Nigerian Aviation Minister Says Botched Nigerian Air Deal Would Have Benefited Only Ethiopia, Analysts Disagree

Nigeria’s Aviation Minister, Festus Keyamo, recently stirred debate over his decision to suspend the Nigeria Air project, revealing that the deal with Ethiopian Airlines would have obligated Nigeria to pay Ethiopia approximately $112 million over a three-year period.

The payments were intended to cover the use of Ethiopian Airlines’ surplus aircraft, which were offered as part of the airline’s 49% equity stake in Nigeria Air. This revelation has reignited discussions about the viability of the now-shelved national carrier project, and it has prompted deeper questions about Nigeria’s approach to foreign partnerships in strategic sectors.

Keyamo made these disclosures during an interview on the Political Paradigm program on Channels Television. He expressed concerns about the unfavorable terms of the agreement, which he argued would have allowed Ethiopian Airlines to dominate the new national carrier without bringing significant value to the table.

“For those aircraft, their equity contribution was supposed to be providing their excess fleet to Nigeria Air. However, it is not an investment as we are paying for them. We are going to pay about $112 million over a period of three years to Addis Ababa. What are they bringing to the table? We are paying them, so what is the investment here?” Keyamo questioned during the interview.

The minister’s decision to suspend the project was fueled by his concerns that the benefits of the partnership would flow predominantly back to Addis Ababa, with Ethiopia reaping profits while Nigeria shouldered significant financial risks. According to Keyamo, the structure of the deal favored Ethiopian Airlines at the expense of Nigeria.

He also refuted claims that stopping the project resulted in a loss of Foreign Direct Investment (FDI), arguing that it was not true FDI if Nigeria was the one footing the bill for much of the operational costs.

“People are saying we lost FDI. But is it FDI when we are the ones paying for their planes? What kind of investment is that?” Keyamo argued.

This reasoning, however, has sparked a broader conversation about Nigeria’s foreign investments and partnerships.

Backstory: The Birth of Nigeria Air

The Nigeria Air project was one of the hallmark initiatives of former President Muhammadu Buhari’s administration. It was designed to breathe life into the aviation sector by reviving the defunct Nigeria Airways. Announced with much fanfare on July 18, 2018, the project was meant to showcase Nigeria’s ambition to reclaim a strong presence in regional and international aviation.

However, just two months after the launch, the project was abruptly suspended due to concerns over its feasibility, cost, and lack of proper groundwork. The initial costs were estimated at $8.8 million, while the take-off costs for the entire airline project were pegged at $300 million. Despite the suspension, the Federal Government revived the plan in 2022, and Ethiopian Airlines won the bid to manage the airline with a significant 49% equity stake.

This partnership was seen as a pragmatic move to leverage Ethiopian Airlines’ vast experience and expansive African network. However, questions soon arose about the terms of the agreement, especially when it became clear that Ethiopia would hold the majority stake, leaving Nigeria with just 5%, while SAHCO (Skyway Aviation Handling Company) held 15% and other investors controlled 31%.

The controversy deepened in May 2023, when the House of Representatives labeled the entire project fraudulent, casting doubt on the transparency of the bid process and leading to the project’s suspension.

Was Keyamo’s Decision Short-Sighted?

While Keyamo’s decision to withdraw from the deal has garnered praise from some quarters, industry experts and stakeholders are now raising concerns about whether it was the right move. They argue that Keyamo’s decision to focus on the financial returns that Ethiopia would have reaped from the deal may overlook the broader benefits Nigeria could have gained from the arrangement.

Critics point out that similar partnerships in other strategic sectors have seen foreign countries or corporations derive substantial financial gains, and yet Nigeria has reaped long-term benefits from the collaborations. For instance, Nigerian Liquefied Natural Gas (NLNG), which is not wholly-owned by Nigeria, was cited.

Aviation industry insiders contend that Keyamo’s argument—focusing on the $112 million Ethiopia would gain over three years—might be short-sighted in a globalized world where cross-border partnerships are the norm.

Comparisons have also been drawn to similar aviation partnerships in other countries. For instance, Kenya Airways, which has struggled with profitability for years, entered a strategic partnership with Air France-KLM in 1995. While the partnership has seen Air France-KLM gain significant influence in Kenya’s aviation sector, it has also helped Kenya Airways maintain operations and grow its route network across Africa, Europe, and the Middle East.

Likewise, RwandaAir has forged key partnerships with Qatar Airways, a relationship that has strengthened the airline’s international reach and allowed it to expand its fleet with more modern aircraft. While Qatar Airways holds a financial interest in RwandaAir’s growth, the collaboration has benefited Rwanda by making its capital, Kigali, a growing hub for aviation on the continent.

These examples suggest that Keyamo’s focus on the short-term financial benefits to Ethiopia might ignore the potential long-term benefits Nigeria could have reaped from the partnership. Critics argue that even if Ethiopian Airlines would have made significant financial gains, Nigeria Air could have become a gateway for more robust aviation growth, increasing Nigeria’s global reach and creating jobs in a sector that badly needs revitalization.

However, in his interview, Keyamo explained that the agreement would have allowed Ethiopian Airlines to control key aspects of Nigeria Air’s management, including the positions of Chief Executive Officer (CEO) and Chief Financial Officer (CFO). This, combined with the ceding of critical Bilateral Air Service Agreement (BASA) rights, would have, in Keyamo’s view, compromised Nigeria’s sovereignty in the aviation sector.

“By allowing Ethiopian Airlines to dominate Nigeria Air, we were effectively handing over our BASA rights, which represent a key aspect of our aviation sovereignty,” he stressed.

Keyamo also highlighted the risk that the deal’s provisions, such as tax exemptions and indemnity clauses for Ethiopian Airlines, would have left Nigeria vulnerable to financial liabilities. Under these terms, any financial setbacks during Nigeria Air’s operations could have shifted the burden onto the Nigerian government, further deepening the nation’s fiscal challenges.

While Keyamo has framed the withdrawal from the Nigeria Air deal as an essential safeguard for Nigeria’s financial and aviation sovereignty, Ethiopian Airlines has expressed disappointment over the project’s collapse.

In August 2024, Ethiopian Airlines CEO Mesfin Tasew Bekele attributed the failure of the project to political interference and resistance from Nigerian domestic airlines. Bekele said that the project was politicized, making it difficult to push forward, despite Ethiopian Airlines’ commitment to supporting the venture.