Aircraft leasing coy to be backed by sovereign guarantee – FG

The minister of aviation and aerospace development, Barr. Festus Keyamo has revealed that the Nigerian Aircraft Leasing Company being set up by the federal government will be backed by sovereign guarantee and minimum equity from the government. It would be recalled that the Federal Executive Council (FEC) approved the establishment of a Nigerian aircraft leasing […]

The minister of aviation and aerospace development, Barr. Festus Keyamo has revealed that the Nigerian Aircraft Leasing Company being set up by the federal government will be backed by sovereign guarantee and minimum equity from the government.
It would be recalled that the Federal Executive Council (FEC) approved the establishment of a Nigerian aircraft leasing company backed by international investors and development finance institutions in a bid to tackle the chronic shortage of aircraft affecting domestic airlines
Speaking on Tuesday in Abuja during a press briefing alongside airline operators and industry stakeholders, Keyamo said the Federal Executive Council approved the creation of a Special Purpose Vehicle (SPV) to drive the project.
Keyamo said the initiative was designed to stabilise Nigeria’s privately-driven aviation sector by making aircraft acquisition easier and more affordable for local airlines.
According to him, Nigeria remains unique in Africa because most of its airlines are privately owned, unlike many African carriers that are government-owned or heavily subsidised.
“It is only in Nigeria and the whole of Africa that you have this volume of private operators. All the major airlines in Africa are owned or subsidised by governments. Since we do not own a national airline, our duty is to support Nigerian private operators to survive and thrive,” he said.
The minister explained that “the proposed leasing company would source funding from international investors, African development institutions and private financiers to acquire aircraft and lease them to Nigerian carriers in local currency, reducing airlines’ exposure to volatile foreign exchange rates.”
He said the structure would also give global financiers confidence through government-backed assurances on aircraft safety and repossession processes, rather than direct sovereign financial guarantees.
Asked about the government’s involvement, he said, “The government is not putting a kobo just a sovereign guarantee for the retention of the aircraft but they will hold a minimum equity, the ministry of finance will guarantee that. The process of incorporation is in weeks, and we have interest all over the world,” he said.
Keyamo revealed that the African Development Bank had keyed into the programme and designated Nigeria as one of its pilot countries under a broader aviation financing initiative.
According to him, “the AfDB has created a $7 billion support package for the programme across Africa and appointed him as an ambassador for the initiative on the continent,”
Chief Executive Officer of Ibom Air, George Uriesi, described the initiative as a “major recharge” for the industry, saying Nigerian airlines had long been disadvantaged by high financing costs and limited access to aircraft leasing.
Uriesi said international financiers previously avoided Nigerian airlines because of concerns around aircraft repossession and regulatory enforcement, but noted that reforms around the Cape Town Convention and aviation insurance had started restoring investor confidence.
“For airlines like ours ordering brand new aircraft, the financing gap is huge. If competitors elsewhere access aircraft financing at three per cent and we are taking the same aircraft at 30 per cent interest, then our hands are tied behind our backs from the start,” he said.
He noted that local currency leasing arrangements would help airlines better predict long-term operational costs without constant exposure to dollar fluctuations.