[OPINION] Asaba International Airport Concession: Did Deltans Get A Good Deal?

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By OLOROGUN STEPHEN K. DIESERUVWE

The Asaba International Airport was conceived and built by the administration of Dr Emmanuel Eweta Uduaghan, CON, as a passenger and cargo airport.

The foundation laying ceremony which took place on May 7, 2008, was performed by Chief Vincent Ogbulafor, the then National Chairman of the People’s Democratic Party, PDP.
The first flight to land at Asaba airport was a chartered Overland Airways flight from Abuja on March 24th, 2011, and the Airport has been operational since then to date.

From reliable sources, the Asaba International Airport was built with approximately forty billion naira (N40b).

OLOROGUN STEPHEN DIESERUVWE

With thunderbolt speed, on Tuesday 23rd February 2021, the Delta State Government under Sen. Dr. Arthur Ifeanyi Okowa signed a 30-year Concession Agreement with First Investment Development Company (FIDC)-MENZIES Aviation (MA) Consortium with the following as members;- First Investment Development Company Ltd;- Menzies Aviation Plc;- Cybernetics International Services Ltd;- Rainoil Ltd;- Radisson Blu Hotels;- Quorum Aviation Ltd;- Arbico Plc; and- Sibraxis EEIG of Greece.

What Deltans Have Been Told About The Concessionaire Obligation
According to the sketchy details in public domain, the Concessionaire shall be responsible for the management, operation and maintenance of the airport, keeping it in good operating repair and condition throughout the concession period at its own cost and risk, and in accordance with Prudent Industry Practice and the provisions of the Agreement. Exemption of Payment of Tax; The Concessionaire shall be exempted from the payment of some specific taxes to the State for a period of five (5) years, to enable it to concentrate on the development of the mandatory capital projects as listed above; Rights of Inspection of the Airport Facilities:
“The assets and all infrastructure constructed by the Concessionaire, together with all related investments in, and upgrades to the assets, shall be handed back to the State at the end of the concession period.

The Concessionaire shall purchase and maintain in full force and effect any and all of the insurances required for the operation of the airport.

“The Concessionaire shall pay to the State a royalty fee of 2.5% of the annual Earnings Before Interest, Taxes, Depreciation, and Amortization.

The Concessionaire shall pay to the State an annual fee of One hundred-million-naira (N100,000,000.00) each year during the concession period, with 10% escalation every five (5) years of the concession period.

“The Concessionaire shall pay to the State an upfront fee of N1b only on or before the close of business on the 15th day following the signing of this agreement.

On employment, the Concessionaire shall at all times be under an obligation to maintain an employment ratio of twenty per cent (20%) of its staff for the operation of the Airport comprising indigenes of Delta State.

What Deltans Don’t Know About The Concession
As stated by the governor, the Concessionaire shall pay to the State an upfront fee of one billion naira only (N1b) on or before the close of business on Tuesday 9th March 2021.

The Concessionaire shall pay to the State an annual fee of one hundred-million-naira (N100,000,000.00), with 10% escalation every five (5) years of the concession period.

TABLE Shows Envisaged Earnings For Every Five Years (click link below to view table).

Based On The 10% Escalation
Going by that explanation, the amount to be received every five years based on the 10% escalation are as follows:
*2021 to 2025 – N100m x5 = N500m,
*2026 to 2030 – N110m x 5 = N550m,
*2031 to 2035 – N121m x 5 = N605m,
*2036 to 2040 – N131.1m x 5 = N655.5m,
*2041 to 2045 – N146.4m x 5 = N732m,
*2046 to 2050 – N161.1m x 5 = N805.5m.
*Total = N3.848billion + N1billion = N4.848billion

At N4.848billion return on investment in 30 years, it will take approximately 247 years to recoup the N40billion investment (N40billion / N4.848billion = 8.25 x 30 = 247.5 years).

Hypothetically, if the forty billion naira (N40billion) is deposited in a fixed deposit account in any Nigerian Bank, it will earn between 7% and 12% per annum.

Using a 10% fixed deposit rate, the N40billion will yield N4billion annually, which will amount to N120billion in 30 years. Principal plus interest in 30 years will amount to N160billion.

Was It A Good Deal?
From the foregoing, can we say the decision to concession the Asaba International Airport was taken in the best economic interest of Deltans? This is the question begging for answers.

*[OPINION] Asaba Airport Concession: Did Deltans Get A Good Deal.?
https://www.theunionnigeria.com/opinion/opinion-asaba-airport-concession-did-deltans-get-a-good-deal/

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