The imbroglio of Lagos airport concession
Jerome Mourinho is
stressed. As the Chief Operating Officer of Bi-Courtney Aviation
Services Limited, the concessionaire of the Murtala Mohammed Airport,
Ikeja, Lagos, he is charged with making sure the airport is run
efficiently and profitably too. To do this, he needs to work closely
with the Federal Airports Authority (FAAN), the statutory body that
supervises the management of facilities at the airport and which
concessioned MMA2 to Bi-courtney in a Build Operate and Transfer
agreement.
Yet, this
relationship, which should be a close and fruitful one, is strained.
The reasons border on accusations and counter accusations of debt and
refusal to honour contractual agreements.
At a Senate
Committee appearance in May, Richard Asuebeogun, managing director of
FAAN, said the organisation was being owed N714 million by Bi-Courtney
for revenues collected on its behalf and which Bi-Courtney is yet to
remit.
But Bi-Courtney was
quick to counter FAAN claims, saying that it is infact FAAN which is
owing the company N11 billion. According to Bi-Courtney, the concession
agreement it has gives it control over all scheduled domestic flights
in and out of Lagos State.
Relying on a court
judgement on March 3 2009, which says Bi-Courtney should run the
General Aviation Terminal, GAT, the company said FAAN is supposed to
relinquish control of the terminal to the concessionaire and also remit
all revenue it has so far collected because, as far as it (Bi-Courtney)
is concerned, those monies are revenue which should legitimately come
to the company.
FAAN insists that
GAT is not part of the concession agreement, and so does not form part
of the revenue expectations of the concessionaire. “What they say we
owe them is for take-off and landing of aircraft at the General
Aviation Terminal (GAT). They are relying on a judgement which stated
that Bi-Courtney has right over GAT.
The concession
agreement does not include GAT, so they cannot be laying claims to
services rendered at that terminal. In any case, we have briefed our
lawyers. In the previous case, they listed only the Attorney General as
defendant. We now want to be joined in the case,” said Akin Olukunle,
general manager, public affairs of FAAN.
Bi-Courtney insists
that its counter-claims were genuine, based on obligations under the
concession agreement between it, the Federal Government of Nigeria, and
FAAN, dated April 24 2003, and as varied by the supplementary
concession agreement, dated June 26, 2004, and the addendum on February
2, 2007.
“You can have cargo
flights, or international flights but all scheduled domestic flights in
and out of Lagos state are covered by the agreement,” Mr. Mourinho
said, adding, “it is on these terms that the banks loaned us money.”
“MMA2 has capacity
for 4 million passengers a year; I am doing only 1.5 million. Will I
now tell the banks that I am now making less than 40 percent of my
projected revenue?” He asked rhetorically.
“This is an issue
that has been heard at the High Court, Appeal Court, and Supreme Court
and all judgements are in favour of Bi-Courtney”, Mr. Marinho said.
Efforts to get
response from FAAN on these particular issues were unsuccessful, as the
spokesman refused to respond to further enquiries.
Before now, the
late President Umar Yar’Adua, perhaps seeing the futility of
government’s position, directed the ministry of aviation to abide by
the terms of the agreement, since it is valid. At a meeting held in
July 2009 involving the parties, the late Yar’Adua said the review of
the concession period to 36 years, though valid, would need to be
reviewed. In the document of the special meeting on aviation, held on
July 7 2009, made exclusively available to NEXT, Yar’Adua directed that
the concessionaire be given the right of first refusal to develop GAT.
“Whatever
infractions that may have occurred are internal matters of government
who will revert to Bi-Courtney if there is reason to do so,” the report
added. The document concluded that the reviewed period will have to be
ratified by the Federal Executive Council before it can be binding on
government. The FEC is yet to ratify this part of the agreement.
Regulatory and legal issues
A competent source
who spoke on condition of anonymity, attributes the current imbroglio
to government’s penchant to always leave important things undone. He
said as at 2003, when the federal government was signing the first
concession agreement with Bi-Courtney, there was no existing framework
on how it should operate, practically giving the concessionaire the
liberty of dictating the terms. According to him, concession
arrangement were novel, and there was little in terms of competence on
the side of government agencies to draft an agreement that would be
beneficial to the country. This created a lopsided background for the
concessionaire to arm-twist the government to concede certain
privileges.
Not until November
2008, over a year after the final draft of the agreement had been
signed, did the government inaugurate the Infrastructure Concession
Regulatory Commission (ICRC), the agency that is to regulate all
concession and public private sector partnership (PPP) agreements and
infrastructure development.
But Mr. Marinho
dismissed this claim as unfair, saying the government had the Bureau of
Public Enterprises (BPE) protecting its interest. “This document was
with BPE for months They had consultants and lawyers who were working
on it on their behalf,” he said.
According to him,
Bi-Courtney was not the initial winner of the concession bid. “There
was a company called Sanderton, which was supposed to build the MMA2.
They were on it for nearly nine years and they could not develop the
project before we came in. So they already had a framework they were
working with before we came in,” Mr. Marinho said.
He said the
concession documents were with the BPE, Ministry of Aviation, Nigeria
Civil Aviation Authority (NCAA), and FAAN and so they are familiar with
the contents. “If it were these institutions that are making these
accusations, then I would be worried.”
However, our source
said the concession agreement was drafted mainly by Bi-Courtney, as
FAAN was reluctant to submit its own position. “FAAN showed no
preparedness to draft the document; thus Bi-Courtney took over. So the
perceived lopsidedness of the agreement cannot be blamed on
Bi-Courtney,” he said.
Ibn Na Allah,
member, House of Representatives Committee on the Judiciary,
collaborates this. According to him, the airport concession agreement
was skewed in favour of the concessionaire, and for this, he is
furious. Na Allah said FAAN lacked the human capacity to be able to put
up a decent agreement that would be in the interest of the country,
thus giving the concessionaire undue advantage of drafting the
agreements to suit them.
“Any staff of FAAN
legal department who took part in the drafting of that agreement should
by now be rotting in jail because they sold out Nigeria,” he said.
Spokesman for the
ICRC, Gbenga Odugbesan, said the commission is making an effort to
correct an already bad situation, adding that the commission met with
the parties in January and followed up two weeks ago in order to reach
an amicable settlement.
“ICRC is working
hard to resolve the issues and experts have been engaged to offer
inputs into the agreements. The interest of the commission is not to
jeorpadise each party, because the government needs massive sum to fix
infrastructure and it cannot do it alone”, he appealed.
Ope Banwo, a
lawyer, said the development is a reflection of government not being
accountable to the people. According to him, many of the interested
parties in the agreement were not carried along, hence the
disagreement. “While it is the responsibility of government to ensure
all interest groups are taken care of, they don’t do that. In fact,
there should be public hearings for people to debate any proposed
government concession before the government gives it out, but we only
see when they are signing the contract.”
No Continuity
The high turnover
of ministers and officials in the aviation industry may also be a
factor in the lingering crisis. From 2003, when the first concession
agreement was signed, to now, there has been seven ministers of
aviation, with five appointed since 2005. The story is the same with
FAAN. Since 2005, there have been four managing director in FAAN, with
the current helmsman, Richard Aisuebeogun, appointed in 2007.
“I am apportioning part of this problem to the breakdown in business continuity,” said Mr. Marinho.
“Every minister
comes with his own ideas and programmes. With the appointment of a new
minister or managing director, we have had to start the process of
explaining and negotiating all over again,” he said.
On this, Mr. Banwo
believes that there should be continuity in government policies .“Our
politicians do not practice government continuity principle. Every new
governor or president wants to start over by cancelling the previous
contracts or arrangements made by their predecessor simply to put their
own people in place, and that is hurting us.
“Developed nations
do not do that, regardless of which government is in power. They simply
wait for renewal time or new projects to start taking care of their own
agenda,” he explained.
According to the
lawyer, agreements are sacrosanct. “Our governments should consider
public interest before signing agreements. It is absurd to cite public
interest later to dodge your responsibilities under an agreement. That
is why they call it contract or agreement. It means you agreed to be
bound. You may review if there are clauses for review in the contract,
but you can’t just wake up and say I don’t like this agreement you
signed voluntarily on grounds of public interest,” he said.
He said government
should be careful about the type of facilities that it concessions, as
some amenities are too important to the wellbeing of the masses for
government to hands off entirely.
“I personally think
a lot of the concessioning is really bad for the country. I am an
unapologetic capitalist, but there are some things that should not be
concessioned like major roads,” he said.
Implications for investors
This scenario, no
doubt, has implication for the government’s drive to attract foreign
investments. Mr. Banwo said with the way government is handling the
issue, no serious investor would be willing to put money down for any
long term capital project. “Governments are supposed to live by their
words and agreements. It is called national credibility. If we lose
that, no serious company will risk investing major money here. ” Mr.
Banwo said.
According to Mr.
Marinho, it even has implications for local investors. “What about the
banks, they provided the funding. There are five airports across the
country that government has earmarked for concessioning. What is
happening to them?”
He said the banks
are refusing to advance credit to other parties interested in the
airports because of the way the Lagos airport is being handled. “When
they ask for loans, the banks tell them, go and meet Bi-Courtney and
let them tell you what they are going through. These banks need to get
their money back,” he said.
Grey areas
He admitted,
though, that there may be some grey areas in the agreement that may be
causing disagreement. “It’s a build, operate, and transfer. I am only
operating it now. At the end, it will go back to FAAN.”
He said the banks
that provided the capital for the project need to remain in business.
According to Mr. Banwo, the government is not often mindful of the
implication for investors. “We all know that most times that government
claim public interest, they are really trying to share the loot for
their own people. Anytime I hear ‘public interest’ in Nigeria, I know
somebody is about to screw us in Nigeria,” he said.
On his part, Mr.
Marinho blames the disagreement on the learning process that comes with
a novel idea. “Because we are pioneers in this relationship, there have
been challenges. There have been issues here and there, but nothing
that cannot be settled. We need FAAN to stay in business and FAAN needs
us for the revenue we generate. It was a federal government decision to
privatise, and the necessary parties signed.”
The hope is that
all parties will be magnanimous and shift ground. Mr. Marinho said all
the documentations are with the minster of aviation, Fidelia Njeze, who
is looking into the issue with the view of brokering an amicable
settlement. It is obvious that all the parties will have to shift some
ground in the interest of all concerned. This may be a tough one on
government, as Section 11 of the ICRC regulations states that “no
agreement shall be arbitrarily stopped or cancelled.”
What this means is that government still needs the cooperation of the concessionaire before any change can be effected.
