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These are the sad reasons Nigerian airlines struggle and fail 

The CEO of AMCON, Mr Ahmed Kuru, has listed out the factors responsible for the failure of airlines in Africa’s largest economy.

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AMCON

The CEO of the Asset Management Corporation of Nigeria (AMCON), Mr Ahmed Kuru, has listed out the factors responsible for the failure of airlines in Africa’s largest economy. Speaking during a stakeholder event that was organised over the weekend to commemorate the 10th anniversary of Aviators Africa Magazine, Kuru highlighted financial recklessness in the aviation sector as a major problem.

What we know

A press statement that was seen by Nairametrics also quoted the AMCON CEO as listing the other problems bedevilling the sector to include: corporate governance lapses, greed on the part of airline owners, over-taxation by the government, unfavourable forex, etc

The AMCON boss, who was represented at the event by Tajudeen Ahmed, also focused on the “serious issues in aircraft financing” which he blamed on “our people that dabble into the business of aviation with the wrong capital mix”.

Why Arik Air carried out adjustment on scheduled operations, These are the sad reasons Nigerian airlines struggle and fail 

Banks were fingered

Nigerian banks were also blamed for lacking the right understanding and financial capacity to fully delve into the business.

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“Banks that have attempted to fund the business in the past neither had the deep expertise nor carried out proper due diligence before committing their funds. Banks lack both the financial capacity as well as the expertise in personnel to critically analyse the business and its associated risks before throwing their money into aircraft/aviation financing.

“Because the banks do not understand the business, it is easy for any ‘sharp businessman’ with dubious intentions to approach them with dodgy proposal to float an airline just to get loans that will go bad shortly after. Such cases abound in the industry.”

[READ MORE: Stakeholders express concerns over Arik Air, as AMCON allays fear]

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The Arik Air example

To buttress the point above, Kuru recounted how the former management of Arik Air spent the sum of $260 million to acquire two A340 planes some years ago. Unfortunately, there was no feasibility study carried out prior to purchasing the airplanes. As such, the former investors did not know on the time that the planes were already commercially obsolete as at the time of buying them. The planes were never used, making it impossible to recoup the money invested in buying them. This contributed to the debt crisis Arik Air was plunged into.

The AMCON CEO went further to state that inasmuch as the investors were liable for not carrying out the necessary feasibility studies, the banks that provided the funding for the purchases were also to blame.

“In such a situation, in as much as we blame the investor for not knowing the right planes to buy, the banks also have a share of the blame. If they had the expertise, they would have guided against the purchase of commercially obsolete planes. The $260million dollars, Arik management ‘wastefully’ spent buying the two aircraft at that time was enough to buy telecommunications operating licence like MTN, Globacom and others did.”

These are the sad reasons Nigerian airlines struggle and fail 

A possible solution

In view of the foregoing, it has become extremely difficult trying to convince banks to lend to the aviation sector, Kuru noted. Unfortunately, the airlines are having to bear the brunt of it in the meantime. But Kuru believes that something can be done to address the situation; the Central Bank of Nigeria should “consider incentives that will encourage banks to fund aviation in Nigeria,” he said.

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Emmanuel is a professional writer and business journalist, with interests covering Banking & Finance, Mergers and Acquisitions, Corporate Profiles, Brand Communication, Fintech, and MSMEs. He initially joined Nairametrics as an all-round Business Analyst, but later began focusing on and covering the financial services sector. He has also held various leadership roles, including Senior Editor, QAQC Lead, and Deputy Managing Editor. Emmanuel holds an M.Sc in International Relations from the University of Ibadan, graduating with Distinction. He also graduated with a Second Class Honours (Upper Division) from the Department of Philosophy & Logic, University of Ibadan. If you have a scoop for him, you may contact him via his email- [email protected] You may also contact him through various social media platforms, preferably LinkedIn and Twitter.

2 Comments

2 Comments

  1. by_stander

    December 9, 2019 at 5:19 pm

    When the people that will make their money have already done so, or you think its only the airline that collected money?

  2. by_stander

    December 9, 2019 at 5:19 pm

    when the people that will make their money have already done so. do you think its only the airline that collected money?

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Energy

NNPC signs gas development and commercialization deal with SEEPCO

NNPC and SEEPCO have signed a gas development and commercialization deal.

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FG to give up majority stakes in its 4 refineries, to be privately managed, NNPC, Pipeline Vandalism: Stakeholder collaboration, critical to tame menace - Kyari, Nigeria explains when it will fully comply with OPEC+ output cut

The state oil giant, Nigerian National Petroleum Corporation (NNPC) has signed a gas development deal with Sterling Exploration and Energy Production Company (SEEPCO).

The agreement between the 2 oil firm is for the development and commercialization of gas from Oil Mining Lease (OML) 143 that could help reduce gas flaring in the country.

The disclosure was contained in a press statement that was issued by the Group General Manager, Group Public Affairs Division of NNPC, Dr Kennie Obateru, on Saturday, September 26, 2020, in Abuja.

According to the statement, the Group Managing Director of NNPC, Malam Mele Kyari, while speaking at the agreement-signing ceremony which held at the NNPC Towers, described the execution of the deal as a great milestone as well as a testament to NNPC’s commitment to facilitating the nation’s transformation into a gas-powered economy.

Kyari disclosed that the deal would not only help reduce gas flaring and its environmental hazards but would also promote gas production and utilization in the domestic market.

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The NNPC boss also commended SEEPCO for its unwavering commitment to gas development and commercialization in the country which has led to the establishment of a Special Purpose Vehicle that will help expand gas utilization in the country as a cleaner, cheaper and more reliable alternative form of energy.

On his part, the Chairman of SEEPCO, Mr Tony Chukwueke, described the deal as an essential partnership that would help the company fulfil the pledge it made to support the efforts of the Nigerian government to eliminate gas flaring by monetizing it.

He commended NNPC and the Group Managing Director for ensuring the execution of the agreement which he described central to the achievement of the company’s cardinal objective of boosting the production of Liquefied Petroleum Gas (LPG), condensate and dry gas for the Nigerian market, adding that the company has invested about $600 million for that purpose.

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This is coming at a time when the Federal Government is shifting focus to gas utilization as an alternative source of energy especially with the increase in the retail pump price of petrol. This is one of the various initiatives by the government as represented by the NNPC towards providing alternative sources of energy.

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Energy

Buhari reappoints 3 Chief Executives of agencies under Federal Ministry of Petroleum

3 Chief Executive Officers of agencies under the Federal Ministry of Petroleum Resources have been reappointed.

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BREAKING: President Buhari retains portfolio as Petroleum Minister

President Muhammadu Buhari has renewed the appointment of 3 Chief Executive Officers of parastatals under the Federal Ministry of Petroleum Resources with immediate effect.

The appointments that were renewed by the president include that of Dr Bello Aliyu Gusau as the Executive Secretary of Petroleum Technology Development Fund (PTDF), Ahmed Bobboi as the Executive Secretary/Chief Executive Officer of Petroleum Equalization Fund (PEF) and Simbi Wabote as Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB).

The disclosure was made through a series of tweet posts by the presidency on its official Twitter handle on Friday, September 25, 2020.

The statement disclosed that the renewal of the appointments followed recommendations to the President by the Minister of State Petroleum Resources, Timipre Syla.

It stated that Dr Aliyu Gusau was credited to have run the PTDF successfully in the past four years, keeping faith with the Seven Strategic Priorities he had introduced in January 2017.

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These are Domestication, Cost cutting, Sustainable funding, Efficient internal processes, Linkages with the industry, Utilization of centres of excellence, and Pursuit of home-grown research.

It also stated that Bobboi got his reappointment for having run PEF in a way that made it a key and strategic player in the administration’s oil and gas reforms, especially in stabilizing the supply and distribution of petroleum products across the country, among others.

Going further, it stated that the NCDMB boss, Wabote, won his pips for managing the NCDMB and completing its headquarters building. Wabote was also credited to have initiated many landmark projects that were widely commended by industry players.

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Corporate Press Releases

UBA launches new online entertainment platform, ‘RED Radio’ with Wizkid interview

UBA’s RED Radio launches with an exclusive interview with its brand ambassador, Wizkid.

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Pan- African financial institution, United Bank for Africa, (UBA Plc), continues to lead in innovation with the launch of its dynamic and creative Online Radio channel – RED Radio.

RED Radio, powered by UBA is a lifestyle web platform that has been set up to inform, educate, entertain and to bring to the fore, the best of Africa. Much like its sister platform, REDTV, RED Radio is expected to showcase the best in lifestyle, entertainment, music, news, comedy and fashion.

Speaking on the launch of RED Radio, Group Chairman of UBA, Tony O. Elumelu applauded the creative initiative, emphasising that UBA is a financial institution always ready to support creativity and entrepreneurship. The 2020 Time 100 most influential person in the world who has committed USD100 million to empowering young entrepreneurs across Africa said about RED Radio, “Creativity and innovation are a powerful combination and every detail in an art piece is important and meaningful. This applies to growing businesses and budding entrepreneurs. You will encounter challenges, like I did, but each experience is a lesson that brings you closer to your goal. That is the beauty of creativity.”

Continuing, Elumelu remarked, “There are many ways to make something beautiful, to make a sound interesting or to bring a story to life. You can define your expression, and today, as UBA’s RED Radio launches, I wish Bola Atta and her enterprising team many successes through this beautiful medium of expression.”

In appreciation of the support of UBA Group Chairman for the exciting creative initiative, UBA’s Group Head, Corporate Communications, Bola Atta, said ‘just like, REDTV which is Africa’s leading online entertainment network, RED Radio is positioned to fast become the foremost online radio platform in Africa’.

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Also expressing his delight, UBA’s Brand Ambassador and star boy, Wizkid, said, “I am never too busy for my UBA family,” as he granted an exclusive interview on one of the station’s flagship shows ‘On the Street’ where he spoke extensively about his upcoming album and what his fans should expect from him in the coming weeks.

RED Radio promises to bring rich and engaging content that will keep its audience coming back constantly for vibrant and robust entertainment. Listeners can tune in to www.itsredio.com 24/7.

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