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Transportation Project Topics

Impact of Air Transport Sector to Economic Development in Nigeria Using Murtala Muhammad International Airport as a Case Study

Impact of Air Transport Sector to Economic Development in Nigeria Using Murtala Muhammad International Airport as a Case Study

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Impact of Air Transport Sector to Economic Development in Nigeria Using Murtala Muhammad International Airport as a Case Study

CHAPTER ONE

Aims and Objectives

The main aim of this thesis is to analyze the impact of air transport sector to economic development in Nigeria.

The specific objectives are:

  • It involved studying how the air transport business has affected the lives of the people in the region of Lagos economically.
  • to examine the importance of air transport in a region and identify main visible impacts of air transport in general and the Lagos region in particular.
  • The economy of Lagos and the Murtala Muhammed Airport business activities will

CHAPTER TWO

LITERATUREย REVIEW

LAGOSย REGIONย ANDย MURTALAย MUHAMMEDย AIRPORT

Lagos State is an African megacity which is located in south western Nigeria on theย West Coast of Africa, within latitudes 6ยฐ 23ยขN and 6ยฐ41ยขN and longitudes 2ยฐ42ยขE andย 3ยฐ42ยขE. The State is flanged from the north and east by Ogun State, in the west by theย Republic of Benin and the south by the Atlantic Ocean and Gulf of Guinea. The totalย landmassย ofย theย Stateย isย aboutย 3,345ย squareย kilometres,ย whichย isย justย aboutย 0.4%ย ofย the total land area of Nigeria. Physically it is the smallest, but the most highly populatedย stateย inย theย country.ย Lagosย metropolisย isย occupiedย byย aboutย 80%ย ofย theย populationย of the State making it the most urbanized State in the country Nigeria. According toย projected population growth studies, it has been forecast that Lagos State populationย will reach 25 million inhabitants in the next ten years (2012), making the city the thirdย largest in the world. As in 2006, the population of Lagos State was 17.5 million, (basedย on the parallel count conducted by the state during the National Census) with a growthย rateย ofย 3.2%,ย theย stateย todayย hasย aย populationย ofย overย 21ย Millionย makingย itย 10ย perย centย ofย Nigeria’s population.ย (Iwugo,ย Dโ€™ย Arcyย & Andohย 2003).

By the late 15th century Lagos Island had been settled by Yoruba fishermen and hunt-ย ers, who called it Oko. The area was dominated by the kingdom of Benin, which calledย it Eko, from the late 16th century to the mid-19th century. The Portuguese first landedย on Lagos Island in 1472 and trade developed slowly. The local obas (kings) enjoyedย good relations with the Portuguese, who called the island Onim (and later Lagos) andย who established a flourishingย trade. It was so until the British came to the region andย forced out the Portuguese to establish their colonial administration in Lagos and alsoย took over the trade which was predominantly agricultural produce. (Encyclopaedia britannica.ย com 2014)

Also known as “รˆkรณ” in popular contexts, Lagos has been Nigeria’s premier city sinceย at least 1861. Its role as distribution centre to the West African coast assured by geog-ย raphy, Lagos attracted Portuguese traders and had become a major centre for theย slave trade by the early seventeenth century. In 1851, the British bombarded the city,ย seeking to expel Portuguese slave dealers, abolish the slave trade altogether, and es-ย tablishย legitimateย tradeย inย itsย place.ย Inย theย process,ย theย Britishย setย upย theirย ownย colonial administration and finally annexed the city in 1861. The former city-state would soonย become a bridgehead to the conquest of the territories that became Nigeria. In 1914,ย Lagos was named Nigeria’s political capital, retaining that status until 1991 when Abuja formally became Nigeria’s new federal capital territory. It has since remained Nigeria’sย capital, exceptย inย name.ย (Encyclopaediaย 2014).

 

CHAPTER THREE

RESEARCHย METHODS

Research Design

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This research aimed to investigate the short-run and long-run relationships between airย transport and economic growth in Nigeria. Based on data availability, this was a longitudinalย researchย designย ofย MMA.

Data

This paper applied annual data from 1980 to 2018. Air transport passengers and the air transport freight in million ton-km represented the air transport variables and change in GDP per capita, current US dollars was a proxy for economic growth. The 2019 World Development Indicators file was the key source of data. All variables were transformed into logarithms and hence interpreted the coefficients as elasticities.

CHAPTER FOUR

RESULTSย ANDย DISCUSSION

The objective of this study was to investigate the short-run and long-run relationships between air transport (air passenger traffic and air freight) and economic growth. Descriptive statistics, correlation and unit root tests were the preliminary tests performed before the key tests.

CHAPTER FIVE

IMPLICATIONS AND CONCLUSIONS

IMPLICATIONS

Bidirectional causality between air transport and economic growth implies that these two indicators influence each other. This suggests that aviation (economic growth) policies may not be taken without influencing economic growth (aviation sector). Practically, for example, policymakers in the Nigerian aviation industry may not continue maintaining restrictive air service agreements without jeopardising economic growth. The AfDB (2019) indicates that restrictive air service agreements persistently impede intra-African services, affecting routing, capacity, frequency and fares. This will delay the development of the aviation sector in Africa and slow the economic contribution of this sector. Apart from the remaining restrictive air service agreements, causality from air transport to economic growth also entails that the high cost of air tickets, increased airport charges and poor air connectivity do not reduce the demand for air transport but also its contribution to economic growth. The previous literature raised these problems (ICAO, 2013; Heinz & Oโ€™Connell, 2013; Bofinger, 2018), which the Nigerian aviation sector is still experiencing.

On a positive note, causality from air transport to economic growth shows that policies thatย are meant to improve the efficiency of the aviation sector will automatically affect economicย growth. In this case, it is our belief that the launch of the SAATM in 2018 will improve theย aviation sector’s contribution to economic growth in Africa. The benefits of the SAATMย include job creation, improved international trade leading to growth in GDP and reducedย travel costs (Deloitte, 2018). This initiativeย may improve competition amongย airlinesย andย the delivery of services. The intercontinental routes in Lagos that are currently monopolisedย may realise increased airlines. In this regard, Abate (2016) argues that liberalisation hasย the potential to elicit competition among African airlines, which would decrease fares.ย Speedingย upย theย fullย implementationย of theย SAATM isย stronglyย endorsed.

The positive effect of economic growth on air transport implies that as African economic growth rises, it causes a greater demand for air transport services. Bidirectional causality between air transport and economic growth shows that it is possible to simultaneously improve air transport and economic growth. While this nexus seems favourable, it also means any adverse shocks to economic growth will jeopardise the performance of the air transport sector. The ARDL results indicate that the effect of economic growth on air transport freight and passengers will materialise in the long run. From a policy perspective, at the moment, this suggests that policy decisions to address the adverse effects of the COVID-19 pandemic on air transport should be taken, in cognisance of how the affected economic growth may come to haunt the demand for air transport, especially in the long term. The income per capita in Africa has already been low and taken as one of the reasons why commercial aviation in the continent remains the least developed (Abate, 2013). This current paper stresses that the COVID-19 challenge and the associated lockdowns that occurred in 2020 may exert downward pressure on income per capita in Africa, further weakening demand for aviation services. Unless the governments make appropriate and adequate post-COVID-19 policies to stimulate domestic aggregate demand, production levels and economic growth, the future outlook of air transport performance is fragile.

Linked to previous implications, our results show that the adjustment speed to correct any deviation from long-run equilibrium relationships between economic growth, air transport passengers and air transport freight was slow. Subsequently, when a shock happens, policymakers should expect a longer period to pass before a full adjustment in the equilibrium relationship between air transport and economic growth is restored. The suspensions of flights due to the COVID-19 challenge that hit the aviation industry hard may have distorted the steady long-run relationship between air transport and economic growth, and it may take time to resolve the distortions.

Also, in the interest of improving air transport provision and connectivity and ultimately the aviation sector’s contribution to economic growth, policymakers in Africa should not be overprotective of the numerous fragile national flag-owned airlines. A good example is the troubled Air Zimbabwe, whose operations are intermittent. This study concurs with an argument by Bofinger (2017) that these fragile, national, flag-owned (often state-owned but not always) carriers are not economically sustainable, lead to lower service standards and impede competition. Protecting state-owned carriers and maintaining restrictive measures while the population is denied access to quality air transport services may not be an effective strategy. Perhaps as argued in Abateโ€™s (2013) paper, it is not necessarily that every nation should own an airline to yield the benefits of an efficient air transport service. Many African economies may continue to be both players and beneficiaries of the sector through enhanced competition.

Anotherย importantย implicationย drawnย fromย theย resultsย isย thatย policymakersย shouldย notย expect the effect of their aviation policies to immediately have an effect on economicย growth.ย Forย instance,ย thisย suggestsย thatย theย SAATMย initiativeย mayย yieldย significantย economicย growthย for Africanย economiesย inย theย longย runย andย not inย theย short run.

CONCLUSIONย 

This study focused on the short-run and long-run relationships between air transport and economic growth in Lagos. It was concluded that a bidirectional causality existed between air transport and economic growth, which the ARDL model suggested it happened only in the long run. The variables were cointegrated. The adjustment speed to correct any deviation from long-run equilibrium relationships between GDP, ATP and ATF was slow. While ATP had a positive long-run effect on economic growth, ATF suggested negative growth effects. Nevertheless, the findings showed no evidence of short-run effects. Even for the individual countries, this study found few short-run effects and hence, concluded that the relationship between air transport and economic growth in Lagos existed in the long-run.

Ourย analysisย wasย limitedย toย Lagosย dueย toย theย unavailabilityย ofย data.ย Thereย shouldย beย variousย channelsย throughย whichย airย transportย influencesย economicย growth,ย whichย requires a detailed investigation. Tourism and trade could be channels in the relationshipย between air transport and economic growth. Further research may broaden the scope ofย this study by considering tourism and trade as mediators in the relationship between airย transport and economic growth. While this study focused on economic growth, futureย studies may instead consider the role of air transport in socio-economic developmentย (accountingย forย poverty and inequality).

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