The federal government on Tuesday said its setting up a new aircraft leasing structure that will back leases with a sovereign guarantee while taking only a small equity stake.
Under the plan, the government, through the Minister of Aviation and Aerospace Development, Festus Keyamo, hinted that it will not bail out airlines directly.
Instead, it would provide guarantees covering two areas: the legal title and safety status of the aircraft, and repossession rights if a lessee defaults.
In return, the government will hold a 5-10 per cent equity stake in the leasing vehicle, positioning it to earn from its enabling role rather than operate the airline.
Keyamo gave the hint during a high-level meeting with Airline Operators and Aviation Stakeholders on matters concerning Nigeria Aircraft Leasing Company, in Abuja.
He disclosed that the structure was designed to address a long-standing problem for foreign lessors.
Keyamo noted: “Previously, even after the Nigerian Civil Aviation Authority deregistered an aircraft, other agencies such as customs could block repossession on legal grounds.
“The sovereign guarantee would bind all government agencies to cooperate on repossession, with the government itself liable if they fail to do so.
“The special purpose vehicle for the leasing company is currently being incorporated, with completion expected in weeks rather than months. Fundraising is underway, and officials report global investor interest, though they declined to give a firm financial close date.”
Speaking on foreign exchange, Keyamo explained that the arrangement was aimed at reducing pressure on foreign earnings and outflows rather than the naira directly.
“Government is not putting one cover on it. Government is only providing a sovereign guarantee for the safety of those aircrafts and for repossession.
“And for that, government will hold a minimum equity in the company. And so government is earning money from it because of the role it’s going to play. Now, whether it’s going to be five or 10 per cent, the Minister of Finance, Attorney General, myself, we all decide. But it’s going to be very minimal share equity.
“So government holds an equity in it for the role it’s going to play in it. Now, why are we dragging it in like this? Because before, deregistration by NCAA was not enough to export an aircraft. After NCA deregisters, customs will come in and give all kinds of stories.”
Continuing, Keyamo said: “I have explained this before in my previous press interviews, especially the one I granted after the approval we secured from the Federal Executive Council about three or four weeks ago.
” It was very important that we brief the airline owners today because eventually they will be the ultimate off-takers of that aircraft leasing company. As you know, one of our major objectives as a government is to see to the survival and stability of the local airlines.
“Why did we make this a prime objective? It’s simply because it is only in Nigeria and the whole of Africa that you have this volume of private operators. All over Africa, all other major airlines are run by governments. There’s no single country in Africa that you have made plenty of airlines run by private people.
“It does not exist. It’s only in Nigeria. All the other airlines we hear of, whether Morocco Air, Egypt Air, Rwanda Air, Uganda Air, South Africa Air, all of them are run or subsidized by governments.
“So government’s duty in Nigeria, therefore, since we don’t own a national airline, we don’t subsidize one, is to ensure that the sector that we preside over, run by private people who are Nigerians, for Nigeria, who employ Nigerians, and for the benefit of the economy, we must support them to make them stable and make their businesses thrive.
“It’s not only for their businesses, like I said. Once they acquire more aircraft, it helps, one, to cut down on constant cancellation of flights you hear for Nigeria.
“So instead of fighting them, you have seen me as minister, despite the fact that we hold several meetings all the time behind the scenes on how to improve their services, I don’t start fighting them every day over cancellation, delay, because we know the problem,”Keyamo said.
Speaking on behalf of the Airlines Operators, Managing Director/Chief Executive Officer, Ibom Air, George Uriesi, commended Keyamo for his interventions.
He said, ‘”Thank you, honorable minister, for what I think has been a seismic term in office as minister of aviation. Honorable minister, you’ve done three very heavy lifts that have been slowing down this industry for a very long time.
“Already our hands are tied behind our back in the wrestling ring. So what he’s done is he’s untied our hands by providing us a Nigerian leasing company that not only will it provide us access to aircraft at way reduced interest rates, we’ll be paying it in Naira. Honorable Minister, so you know if it’s $100 Naira a month you’re paying, for the next 10-12 years it’s $100 Naira a month,” Uriesi said.