MKO Abiola International Airport: When Dream Refuses To Die

Against all odds, the much criticised Osun airport, named after Moshood Kashimaawo Olawale Abiola, MKO International Airport, Ido Osun, will sooner be completed. The saying that dreams never die, even if capacities are limited, aptly applies to this project.

 

The dream project, an International Cargo Airport, a revamp of an old airstrip with significant history behind it, is cited in Ido Osun, Ede North/Egbedore Local Governments. It has the capacity for human and cargo haulage, apart from potential for aircraft maintenance hub in sub-Saharan Africa.

 

The developmental visionary, Ogbeni, even though without the requisite financial muscles, wants the best for his state. He went the entire hug to move contractors to site, with N3.6b, but the sudden glut in resources will put a wedge to the intended smooth project running.

 

Then came the usual criticisms. They said he is too ambitious. That just like the over-ambitious mega-schools, roads, feeding, and other projects, this man continues to “over-do”, which they claim he is known for. But as luck or divine intervention would have it, depending on which side of the divide one finds himself or herself, a private company, All Works Of Life or AWOL, has signed a concession agreement with Osun Government to Build, Operate and Transfer,  as is being done world-wide.

 

Under a build-operate-transfer (BOT) contract, an entity – usually a government – grants a concession to a private company to finance, build and operate a project. The company operates the project for a period of time – perhaps 20 or 30 years, or even more – with the goal of recouping its investment, then transfers control of the project to the government. BOT projects are normally large-scale, greenfield infrastructure projects that would otherwise be financed, built and operated solely by the government. Vivid examples internationally are a highway in Pakistan, a wastewater treatment facility in China and a power plant in the Philippines. The Lekki Concession Company, LCC, in Lagos, built a world-class road facility for Lagos State Government under this same arrangement.

 

In general, BOT contractors are special-purpose companies formed specifically for a given project, like the LCC in Lagos. During the project period – when the contractor is operating the project it has built – revenues usually come from a single source, an offtake purchaser. This may be a government or state-owned enterprise. Power Purchase Agreements, in which a government utility acts as offtaker and purchases electricity from a privately owned plant, are an example of this arrangement. Under a traditional concession, the company would sell directly to consumers without a government intermediary. BOT agreements often stipulate minimum prices the offtaker must pay.

 

AWOL International Limited in partnership with a Turkish company, Biray Group, is expected to complete the project within the span of 8 months, with 5 Star Hotels including all amenities like Cultural center, Water Park Recreation Center and Garden, Butterfly Museum and Casinos within the period of 2years.

 

It is clear what nations have achieved by allowing private investors to handle businesses as concession enables long term focus to meet the demands of international competition, maintain a customer-focused plan and also free the government from providing subsidies to an unprofitable enterprise. But this project is clearly profitable.

 

Governor Aregbesola has developed the first policy on airport concession and put in place administrative and legal frameworks in Nigeria that will provide the platform for transparent concession agreement that would be fair to both government and the investor, AWOL. Osun airport concession will allow for better adjustments to market changes and will often provide more innovative solutions to customers, resulting in improved outcomes for all and create a dynamic workforce.

 

According to the airport’s design, it will facilitate the smooth movement of the people and goods from one point to other and serve as a channel way for tourism, hanger and cargo.

 

Key lessons for Osun airport concessioning: Successful Osun airport concessioning will engage customers as key stakeholders from the outset in establishing the master plans, financial plans and the economic regulation process and then involve them in an ongoing and regular basis through agreed processes and full transparency; More efficient management is the key to successful concessioning of Osun airport, since cost of capital is almost always higher in the private sector; good governance is more important than transferring ownership to the private sector, in order for concessioning to be in the public interest. Independent, robust economic regulation will always be necessary to create incentives for efficiency improvements and for sharing these gains with customers, in the private monopolies created by concessioning. The most successful economic regulation has been where the regulator is also overseen by an independent Competition Commission to prevent too comfortable a relationship between the regulator and the regulated entity; Economic regulators have sometimes been good at extracting maximum value from existing assets, but have not been good at ensuring cost-effectiveness from new investment.

 

As usual, the opposition in the state is crying wolf where none exists. The concessioning is an open slate for all to see and contribute. But the governor has called on the citizens to hold opposition party responsible if the project fails, because of its vitriolic comments and threats of litigation. Why won’t he warn, knowing fully what Osun opposition are capable of doing to thwart the wheel of progress in order to gain elusive popularity?