20 July 2018 ( Lagos ) : Today analysts turn their attention to Nigeria’s aviation sector. Given that the sector’s performance is strongly tied to consumer confidence, trends within the industry are often regarded as a sound indicator of private consumption. Based on data from the National Bureau of Statistics, air transport grew by 10.2% y/y in Q1 2018. 

This is a considerable acceleration from 4.3% posted in the previous quarter. Analysts can attribute this acceleration to the relatively stable macroeconomic environment and also to seasonal effects, since increased domestic travel is generally recorded in January as Nigerians return to base post-festive celebrations.

Domestic air travel is predominantly for corporate or business purposes. The sector should receive an additional boost from improved tourism across the country. Analysts understand that local attractions are slowly becoming visible via the efforts of domestic travel agents that target individuals and groups within and outside Nigeria.

Recent data released by the Nigerian Civil Aviation Authority (NCAA) show that the total value of tickets sold last year rose to N505bn (US$1.7bn) from N422bn in 2016. The increase was mainly due to the relatively stable fx market as well as resumed flight activities on some domestic routes.  

The NCAA also shared personnel statistics showing that the number of licensed pilots increased to 2,356 last year from 2,226, while the number of  expatriate pilots declined from 631 to 609. This could be linked to the fx sourcing issues which were prominent early last year. 

Although the economy is relatively stable, consumer confidence is soft, which could have a direct impact on sales of international airline tickets. However, in Q3 analysts expect an uptick in international traffic as some Nigerians could be inclined to explore summer travel packages.

The federal ministry of transportation has announced plans to launch a new national carrier by end-December. Analysts understand that the certificate of compliance from the regulator has been obtained and that some conversations may have taken place with a high profile and profitable African carrier. The aim is for this airline to operate on a public-private partnership model.

At the early stage, the airline would operate 40 domestic, regional and sub-regional routes, and an additional 41 international routes. If achieved, this would be a significant improvement in terms of route access when compared to the current operational airlines.

Analysts have often stated that Nigeria’s aviation industry has the potential to become a pan-African hub similar to Nairobi. The launch of the new national carrier could be a good step in this direction.

Source : Gregory Kronsten, Olubunmi Asaolu, Chinwe Egwim from FBNQuest Capital Limited.

Reporting for EasyKobo on Friday, 20 July 2018 in Lagos, Nigeria