High Interest Rates Bane of Rapid Growth in Aviation Sector

Chinedu Eze

The failure of government to adopt specific policy that will extend credit facilities to investors in the aviation sector from government owned financial institutions is one of the factors that stagnated growth in the aviation industry, stakeholders in the industry have said.

The stakeholders noted that as a capital intensive business, which is catalyst to nation’s economic growth and known to create thousands of jobs, the industry ought to be supported with low interest, long term loans to help airlines and other related businesses in the industry to grow.

They identified lack of support from financial institutions, absence of economic development, policy summersaults and lack of expertise as some of the major obstacles confronting the growth of the sector in Nigeria.

At a one day virtual workshop organised by Aviation Round Table (ART) in Lagos with the theme: “Financing Aviation Infrastructure Deficit in Nigeria Using Private Capital: Challenges & Prospects,” they emphasised that for the sector to experience rapid growth and be able to address some of the infrastructure challenges, private sector and government collaboration was necessary.

Speaking, Founder, International Partners for Aviation Development, Innovation and Sustainability (IPADIS), Dr. Bernard Aliu, declared that there was the need for injection of private capital to tackle the myriad of infrastructure gaps noticed in the African aviation system.

Aliu said it was wrong for players in the sector to confuse ownership with the source of financing, adding that investors should also be able to differentiate management from corporate governance.

He also called for immediate economic development for African aviation, clear civil aviation policy and master plan, vibrant liberalised aviation market, socio-political and economic stability, creation of enabling institutional legal and regulatory framework and robust ethics, accountability by private organisations to grow the sector.

The Chief Executive Officer (CEO), Quorum Aviation Services, Mr. Abiola Lawal, said that Nigeria is faced with three major challenges: economics/financial, legal framework and political/policy.
According to him, none of the banks in Nigeria was ready to finance aviation business, while various government interventions had failed due to high single digit interest rates.

Lawal argued that high interest rates of between 20 and 22 per cent for investors in the sector would only make players and organisations in the industry bankrupt.

He added that the intervention funds by the Central Bank of Nigeria (CBN) at nine per cent interest loan rate was too high to sustain business in the sector, adding that in the other climes, investors access loans at maximum of two per cent.

The CEO, TAL Helicopters, Olufemi Adeniji stated that train and road transport had failed in Nigeria because of high insecurity in the country, but regretted that aviation industry was yet to fully tap into the opportunities.

He observed that lack of planning and non-adherence to ease-of-doing-business scheme by government agencies further compounded the woes in the sector.

“Ease-of-doing-business doesn’t work in Nigeria. This is a shame. I brought Boeing Company into Nigeria, but the same company ended up going to Ghana with a grant.
“Funding is a major problem in the Nigeria’s aviation industry. We really need to change our orientation if we want to be taken seriously.”