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Nigeria: Aviation Practice Area Review 2016

By Etigwe Uwa, Streamsowers & Köhn

author

The aviation industry in Nigeria has witnessed some downturn in the last year. Dwindling oil prices (Nigeria’s economy is largely dependent on income from crude oil exports) has placed a lot of pressure on business enterprises including those in the aviation sector, such as airlines. Over the course of the year we have received a lot of requests on review of bilateral air services agreements and regulatory compliance as regards repatriation of earnings by foreign airlines. These questions arise because of restrictive government policies on foreign exchange repatriation, resulting in foreign airlines seeing their revenue trapped in Nigerian banks. This has caused some to scale back on operations; indeed, two airlines have stopped operations altogether. There has also been very little business in the areas of aircraft leasing and purchase.

New regulations

A new Nigeria Civil Aviation Regulations were promulgated in December 2015 and took effect on 1 July 2016 (NCAR 2015). The new regulations have made provisions for economic and consumer protection (which were not incorporated in the 2012 review), and standardised the operational procedures, implementation and enforcement in the aviation industry to conform with the standards and recommended practices contained in the annexes to the Chicago Convention on International Civil Aviation. Of significance in the NCAR 2015 are the provisions guiding the certification and operations of unmanned aircraft systems (drones) in the Nigerian airspace, with the effect that no government agency, organisation or an individual can launch a remotely piloted aircraft or unmanned aerial vehicle in the Nigerian airspace for any purpose whatsoever without obtaining the requisite permit for aerial aviation services from the NCAA and the Office of the National Security Adviser.

Funding

In Nigeria, where investment in the sector is locally propelled, investors and lessors can access funds from banks and other financial institutions, grants from the government and its agencies, private individuals and international lending organisations. However, it is important to state that access to funds has often been affected by factors including: government bureaucracy; inconsistent economic policies; the increased cost of doing business and a rigorous loan application process; high interest rates; and fluctuations in the value of the dollar. In addition, because airlines run on aviation fuel, any vagaries in the oil and gas sector have an impact on the availability of funds for aircraft operations. Nigeria currently observes a frequent scarcity of aviation fuel, which has had an adverse impact on the regularity of air transport services in Nigeria. In addition to the challenges already mentioned above, a downward turn in the oil and gas sector has also had a remarkable impact on aircraft finance.

Technological developments

Recently, the government adopted the task of modernising airports and improving infrastructure to provide, in particular, adequate aerodrome lighting as well as rescue and firefighting facilities to support night-time operations at all major airports, with a view to upgrading the airport facilities to the ICAO standard requirement. The Nigerian Meteorological Agency is currently advancing its technology to provide timely weather forecasts which can help the pilots make informed landing decisions.

The aviation legal marketplace

This has not changed significantly within the past few years. Major areas of practice remain carriage by air claims: loss of baggage and cargo, and air accident claims. With the implementation of the Cape Town Convention, a number of law firms have been engaged in the registration of interests in aircraft mobile equipment at the international registry; they have also been involved in litigation relating to the enforcement of security created pursuant to the Convention.

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