have an edge if you start to invest regularly for
retirement from now. Setting up automatic contributions to either one of
these retirement vehicles at a young age will help you build wealth
effortlessly.

The luxury of time

When you are young, you may not have
much in the way of income or assets. However, you do have one of the
most valuable resources at your disposal. That resource is, time. The
day you start earning is the day you must start to save. At this time,
you tend to have fewer financial responsibilities; once you start
raising a family, responsibilities and expenses begin and that can be a
challenging time for most young families. But investing a significant
part of your earnings from the start gives you an advantage of a few
years.

One of the greatest failures of investing is procrastination. If you
are consistent and disciplined, your savings will be able to grow
considerably. The financial choices you make now, will largely determine
your quality of life in future. Time is on your side; so start now.