December 31, 2021 / 11:34 AM / by CSL Research / Header Image
Based on a Punch news report, between January and September this year, output in the aviation sector rose to N146.6bn from N114.2bn recorded in the corresponding period of 2020. The relaxation of travel restrictions occasioned by the COVID-19 pandemic and increased economic activities during the year drove recovery in the aviation sector in the first nine months of 2021. The National Bureau of Statistics classifies aviation or air transport as one of the sub-sectors under the transport and storage sector. Road transport, rail transport, water transport, transport services and post and courier services are the remaining five. During the review period, the contribution of the transport and storage sector to the GDP stood at N2.4tn, which was driven by the economic performance of road transportation (N2.2tn), air transport (N146.6bn) and transport services (N62.4bn).
The aviation sector was one of the worst-hit sectors by the pandemic derailing the interesting prospects posed by the sector. In 2019, the sector was the fastest-growing sector in the country, surging higher by 13.2% y/y. However, the sector dipped in Q2 2020, down 57.4%. In Q3 2020, the sector again contracted by a staggering 38.9%. Surprisingly, monetary and fiscal policymakers did not appear to be overly concerned with the struggles of the sector, despite its systemic importance to economic activities in the country. However, following pressures from stakeholders as well as the legislative arm, the Federal Government finally approved a N4.0bn bailout fund for airlines at the beginning of November 2020. The sector returned to growth in Q2 and Q3 2021, up 4.98% and 33.3%, respectively.
Barring any new obstacles from the emergence of the Omicron variant, we believe the aviation sector is set for growth. In our opinion, while the aviation sector does not contribute a huge percentage to overall GDP, we note it has systemic importance for the conduct of trade and other economic activities in the country. Thus, we think the FG may need to support the sector more as it gets out of the deep recession it sank into. Only recently, the Minister of Aviation, Hadi Sirika, announced that the country's delayed national air carrier, Nigeria Air, is planned to launch on or before April 2022. The proposed airline was initially planned to begin in 2018 but plans stalled. We believe the launch and smooth running of the airline will also be a boost to the aviation sector.