A correction has been made in the second paragraph: Nigeria exports 2.2 million barrels of oil per day, not per year as stated in the earlier version.
On paper, Nigeria should be one of the most lucrative and dynamic aviation markets in Africa.
The West African country is the biggest oil producer on the continent, exporting 2.2 million barrels a day, says the US Energy Information Administration (EIA). That puts in the top 20 producers worldwide.
With a population of 160 million, Nigeria is the most populous country in Africa, and since large cities such as Lagos, Abuja, Kano and Port Harcourt are poorly connected by road and rail, air travel would seem to be an attractive way to travel for the growing middle classes.
But in reality, and despite these advantages, competition in the Nigerian market remains severely constrained.
While a number of airlines do compete in the domestic market, Innovata data shows Nigerian carrier Arik dominates across all sectors.
In March 2013, Arik controlled 55% of the domestic and regional seat capacity out of Nigeria with 411,000 seats, followed by state-controlled Aero Contractors with 28% and Dana with just 5.2%.
How Nigeria's domestic market is split
SOURCE: Flightglobal's FlightMaps Analytics
On international routes, Arik is the only indigenous carrier, but only holds a 7.7% share of seat capacity out of Nigeria, while more than 40% of the market is held by foreign competitors including Emirates, British Airways, Lufhansa and Air France.
How Nigeria's international market is split
SOURCE: FlightMaps Analytics
Nigeria’s safety record was also tarnished when a Dana Air flight crashed in 2012 with the loss of more than 160 lives, leading to a spate of groundings of the carrier pending safety audits.
While entrepreneurs have flocked to start new carriers and airlines – with Discovery Air, First Nation, Azman and Air Peace among the latest – the list of airline failures over the years has been equally long.
Sudeep Ghai, managing partner at consultancy Athena Aviation, says Nigeria is simply not living up to its potential: "Nigerian aviation is frankly a story of unfulfilled potential best evidenced in the Airbus’s latest market forecast, which, in one graph displaying national propensity to travel by air, places Nigeria near the bottom of the list, just ahead of Afghanistan, and yet the same manufacturer is also confident that Lagos is one of only 42 mega cities which 20 years from now should account for over 10,000 daily long-haul passengers. Nigeria today has around 100,000 seats per week – less than Tunisia or Algeria, and one-third of the South African seat count."
So why is the market so underdeveloped? Issues of corruption, crime and the ever-present threat of terrorist attacks provide their own challenges. However, Arik Air’s chief executive Michael Arumemi-Ikhide says structural issues within the aviation industry in Nigeria are a major factor.
"Unlike anywhere else where the opportunities abound in Nigeria and in West Africa in general, our challenges are significant. Whether it's because of idiosyncrasies in the business environment, lack of infrastructure, navigation systems and airport charges are exorbitant," Arumemi-Ikhide tells Flightglobal.
"First, airport and navigation charges are a complete distortion – they are extremely high. If you are going to create an environment for the private sector to flourish and players like Arik and others to enter market and sustain themselves, it has to be with a very beneficial financial environment," he adds.
But Athena’s Ghai warns that a lack of foresight and planning by owners of airline start-ups means many of them "are or will remain paper concepts".
He warns. "Our own research suggests that 80% of start-ups typically fail within three years of commencing operations and the percentage of projects that never move beyond the drawing board is higher still."
But despite the challenges, both Ghai and Arumemi-Ikhide are optimistic that there are indications the market may be turning a corner.
Ex-Camair boss Alex van Elk is planning to launch a new Lagos-based low-cost airline operating flights to the "golden triangle" of Lagos, Abuja and Port Harcourt – the heart of the oil business.
Nigerian routes by origin city
SOURCE: FlightMaps Analytics
Van Elk says the carrier will emphasise safety and punctuality and a "quality cabin service" and will operate just one class of seats as it attempts to drive down costs to offer Nigerians a cheaper alternative.
A year after the demise of flag carrier Air Nigeria, the country is preparing to use the assets of Aero Contractors as a nucleus for a new national carrier to be launched "very soon", it says.
Meanwhile, pan-African low-cost carrier Fastjet is also planning to enter the market through a joint venture with the country’s Red1 Airways. And, says Ghai, now could be propitious timing for new entrants into the market.
"Let’s assume some of these players do come to market. Assuming the national carrier concept does not eradicate the case for existing or new entrants – and this is an important assumption – there is one clear reason to invest. The existing operators teetered on the edge of insolvency a few years ago and are now controlled in very large measure by the Asset Management Company of Nigeria [AMCON]. Over the last few years, AMCON has taken over N132 billion [$832 million] of debt through the purchase of non-performing loans and now has a significant share of Dana, Arik and Aero."
Ghia adds: "These airlines are now stuck with turnaround plans while the bankers behind AMCON try to recover the money sunk into their airline portfolio. So in principle a well-run airline that could deliver a broad network, quality product and safe, reliable, on-time and consistent performance is likely to be well received."
Arik’s Arumemi-Ikhide says with basic reforms to liberalise charges and import and export duties there is plenty of scope to grow the market.
"In 2012, we carried 2.4 million passengers," he says. "This year, for first six months January to June, our passenger figures were up 27% compared to last year. If you look at the Nigerian market from 2001 to 2010 in total, it grew from 4.4 million to 14.6 million, with a 17.6% annual growth rate.”
The Nigerian executive says he has faith in the government’s aim of modernising the aviation market and notes that they have been receptive to his call that the country’s airports need to operate 24 hours a day if they are to compete with the Middle East’s hubs.
The Arik boss has big ambitions to launch the carrier into an alliance once its network is firmly established in Nigeria, and will then look to new long-haul markets such as more destinations in North America and a joint venture with one of the Gulf carriers to connect to Asia.
The ambition to develop Nigeria’s aviation market seems never to have been stronger.