September 25, 2021

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FAAN in N140bn financial crisis

By Chinelo Obogo

 

Following the opening of the bid for the concession of the international terminals of four airports in the country, it has been revealed that the Federal Airport Authority of Nigeria (FAAN) is in deep financial crisis and faces a huge debt of over N140 billion.

In an advertorial placed by the Nigerian Union of Pensioners (NUP), FAAN branch, and signed by the association’s secretary, Emeka Njoku, in response to the commencement of the bidding process for the international terminals of Nnamdi Azikiwe Airport, Abuja, Port Harcourt Airport, Omagwa, Mallam Aminu Kano Airport, Kano and Murtala Muhammed Airport, Lagos, prospective bidders were warned of the indebtedness of the agency which Daily Sun can also reveal may cripple operations if there is no reprieve from the Federal Government.

Bidders were warned that the agency has over 60 pending litigation arising from several faulty concession agreements yet to be resolved and there is also the issue of the unresolved BI- Courtney concession of Murtala Muhammed Airport (MM2).

The NUP said that FAAN owes contractors who have delivered their contracts over N15 billion. Sources within the agency told Daily Sun that this figure does not include ongoing contracts. NUP urged bidders to investigate not only their claims, but should also clarify from the Minister of Aviation, Hadi Sirika, how the over $1 billion loan from China for the construction of the same terminals earmarked for concession would be repaid.

Daily Sun gathered that FAAN generates an average of N70 to N75 billion annually and remits an average of N1 billion monthly into the Federation Account while monthly salaries for the agency’s 8000 staff currently stands at over N2.3 billion. Sources also told Daily Sun that in the past four months, about N2 billion deducted from staff salaries for cooperative contributions have not been remitted.

While more than two-year arrears of minimum wage is yet to be implemented and N3 billion in gratuities not paid to retired staff, the most critical aspect of the debt is the staff accrued rights of over N120 billon. An agency source disclosed that this figure does not include accrued rights from 2017 till date which, if valued, may bring the total amount to N150 billion, while what FAAN presently has with PENCOM is not up to N7 billion.

Daily Sun gathered from reliable sources in the agency that at the inception of the Pension Reform Act in 2004, the accrued rights of staff stood at N28.3 billion. But the agency didn’t transit to the scheme at the time because it didn’t have the funds.

When the remittance of the Contributory Pension Scheme (CPS) started in 2007, the agency still didn’t transit but continued paying retirees about N500m monthly from its Internally Generated Revenue (IGR), which violates the Pension Act. By 2012, however, PENCOM insisted that FAAN should carry out another accrual valuation and when it was done, the amount had increased from N28.3 billion to about N84.3 billion. And in 2015, it rose to N103.5 billion as more staff had been employed, people were promoted and salaries were increased.

The implication of this is that all current staff of FAAN have no pension in their accounts unlike their counterparts in other aviation agencies since their deductions were not remitted into their PFAs. Daily Sun gathered that even those who retired over a year ago are yet to receive their monthly pension and gratuity.

“What the management of FAAN is now doing is that they are begging PENCOM so that anyone that is retired before the 2004 Act can retire on the previous benefit scheme so that FAAN can continue to pay them from their IGR. But PENCOM refused and said only those who retired from August 2020 can benefit from it. Those who retired from that time till now are about 48 in number and the amount of money FAAN is looking for to send to the PFA for this set is over N2 billion but the money is not there.

 “You put in your best years in civil service and when you retire, there is nothing in your pension account. In the OBC for the concession, nothing was mentioned about the 25 per cent that FAAN remits monthly. The implication is that if there is no waiver or reprieve from the government, the agency would have to remit its statutory 25 per cent of its IGR from the 40 per cent of the sharing formula and it would be left with 15 per cent which would be insufficient to meet its financial obligations and maintain the remaining 18 airports. It would be difficult for FAAN to survive and may eventually collapse,” another source said.

The post FAAN in N140bn financial crisis appeared first on The Sun Nigeria.

Source: news