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FG to provide $1bn guarantee for local airlines

By on November 2, 2012

Arik aircraft in flight

The Federal Government is set to provide bank guarantees to enable indigenous airlines to buy new and serviceable airplanes.

Plateau State Governor, Mr. Jonah Jang, disclosed this to State House correspondents at the end of the National Economic Council meeting presided over by Vice-President Namadi Sambo at the Presidential Villa, Abuja on Thursday.

He was joined at the briefing by governors Adams Oshiomhole (Edo) and Ibrahim Shettima (Borno), as well as the Minister of National Planning, Dr. Shamsudeen Usman.

The council, chaired by Sambo, has all state governors, Central Bank of Nigeria Governor, as well as ministers of Finance, National Planning and Federal Capital Territory as members.

Jang said the council commended the efforts being made by the Federal Government to reinvigorate the embattled aviation industry.

The efforts, he explained, included the plan to support the airlines by providing guarantees to enable them boost their fleet through the purchase of new or serviceable aircraft.

Investigation by our correspondent revealed that the plan to provide the guarantee for the airlines had been on the government’s drawing board for sometime now.

A source familiar with the situation said the move followed a paper presented to NEC by the Minister of Aviation, Ms Stella Oduah, on how to move the aviation sector forward, especially on how to turn around the declining fortunes of the airlines.

It was gathered that the challenges air travellers had been facing in getting air tickets in the last six months made the plan more urgent.

A source familiar with the development told our correspondent, “What the government is planning will make foreign banks to finance aircraft acquisition by Nigerian airlines.

“Foreign banks will not finance aircraft acquisition for Nigerian airlines except a local bank provides the guarantee. Local banks will not do this unless they are sure that in case the airlines default, someone will pay. So, this is where the government guarantees come in.”

Our correspondent gathered that with the drive the minister was having about it, the plan could materialise in six months.

It was also gathered that if things worked well, the airlines might start bringing in new planes in 18 months.

It was also learnt that the government was looking at providing between $500m and $1bn guarantee to allow Nigerian carriers to bring in at least 20 brand new jets into the country.

It was gathered that the plan was similar to what South Africa and Ethiopian governments did to their national carriers to enable them get new planes.

However, our correspondent gathered that the government was also looking at adopting the John Obakpolor committee’s report, which recommended that it should set up an aircraft leasing company from which domestic airlines could get planes.

The model, it was learnt, was being adopted by China and Indian to help their airlines to refinance new planes.


Source: Punch

One Comment

  1. Mary Kaplan

    November 4, 2012 at 8:33 pm

    Good post. Glad the government is supporting local airlines to help them improve their fleets and offerings.