Operators in the aviation industry may have cause to smile soon, as discussions are on going between the Minister of Aviation Hadi Sirika and the Central Bank of Nigeria (CBN) for loans to be granted at a single digit interest rate of 9%. Loans to most businesses currently range from 25-30%.
Chief Executive Officer (CEO) of the Accident Investigation Bureau, Mr Akin Olateru disclosed this while meeting with members of the National Association of Aircraft Pilots and Engineers (NAAPE) recently.
Sirika is working with CBN to ensure that interest rates on loans to investors in the sector was not more than 9 per cent. This would go a long way in improving standards in the sect
Will history repeat itself ?
Previous intervention efforts by the apex bank, have had mixed results. A Senate hearing held last year to investigate the application of bail out funds released by the CBN to the sector, revealed some of the funds were misapplied. Some of the operators that got bailout funds, eventually folded up, while the Asset Management Company of Nigeria (AMCON) took over the operations of Aerocontractors in February 2016, and Arik Air in February this year.
Cheap loans are not enough
Rather than dole out funds at low interest rates, the government should put in place an enabling environment for businesses operating in the sector to thrive. Companies operating in the aviation sector have often complained of multiple taxation, and the poor state of airports in the country.
The sector is also affected by happenings in the larger economy. Q2 2017 Air Transportation data recently released by the National Bureau of Statistics (NBS) show air fares in the country went up by 57% due to a massive jump in inflation. A large proportion of components used in the industry have foreign exchange components. The depreciation of the Naira against the dollar last year, led to an increase in the cost of these components. Air passenger traffic also decreased by 16.13% year on year.