Investing in Nigerian Commercial Aviation: Opportunities and Risks Analysis for Investors in Nigeria's Growing Airline Industry

 

Nigeria's aviation industry has been in existence for over 80 years, with the first commercial flight in Nigeria dating back to 1931. The Nigerian Civil Aviation Authority (NCAA) was established in 1958 as the regulatory body for the industry, and since then, the Nigerian aviation industry has grown significantly.

One of the major growth drivers of the Nigerian aviation industry has been the increase in the number of domestic and international travelers. The Nigerian National Bureau of Statistics (NBS) reported that there were over 7 million domestic air travelers in 2017 and this figure is expected to increase in the coming years due to the growing population, increasing disposable income, and a rising middle class. The country's economic growth, particularly in the oil and gas industry, has also led to an increase in international travel.

The Nigerian government has also made efforts to improve the country's infrastructure and has begun investing in the expansion of its airports. The Federal Airports Authority of Nigeria (FAAN) manages 22 airports across the country, with the Murtala Muhammad International Airport in Lagos and Nnamdi Azikiwe International Airport in Abuja being the two major airports. These airports are currently undergoing major renovations and expansions to accommodate the growing number of passengers. The Federal Government has also developed new airports in several states in Nigeria such as the Akanu Ibiam International Airport in Enugu, and a Greenfield airport in Ogun state (yet to be completed) to further increase the capacity of the Nigerian aviation industry.

However, the Nigerian aviation industry still faces several challenges. One of the major challenges is safety concerns, with Nigeria being placed on the European Union Air Safety List (EUASL) in 2010, which banned all Nigerian-registered airlines from operating within the EU. The ban was lifted in 2018 after the NCAA took several measures to improve safety standards, but safety concerns remain a major issue in the Nigerian aviation industry.

Another challenge is the inadequate infrastructure and poor maintenance of airports, which often results in flight delays and cancellations. Many of the airports in Nigeria lack basic facilities such as efficient air traffic control systems, adequate runway lighting, and reliable weather forecasting systems. In addition, the Nigerian government has struggled with corruption and bureaucratic inefficiencies, which can make it difficult for investors to navigate the legal and regulatory landscape.

The Nigerian commercial aviation industry is still relatively underdeveloped, with the majority of the market being dominated by a few players, such as Arik Air, Dana Air, and Air Peace. This presents opportunities for new investors to enter the market and compete with existing players. However, entering the market also requires significant investment, as the cost of starting a commercial airline in Nigeria can be quite high.

Investors also need to consider the current pandemics effect on the global aviation industry, which has led to a significant reduction in air travel and negatively impacted airlines' financial performance. This has led to financial losses and difficulties for many airlines, and investors may be concerned about the long-term stability of the industry. It is important for investors to do their due diligence and carefully consider the risks before making a decision.

One potential opportunity for investors in the Nigerian commercial aviation industry is the potential for high returns on investment. The Nigerian market is relatively untapped, and with a population of over 200 million people and a growing middle class, there is a large potential market for air travel. Additionally, the Nigerian government has made efforts to improve the country's infrastructure, which could lead to increased demand for air travel in the future.

Investors can also consider investing in specific segments of the Nigerian commercial aviation industry, such as aircraft leasing or maintenance and repair services. These segments have a lower capital requirement than starting an airline, and they can still provide attractive returns on investment.

Another potential opportunity for investors is the Nigerian government's efforts to develop the country's tourism industry. The government has identified tourism as a key driver of economic growth and is actively promoting the country as a tourist destination. This presents an opportunity for investors to invest in the development of tourism-related infrastructure, such as hotels and resorts, as well as in the airline industry to support increased travel to Nigeria.

It is also important for investors to consider the long-term potential of the Nigerian commercial aviation industry. Despite the current challenges and risks, the Nigerian market is expected to continue to grow in the coming years, driven by population growth, economic development, and increasing demand for air travel.

In summary, investing in the Nigerian commercial aviation industry presents both opportunities and risks for investors. The country's large potential market and growing middle class, as well as the government's efforts to improve infrastructure, present opportunities for investors. However, safety concerns, inadequate infrastructure, and the current pandemics effect on the industry, make it a risky investment. Investors should carefully consider these factors before making a decision and also do their due diligence to identify possible specific opportunities within the industry that may lower the risk and increase the chances of returns on investments.