A snap shot of the commercial/ scheduled airlines in Nigeria's aviation industry, will show that Nigeria has over 16 schedule carriers with a combined fleet of less than 100 commercial jet aeroplanes. Which is rather paltry when compared to Malaysia's Air AsiaX that has just placed an order for 100 Airbus 320 jets. Malaysia also an former British colony like Nigeria, offered independence in 1957 like Nigeria and they were ready; we were not until 3 years later. We offered them palm oil seeds in a mutual transfer of skills programme with International Instituted for Tropical Agriculture (IITA) in the late 70's. Now they are the worlds largest exporter of palm produce and we're not.
In the third week of September 2012 Central bank of Nigeria sent a circular banning financial institutions from extending further credit to Nigeria's two major carriers Arik Air and aero contractors. According to them this will prevent these two airlines from further escalating their huge debt profiles by borrowing more money. Perhaps that was a little too late as both airlines are currently burdened with unsustainable loans. This would have been averted easily if the Apex Bank had the foresight to place these airlines under administrative scrutiny as soon as it deployed tax payers money (BASA fund) to refinance bad loans in aviation sector in late 2010. As is done in the USA when organisations that are critical to it's National interest have to be protected from bankruptcy; chapter 11 protection. All the top 10 airlines in America have been shielded from imminent collapse by this facility except Southwest airlines. In the case of Nigeria, it is worth noting that over N100 billion of tax payers money had already been expended in giving all the local airlines a sort of a lifeline. For now the strategy of the CBN and AMCON appears to be very confusing; you fund and then you stifle. Something is wrong and nobody is telling us what the game plan is. If the airlines are reckless why are they still allowed to run themselves aground with our money? It appears as a deliberate attempt to make sure that the bailout money is wasted and never recovered. Why not takeover their operations and hand them over to someone who has an idea of airline economics and airline operations.
The federal government recently approved a $1.1 billion loan facility to be burrowed from the Chinese in order to revamp the transport sector. That was after the aviation minister had embarked on a road trip costing well over N250 million with initial reports indicating that investors are falling over themselves to come and invest in the Nigerian transport sector. Evidently that was not true, serious investors do not trust our politicians, policy-makers (who mostly make no policies at all) and our lawless operating environment that makes it almost impossible to implement sensible policies; e.g. privatisation. So rather than risk their own money by investing it directly, they give us a loan; which can be both qualified and quantified and most importantly securitized by the federal government itself in either oil exports or mining rights. We may never know until we see wake up one morning and find a group of Chinese Corporations mining plutonium somewhere in the middle belt.
According to impeccable sources, this is made up of $500 million for the railway reconstruction, $500 million for the branding and rebuilding of four major International airports and $100 million for the Galaxy backbone infrastructure. The loan is to be repaid after an moratorium of seven years, at an interest of 2.5% over a period of 20 years. Attractive though these may sound, some of us are sceptical considering antecedence of government and borrowing discipline. It brings to mind a fiasco that occurred when the Nigerian government in 1985 took out a loan of $5 billion from the The World bank bank. An appraisal of the Status of the loan in 1997 indicated that though the country had made repayments in excess $10 billion, the loan had mysteriously manage to balloon itself to $35 billion. Most of this was interest as a result of default in repayments.
Are we going to see a replay of such horrors in the clutches of the Paris club of China?
Disappointed with the current crop of aviation entrepreneurs? leave them to suffer a slow and painful death with the attendant cascading negative effects on passengers, employees and creditors. Just license a new breed of airlines to continue the cycle of failure; after all the re-election jamboree is about to begin where our $200 million a day oil largesse will be put to good use until it runs out in 2053.
In the third week of September 2012 Central bank of Nigeria sent a circular banning financial institutions from extending further credit to Nigeria's two major carriers Arik Air and aero contractors. According to them this will prevent these two airlines from further escalating their huge debt profiles by borrowing more money. Perhaps that was a little too late as both airlines are currently burdened with unsustainable loans. This would have been averted easily if the Apex Bank had the foresight to place these airlines under administrative scrutiny as soon as it deployed tax payers money (BASA fund) to refinance bad loans in aviation sector in late 2010. As is done in the USA when organisations that are critical to it's National interest have to be protected from bankruptcy; chapter 11 protection. All the top 10 airlines in America have been shielded from imminent collapse by this facility except Southwest airlines. In the case of Nigeria, it is worth noting that over N100 billion of tax payers money had already been expended in giving all the local airlines a sort of a lifeline. For now the strategy of the CBN and AMCON appears to be very confusing; you fund and then you stifle. Something is wrong and nobody is telling us what the game plan is. If the airlines are reckless why are they still allowed to run themselves aground with our money? It appears as a deliberate attempt to make sure that the bailout money is wasted and never recovered. Why not takeover their operations and hand them over to someone who has an idea of airline economics and airline operations.
The federal government recently approved a $1.1 billion loan facility to be burrowed from the Chinese in order to revamp the transport sector. That was after the aviation minister had embarked on a road trip costing well over N250 million with initial reports indicating that investors are falling over themselves to come and invest in the Nigerian transport sector. Evidently that was not true, serious investors do not trust our politicians, policy-makers (who mostly make no policies at all) and our lawless operating environment that makes it almost impossible to implement sensible policies; e.g. privatisation. So rather than risk their own money by investing it directly, they give us a loan; which can be both qualified and quantified and most importantly securitized by the federal government itself in either oil exports or mining rights. We may never know until we see wake up one morning and find a group of Chinese Corporations mining plutonium somewhere in the middle belt.
According to impeccable sources, this is made up of $500 million for the railway reconstruction, $500 million for the branding and rebuilding of four major International airports and $100 million for the Galaxy backbone infrastructure. The loan is to be repaid after an moratorium of seven years, at an interest of 2.5% over a period of 20 years. Attractive though these may sound, some of us are sceptical considering antecedence of government and borrowing discipline. It brings to mind a fiasco that occurred when the Nigerian government in 1985 took out a loan of $5 billion from the The World bank bank. An appraisal of the Status of the loan in 1997 indicated that though the country had made repayments in excess $10 billion, the loan had mysteriously manage to balloon itself to $35 billion. Most of this was interest as a result of default in repayments.
Are we going to see a replay of such horrors in the clutches of the Paris club of China?
Disappointed with the current crop of aviation entrepreneurs? leave them to suffer a slow and painful death with the attendant cascading negative effects on passengers, employees and creditors. Just license a new breed of airlines to continue the cycle of failure; after all the re-election jamboree is about to begin where our $200 million a day oil largesse will be put to good use until it runs out in 2053.
