Aviation
By Gabriel Agbeja
NIGERIA’S aviation industry is poised for growth, with the International Air Transport Association (IATA) predicting a seven per cent increase in passenger traffic by 2025.
However, for the country to fully realise its aviation potential, it is crucial to empower local airlines.
In line with this, Mr Festus Keyamo, the Minister of Aviation and Aerospace Development says the Federal Government will deepen partnerships with global lessors and financiers to support domestic airline growth and fleet renewal in Nigeria.
Keyamo was speaking at the Airline Economics Growth Frontiers Global in Dublin, Ireland, recently.
The News Agency of Nigeria (NAN) reports that the Airline Economics Growth Frontiers Global event was held from January 12 to 15.
The event, which was part of Airline Economics Week, focused on latest developments and trends in the global aviation industry with emphasis on the financing and leasing of aviation assets.
The minister affirmed that the Federal Government would improve on its stakeholders’ engagement and also prioritise a thriving aviation ecosystem that would be globally competitive, inclusive and resilient.
According to him, the Renewed Hope Agenda of the present administration is meant to strengthen adherence to international protocols, including the “Cape Town Convention“, to boost investor confidence.
NAN reports that the Cape Town Convention provides creditors with internationally recognised rights in the event of a debtor’s default or insolvency.
It also reduces risks of lending for aircraft financiers and other parties involved in aircraft purchasing and leasing.
NAN further reports that the convention’s primary goal is to protect the interests of sellers, purchasers, and creditors by establishing an international registry for recording interests in mobile equipment.
Kayamo also said the Federal Government had been intensifying efforts toward strategic investments in airport modernisation and air navigation systems to enhance safety and efficiency.
“We are already advancing training programmes to develop local talent and sustain industry growth, “the minister added.
He urged global financiers to invest in the concession of Murtala Muhammed International Airport, Lagos, and Nnamdi Azikiwe International Airport, Abuja.
Keyamo emphasised that the Federal Government of Nigeria had implemented streamlined policies to create an enabling environment for investors to concession the nation’s airports.
“Initiated measures to reduce operational bottlenecks, including reviewing airport concession agreements to improve efficiency, have been put in place,” he said.
Keyamo also highlighted the need to expand Lagos and Abuja airports to enhance capacity and passenger experience, stating: “There is a need to expand Lagos and Abuja airports to enhance capacity and passenger experience.”
The minister noted that the Nigerian aviation sector had experienced significant growth, aligned with the government’s commitment to modernise infrastructure, improve safety, and foster economic growth.
He said that Nigeria’s Cape Town Convention index, which increased from 49 to 75.5 as a result of recently implemented policies, would help improve lessor’s confidence in placing leased aircraft in Nigeria.
“We hope that our demonstration of supporting economic growth, with aviation being a key factor, will open arms from the industry,” Keyamo said.
To achieve these targets require a safer aviation environment and ccoperation among all stakeholders and the minister said the government had created multiple platforms to unify aviation stakeholders for that purpose.
The minister also said the government had also partnered with airlines, the insurance industry, and regional banks to address key issues and implement reforms.
“We have developed and signed an MoU, with Boeing to help with safety improvement, operational efficiency, talent development, infrastructure development, and capacity building concerning Maintenance, Repair, and Overhaul (MRO),” he said.
Ms Rose Lereece, Director Customer Finance, Boeing Commercial Airplanes acknowledges the importance of security structure in consummating aircraft lease.
She described the security structure as a “Stand-by Letter of Credit (SBLC),’’ serving as a security provided by a commercial bank and covered by a confirming Banking and an Insurer.
According to her, SBLC provides a short-term guarantee (immediate and irrevocable) which allows the lender or lessor to cash-in an amount to the value of six to 36 months of payments (in USD).
Lereece said that the payments were envisioned to include both rentals and maintenance reserves.
She listed SBLC security features to include, immediate availability and irrevocable funds, US Dollar settlement and further security in the form of confirming and or third-party insurance.
She said that others were more entities that implied more security and fees, giving lessor or lender the ability to cure and continue or severe and repossess.
“`Collateteralisation by the airline of a fraction of the agreed SBLC value may be required by the commercial banks, “she added.
According to her, airline pays commercial banks a single rate that embeds all fees including insurance where applicable while commercial banks pay lessor in the event of an issue.
The director explained that commercial banks obtained SBLC insurance support from the confirming bank while the confirming bank obtained SBLC insurance support from the insurance provider.
She further explained that the insurer provided insurance for the confirming bank or the commercial bank.
Mr Moor Ibekwe, Boeing Sales Director Africa Region Commercial Airplanes, said that the value of the SBLC, measured in payments due, could be six to 36 months for both rental and maintenance reserves.
He explained “playout term “as one-off or monthly according to the severity of the underlying issue.
“Continued utilisation or restoration would be at the behest of the lessor or the lender, confirming bank support needed for the lease or loan traction.
“Insurance support needed for the lease/ loan transaction while tenor is the period for which the SBLC must be available to the lessor or lender in the first five years of a 12-year lease” he added.
Mrs Helen Brume, Director Project and Asset-Based Finance of Afreximbank, assures of the bank’s readiness to would support African airlines with 25 aircraft.
Afreximbank, a 30-year-old development financing institution, has a primary mandate to promote trade across Africa.
According to Brune, the aircraft to be delivered soon will address the need for robust aviation infrastructure and enhance competitiveness among African airlines.
The director also spoke on the bank’s extensive experience in supporting Arik Air, Kenya Airways, and TAG Airline over the past two decades.
She said that Afreximbank would support aircraft financing for more Nigerian airlines.
“This initiative aims to provide Nigerian airlines with access to dry-leased aircraft, enabling them to better service Bilateral Air Service Agreement (BASA) routes and domestic operations, “she said.
Legal backing is crucial for any sector to deliver on public expectations and the National Assembly says it is ready to provide the necessary legislative backing and one area it is required is insurance.
Sen. Abdulfatai Buhari, Chairman Senate Committee on Aviation and Aerospace Development, said Nigeria Insurance Industry Bill, 2024 would attract global investment to the nation when passed into law.
According to him, such a more robust and modern regulatory framework Bill will potentially increase confidence in the Nigerian insurance market, making it more attractive to investors, including in the aviation sector.
“The Nigerian Insurance Reform Bill, 2024, aims to provide a comprehensive legal and regulatory framework for the insurance business in Nigeria.
‘’It is a milestone in the efforts to reform the insurance industry.
“This overhaul is expected to bring the insurance industry in Nigeria up to date with global best practices; the bill seeks to repeal and replace several outdated insurance laws,’’ he said.
The lawmaker canvassed certain percentage of the insurance on the aircraft dry lease that would be acquired by the Nigerian local airlines to be accrued into local Nigerian market.
Buhari said carrying Nigerian market along with the international market of the insurance on aircraft dry lease would provide additional comfort and boost confidence in the area of regulation in Nigeria.
Prof. Obiora Okonkwo, the Chief Executive Officer, United Nigeria Airlines, said that satisfying the lessors’ interest and the local market in terms of insurance could be a big task for the local airlines to acquire dry lease.
Okonkwo said that lessors wanted 100 per cent of the insurance on their aircraft dry lease to be in the international market.
‘’The lessors want their equipment safe and secured. So, regarding the insurance, we need to find a common position; there is no regulation that makes it compulsory to be domesticated in Nigeria.
“The lessors are listening to us; we need to have the same spirit to grow the industry, the bigger the industry the better for us.
‘’Even, if it is a small percentage of the local market, it is still better than nothing, “he said.
Nevertheless, Mr Olusegun Omosehin, the Chief Executive Officer of the National Insurance Commission (NAICOM), maintained that a certain part of the insurance should to be extended to the local market.
According to him, 6 to 20 per cent of the insurance of the aircraft dry lease that will come to Nigeria will significantly increase the nation’s Gross Domestic Products (GDPs).
As Nigeria’s aviation industry continues to grow, it is essential that local airlines are empowered to play a leading role in shaping its future.
By providing access to funding, developing infrastructure, simplifying regulatory requirements, and investing in training and capacity building, local airlines can thrive in a competitive market. (NANFeatures)
1st February, 2025.
C.E.
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