Nigeria Signs Landmark Cape Town Convention to Boost Local Airlines and Lower Flight Costs

• Sep 12, 2024

In a major step to enhance Nigeria’s aviation sector, the federal government has officially signed the Cape Town Convention (CTC) practice direction. This pivotal agreement will allow domestic airlines to access aircraft on dry lease, potentially leading to reduced flight rates for passengers.

The signing ceremony was held on Thursday at the presidential villa in Abuja and was led by Vice-President Kashim Shettima. The event was attended by key aviation stakeholders, including Allen Onyema, Chairman of Air Peace. This significant move marks 20 years since the CTC treaty was first introduced. The treaty aims to improve asset-based financing and leasing of aviation equipment, such as aircraft, airframes, engines, and helicopters. By doing so, it expands funding opportunities and lowers costs for airlines.

John Tsoho, the Chief Judge of the Federal High Court, carried out the signing during a stakeholders' meeting of the Presidential Enabling Business Environment Council (PEBEC), chaired by Vice-President Shettima. The CTC practice direction is expected to resolve issues related to obtaining certain and opposable rights to high-value aviation assets that do not have a fixed location.

Stanley Nkwocha, the Vice-President's media aide, stated, “The signing of the CTC Practice Direction will ensure the Cape Town Convention becomes fully operational in Nigeria, thereby reducing the cost of insurance for airlines, restoring investors' confidence in the Nigerian aviation sector, and reducing the cost of doing business in the nation's aviation sector.”

The dry lease arrangement involves hiring an aircraft without a flight crew. The lessee is responsible for operational tasks such as providing crew members and maintaining the aircraft. This arrangement is particularly beneficial for domestic airline operators who have struggled to access aircraft on the same favorable terms as larger international airlines.

Festus Keyamo, the Minister of Aviation and Aerospace Development, highlighted past challenges, noting that some local operators had breached the CTC regulations, leading to Nigeria being blacklisted by the Aviation Working Group, co-chaired by Airbus and Boeing. This blacklist was lifted after Nigeria implemented laws to prevent such breaches.

“Why we cannot compete with big international airlines is because we don't have access to aircraft on the same terms as they have,” Keyamo explained. “People don’t know that the best airlines in the world run their fleet 100 percent based on actual purchase of aircraft.”

Recent studies indicate that 70 percent of the global fleet is on dry leases. The Nigeria Civil Aviation Authority (NCAA) has also confirmed that the federal government is working to make aircraft acquisition easier for local airlines. The minister is currently in discussions with major companies like Boeing and Embraer to facilitate dry leasing for Nigerian airlines.

This historic signing of the CTC practice direction is a significant advancement for Nigeria’s aviation industry. It will provide local airlines with greater access to aircraft, potentially lowering flight costs for passengers. Additionally, this move is expected to increase the competitiveness of the Nigerian airline sector and attract more investment, driving economic growth and positioning Nigeria as a leader in aviation innovation.

By enabling easier access to aircraft and reducing operational costs, the CTC practice direction will help Nigerian airlines expand their services, improve efficiency, and offer more affordable travel options. This development not only benefits the airlines but also enhances the overall travel experience for passengers, making air travel more accessible and affordable across the country.