Why Nigerian airlines fail to qualify for $20bn Afreximbank loan

The inability of Nigerian airlines to access the $20bn syndicated loan by the African Export-Import Bank (Afreximbank ) for the industry in Africa has been attributed to failure of successive administrations to guarantee the loan in the past three years.

But reports said many African countries, including South Africa, Egypt and Morocco have been enjoying the facility since 2013, while the only airline that had come close to securing the loan was Arik Air, which at its initial stage of expanding its international routes sought after the facility and is yet to pull through.

One of the major operators told Ripples Nigeria that in the past two years the airliners had been approaching the government to allow the Bank of Industry (BoI) guarantee the elusive loan, as is obtainable in other countries that have benefitted from the facility, but such request has not been granted.

“We have made more than two presentations to the federal government to facilitate the process whereby we are to be accessed by BoI, which has the pedigree that Afreximbank required, and we are still waiting even though nobody seems to hear us out, apparently because government has refused to endorse the move,” he said.

Other experts of the sector said there was no follow up to directive by the government, which mandated the regulatory body NCAA to prepare the ground for evaluating the airlines with the hope of having them go public.

Read also: Adeosun differs with Emefiele, can’t say when recession will end

It is believed that the failure of the policy has also been identified as the main cause of the stunted growth in the sector in Nigeria.

But Afreximbank’s senior manager, Syndications and Specialised Finance, Samuel Mugoya, enumerated some of the major challenges facing African airlines to include: their inability to source long-term loans at single digit interest rates, and being run as family outfit without equity.

He cited Nigeria as one of the countries with worst case scenarios.

He pointed out that the situation was worsened by the fact that over 60 per cent of local airlines carry their expenses in hard currency, whereas they generate their revenue in local currency.

Revealing that many financing institutions are ready to offer help that would see the airline industry turn out better, the expert pointed out that the business plans of many of the airlines fell short of being satisfactory.

By Emma Eke….

 

 

 

 

Join the conversation

Opinions

Support Ripples Nigeria, hold up solutions journalism

Balanced, fearless journalism driven by data comes at huge financial costs.

As a media platform, we hold leadership accountable and will not trade the right to press freedom and free speech for a piece of cake.

If you like what we do, and are ready to uphold solutions journalism, kindly donate to the Ripples Nigeria cause.

Your support would help to ensure that citizens and institutions continue to have free access to credible and reliable information for societal development.

Donate Now