Minister of Aviation, Stella Oduah
The Federal Government has been accused of exposing huge public resources amounting to over N135 billion as intervention fund to the airlines and even plans to inject more funds to resuscitate the operators by providing them with long-term, single-digit loans to acquire new aircraft.
While this later plan is commendable, industry observers are not hopeful that some of these airlines, including the ones operating and the others struggling to come up would be able to honour obligatory conditions attached to these loans.
An industry expert, Nick Fadugba, told THISDAY that the level of financial exposure to the airlines by government has reached a critical point.
“The government very thoughtfully introduced the intervention fund for the airline industry. Now, this was a very positive measure by the government. I think it was well-motivated on the part of government, but I believe that the exposure now is quite critical.”
Fadugba expressed worry on whether these funds could be repaid by the airlines.
“Don’t forget that the intervention fund is public money. It belongs to the people of Nigeria. Government’s money is people’s money; tax payers’ money and right now, if you look at the account as far as we know from the information we have, the level of indebtedness of individual airlines to AMCON (Asset Management Corporation of Nigeria) is sincerely excessive and I have some reservations about whether the airlines involved are capable of refunding these debts in full. And if they don’t, the exposure is going to be for the Federal Government and at the end of the day for the national treasury.”
Fadugba made recommendations on how to recover these funds and questioned whether the debts were being serviced, adding that all over, the world airlines owe debts because the business is capital intensive.
“However, the critical thing is while airlines all over the world have debts, including in Nigeria, it is essential that all debts are serviced regularly and promptly. You cannot justify having large debts when you are not servicing it. I believe that you need capital to run an airline, but you must pay your bills promptly and many airlines are said not to be servicing their debts and yet they are looking for more loans from public funds.”
His recommendation was that government should establish a body that should monitor the finances of these airlines, noting that the major work of the Nigeria Civil Aviation Authority (NCAA) is regulation.
“Another critical area for me is that there is nobody in Nigeria at the moment, who is monitoring the financial and business performance of the airlines that benefitted from government funds.
“Now, some might say that NCAA should do this but at the end of the day, NCAA is a regulator. It is not a bank to be monitoring the financial performance on a day-to-day basis.
“But I believe that if the Federal Government of Nigeria is going to provide these huge funds to the airline industry then the Federal Government should set up a mechanism or a body to monitor on a monthly basis the performance of the airlines that have received the money. And at any sign where the airlines are unable to service the loans provided by the government, then action must be taken.”