GERMAN airline Lufthansa is denying liability for the payment of $14m demanded of it by the Nigerian senate because it signed a waiver agreement with the federal government in 2008 which exempted it from paying royalties.
Earlier this year, the senate committee on aviation found Lufthansa, along with other international airlines operating in Nigeria like British Airways and Virgin Atlantic guilty of royalty evasion. It ordered them to make the payments immediately but Lufthansa is now pointing to a special agreement it signed that gave it an exemption.
According to Lufthansa, in 2008 it entered into an agreement with the Nigerian government under which it could operate from Lagos, Port Harcourt and Abuja airports, using Abuja as its operational hub for West Africa. Under the terms of the agreement, Lufthansa was also meant to provide manpower training and facilitate the development of the maintenance, repair and overhaul (MRO) facilities in Nigeria
Part of the condition for using the Abuja airport as an operational hub included Lufthansa reaching a commercial agreement with domestic carriers that would ferry passengers from the sub region, which led to the selection of Arik Air, and gave Lufthansa fifth freedom rights. At the time, the government considered this as invaluable to the development of the local aviation industry and therefore decided to grant Lufthansa a waiver on royalties as part of the agreement.
However, according to sources in the aviation ministry, aviation minister Stella Oduah, revoked the memorandum of understanding (MoU) between the government and Lufthansa on November 7 because she had not seen any appreciable benefit from it. The source added that the airline did not keep its own part of the agreement, which included assisting in manpower development and the use of the Abuja airport as an operational hub.
Lufthansa on its part, blamed the Nigerian government for not creating the enabling environment for it to execute its own part of the MoU. One official, who was alleged to have been involved in the original deal, said it is only Nigeria that still collects royalties, arguing that the reason Ghana had become attractive to foreign airlines, in spite of its smaller population and lower per capita income, was because it had removed levies that would discourage airlines from flying to the country, including royalties.
One senior official in the presidency who also participated in drawing up the agreement between Lufthansa andNigeria, said the airline had trained local aviation personnel at the Nigeria Airspace Management Agency and the Nigerian College of Aviation Technology, Zaria. According to him, the MRO facility had not taken off because Lufthansa made it plain that it was not going to build the facility for Nigeria but would partner with any Nigerian investor that was willing to fund the project.