FAAN, Maevis agreement: The truth of the matter
By UCHE USIM
Monday, April 09,  2012

Princess Uduah

Business experts say the fundamental reason organizations go into concession/Public-Private-Partnership (PPP) is the expectation that the external partner can initiate operations and reach operating stability much faster than it can with an in-house effort.

It is also believed that concession has a unique advantage as it combines responsibility for usually disparate functions – design, construction and maintenance – under a single entity, and this allows the private partners to take advantage of a number of efficiencies.

Moreso, in concession, the sponsors’ commitment of substantial equity to the project assures that they will also remain committed to the project’s successful operation over the concession period. Their investment provides a strong incentive to have the project perform well above its minimum expectations in order to ensure good returns on investment.
However, the above, as it appears, does not play out in the nation’s aviation sector.

That concession/Public-Private-Partnership deals in the aviation sector have largely been a perennial mess is not news to stakeholders. But what is news and shocking about it is that the Federal Government has literally been asleep for so long that concessionaires and their principal, the Federal Airports Authority of Nigeria (FAAN), have regularly locked horns in what many call the battle of supremacy. The resultant effect of these fights is that the sector and the public do not enjoy the desired dividend of having a PPP as the airports have, for many decades, run largely as inefficient entities.

And like one whose anesthesia has dissipated, the government seems to have woken up from its slumber as it struggles to change the status quo. Aviation analysts describe FAAN as a house of commotion with tardy commercial and operational procedures. The public perception of FAAN is largely that of an inefficient establishment, laced with corrupt lots who fatten their individual accounts by stifling the organization.
A former managing director of FAAN, Mohammed Yusufu, said the loopholes in FAAN cost it about N5 billion annually and the anomalies is what the incumbent Managing Director, George Uriesi, is fighting tooth and nail to address.

He said part of his challenge is poor staff orientation, as some of them do not understand what FAAN stands for and this has affected its dealing with the external public. To show his seriousness in righting the wrongs, by midnight of Friday, March 23, the much-touted concession reform and aviation transformation agenda claimed its first casualty, Maevis Nigeria Limited. The company was, hitherto, in charge of FAAN’s aeronautical revenue collection and remittance in Lagos and Abuja Airports.

The deal, signed on October 31, 2007 with FAAN, was for the acquisition, installation, operation and management of an Integrated Airport Operation Management System (AOMS), Common User Self-Service System (CUSS), Flight Information Display System (FIDS), Airport Pricing and Billing System, a proactive revenue management system and an Electronic Payment gateway system. The Agreement covered the nation’s four major Airports, namely: Murtala Muhammed Airport, Ikeja; Nnamdi Azikiwe International Airport, Abuja; Port-Harcourt International Airport, Port-Harcourt, and the Mallam Aminu Kano International Airport, Kano.
The pact specified that Maevis was to solely fund the project at a total cost of N3,959,293,695.97.

The agreement was for a period of ten years in the first instance, subject to a renewal term of five years, based on satisfactory performance and on terms and conditions to be agreed upon by the parties at the time. By the Agreement, FAAN was to pay Maevis two per cent of the base revenue collected and where revenue collected exceeded FAAN’s projected base revenue (as contained in Schedule 3 of the annexure to the agreement in any year), thirty five per cent of that additional revenue.

Along the line, the FAAN MD alleged that Maevis breached certain terms of the agreement. Maevis chose from the very beginning to operate the concession, using FAAN’s revenue in 2007 as a base year for the entire concession period.“The agreement stipulates projected revenue that Maevis is expected to collect based on an assumed growth factor through the period. Maevis ignored this provision of the agreement and instead chose to collect a 2 per cent commission on FAAN’s 2007 revenue numbers and 35 per cent commission on any amount above FAAN’s 2007 numbers.

“Another breach is the illegal operation of the so-called ‘Platform Accounts’ used to warehouse FAAN’s funds collected by Maevis: Contrary to the provisions of the agreement that ‘Maevis shall pay all FAAN revenue collected into designated FAAN bank accounts” and in contravention of the Federal Republic of Nigeria Financial Regulations, Maevis from the very beginning chose to collect FAAN’s revenue (which is government revenue) in a ‘platform’ account operated by themselves, and to which FAAN had neither access nor control. FAAN was not a signatory to these platform accounts and was not a party to the opening of the accounts.

FAAN only had ‘viewing’ access to a portal provided to it by Maevis through which FAAN was only able to view the monies paid into its accounts by Maevis. As a result, FAAN had no way of knowing the basis upon which the amounts paid into FAAN’s accounts were arrived at, nor could FAAN authenticate the accuracy of any remittances to it by Maevis. Furthermore, rather than FAAN receiving its revenue and determining what is due to be paid as commission to Maevis and then paying it as stipulated in the agreement, in practice, Maevis collected FAAN’s revenue and first deducted what it determined was its commission before remitting the balance to FAAN” he stated.

FAAN thus discovered that the deal was simply a cash cow for Maevis and a drainpipe to its own revenue and desperately wanted a review. It claimed it called the company for several re-negotiation meetings, which it said the company rejected in totality, leaving FAAN with no option than to take the matter to higher quarters including the National Assembly and office of the Attorney General of the Federation. Securing their nod, FAAN served the concessionaire a termination notice on February 24, 2011, which expired on May 23, same year.
According to Uriesi, FAAN’s managing director, both companies, in principle, had parted ways since the expiration of the termination notice.

Maevis ran to the court for shield and also obtained a judgment in its favour which mandated the warring parties to maintain status quo or head for arbitration to resolve the matter. At press briefing, the Executive Director of Maevis, Mrs Tokunbo Fagbemi said it was shocking that FAAN did not head to the arbitration as ruled by the court, describing its action as illegal. “Why is FAAN afraid of Maevis? Why didn’t FAAN head for the arbitration as ruled?” she said at the briefing.

However, FAAN said as a principal, it acted on the approvals from several government agencies including the Attorney General of the Federation to evict Maevis from Lagos and Abuja airports and replaced its AOMS with that of the Société Internationale de Télécommunications Aéronautiques (SITA). Aside that, it dragged Maevis to the dreaded Economic and Financial Crimes Commission (EFCC) and Independent Corrupt Practices Commission (ICPC) and requested a full investigation into the activities of Maevis and two of its banks on issues of alleged funds diversion.

Using the Maevis as a case study, the FAAN boss said it will deal with other fraudulent concessions with a view to ensuring that concessionaires do not have the feeling that they are bigger than their principal. But before Maevis, other concessionaires have been flushed out by previous FAAN management including Pan Express Limited and Terminal Zero formerly in charge of cargo billing and collection and the MMIA international car park toll plaza respectively.

For decades, the Federal Airports Authority has outsourced some of its functions to private concerns with a view to upping its service delivery and revenue but whether this golden objective has been realized is another kettle of fish. As always, the Maevis’ saga has become a hot subject of debate between two schools of thought.
Some are blaming the government via FAAN for appending its signatures on many concession deals only to scuttle the deal halfway thus jeopardizing the investment of the concessionaire. The attendant questions are: “Why is FAAN having problems with virtually all its concessionaires save for a few? Were FAAN officials blind while signing the concession deals with the concessionaires or did they not understand the content of the agreement? Were they coerced to signing it and by who? Why didn’t they resign honourably than plunge FAAN and the nation into endless commercial chaos?

Why haven’t the government punished those who signed these controversial agreements? How can private companies wield more powers than a Federal Government parastatal? If FAAN must review or terminate concession deals, must it not follow due process housed by the rule of law? Must FAAN muscle out its private sector partners before it is recognized as a powerful government agency?” This school of thought believes such blatant disregard to signed concessions, as it appears, was capable of chasing away local and foreign investors who ought to be vital partners of government in the urgent task of revamping the nation’s ailing aviation sector.

On the other hand, the argument of those supporting FAAN’s action is that most of the concessionaires hob-nob with the high and mighty in the country such that they lobby for concession deals from authorities higher than FAAN management. As such, the legal team of the parastatal is literally forced to sign the concession agreement (often favourable to the concessionaire and skewed against FAAN) as refusal would attract unpalatable consequences. “If an incumbent Aviation Minister gives you directive to sign a deal, who are the FAAN officials to refuse him/her? The punishment may earn the affected official a bitter transfer or even a sack” a top FAAN official told Daily Sun.

This view was corroborated by Benjamin Okewu, National President of the Air Transport Services Senior Staff Association of Nigeria (ATSSSAN). According to him, the union fought for about two years for the Aviation Ministry to return some FAAN staff who refused to sign a controversial concession agreement, to the headquarters. “They were punished for refusing to sign the agreement skewed against FAAN and the public at large. They were immediately transferred out of the headquarters as punishment. We fought for years for their return. That is the challenge FAAN faces but we would no longer allow any concessionaire to get away with a fraudulent deal against us. This Maevis’ case should serve as a deterrent,” he added.

One of FAAN’s numerous concessionaires said there is high-level rot in FAAN that tends to eclipse their (concessionaires) contributions to its development. He thus called for a town hall meeting involving FAAN, its numerous concessionaires and the general public so as to understand why it seems concessionaires are impairing, rather than improving FAAN’s revenue and operations.

“The government needs to convey a town hall meeting where there would be no holds barred. Let every party speak of what it suffers in the hand of FAAN. We cannot be labelled inefficient when it is actually FAAN that should bear such a name. Why is it that FAAN is not in good terms with virtually all its concessionaires? Is that a pointer to the fact that the problem is actually FAAN’s and not us per se? Are we given free hand to operate as concessionaires? Is the environment conducive? Is FAAN playing by the rules binding us? These are some of the things we’ll unearth at the meeting and at the end, Nigerians will have learnt a lot from us and FAAN,” he said.

While the view of the concessionaire must be amplified for the public to hear and draw inference, investigations also show that when FAAN is arm-twisted to sign a controversial deal, it obliges its boss (the ministry) but what then happens is that FAAN painfully accommodates the concessionaire and its excesses until such a time when the concessionaire’s godfather is out of government, then it bares its fangs on the company. Today, FAAN is battling is also slugging it out with Bi-Courtney Aviation Services Limited, operator of the Murtala Muhammed Airport Terminal 2 (MMA 2), even as it assured that all lopsided agreements will be addressed.

However, the FAAN boss, George Uriesi told Daily Sun that a road show will be organized by the authority with a view to enlightening the public on how best to partner FAAN is aviation development. Aviation analysts however have hailed concession deal between FAAN and I-Cube West Africa Limited, the concessionaire in charge of the Murtala Muhammed International Airport (MMIA) access gate tolls. Aviation unions who perused the agreement described it as water-tight as several mechanisms were put in place to ensure that FAAN gets its statutory N40 million monthly.

One of such mechanisms is a bank guarantee, which ensures that FAAN gets its money uninterruptedly.
“We don’t have any problem with I-Cube at all. The agreement is clear and the company is meeting up with its part of the agreement”, Benjamin Okewu, ATSSSAN President said recently. Stakeholders await such a time when the government evolves a strong and honourable concession plan which will be respected by all parties to the benefit of the sector and the nation.

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