Amos Akpan Chinedu Eze
An industry expert has given reasons why Nigerian airlines find it difficult to access credit from the international market.
Nigerian airlines in the past did not have the goodwill to attract international financiers to support their businesses with single-digit and long-term loans for aircraft acquisition, lead consultant at ETIMFRI Group, Amos Akpan said.
He recalled that before the 2006 Civil Aviation Act and before the Category 1 rating of Nigerian by the US Federal Aviation Administration (FAA) along with the certification of Nigeria by the International Civil Aviation Organisation (ICAO), the country’s air transport sub-sector could be described as rudderless.
Nigerian carriers benefitted from such credit facility in the past, but not as regular as other airlines in Africa such as Ethiopia Airlines, Kenya Airways and others.
In Nigeria, airlines like the defunct Afrijet had benefited from such credit facility, but the airline that hugely benefitted from international financiers was Arik Air.
According to the Founder of the Airline, Mr. Joseph Arumemi-Ikhide, Arik Air was beneficiary of such credit facility, which the airline effectively serviced because it maintained acceptable international standards when it started flying.
But the aviation economist explained to THISDAY that Nigeria’s financial sector did not develop internationally recommended practices, credit based financial system until recently.
But since the high rating of Nigeria’s safety standard by international aviation regulatory bodies, they have recently commenced building data for credit worthiness.
He noted that this was one of the reasons why Nigerian airlines could not engage on interlining with foreign airlines in addition to the fact that banks may not be able to come up with forex when needed to pay their foreign partners.
“This makes it difficult to synchronize with other operators in climes with developed credit systems. It is an issue of difference in practices based on cultural setting. Leasing aircraft or any aviation plant for business operations requires you satisfy certain regulatory criteria.
“There is the lack of understanding of aviation business by commercial financial institutions in Nigeria. An investor wants to bring in $100 million through a Nigerian airline. The investor requires a guarantee from a Nigerian bank that it will receive all income from operations, process the repatriation of the sum plus interest for a period of 15 years.
“The Nigerian bank will require assets or cash worth $120 million deposited with her as collateral before issuing the guarantee to the foreign investor. Note that the investor has […]