The Central Bank of Nigeria (CBN) has confirmed that the intervention fund given to Nigerian airlines in 2010 was actually meant to cushion the debts owed the banks by the domestic carriers.
The federal government gave N300 billion to the power and airlines to share, which was meant to help the airlines acquire new aircraft and fund their operation.
But the Assistant Director at the Infrastructure and Finance office of CBN, Elder Boma Benebo explained to the House Committee on Aviation during the on-going public hearing on how to resuscitate the airline industry that the domestic carriers exposed the banks to about N246.9 billion loans.
Benebo said CBN became concerned in 2010 when it realised how much the airlines owed the banks and substantial amount of the loans, about 14 percent was non-performance loan.
He said at that time the financial system was at risk and “we looked at hoe to strategy the system and also help the aviation sector and we decided to restructure the loans on short term and long term basis.”
Benebo said the airlines borrowed the huge money on double digit, short-term interest rate that was as high as 23 percent so they could not pay the interest.
“so the intervention fund was used to restructure the loans, so the money was given to the airlines to offset their debts in the banks and the interest rate was reduced from 23 percent to 7 percent and from short period of time to 10-15 years. We asked the banks to refinance the loans and also give working capital to the airlines,” he said.
According to him, the airline industry was in financial straights so CBN collaborated with the then Ministry of Aviation and after studying the situation brought in a consultant, the Africa Finance Corporation (AFC) to help revamp the airlines.
“We looked at the airline industry and saw that it was in financial straights. It had negative equity and they were losing revenues and we also found that poor infrastructure was also part of their problems, so in 2010 we made recommendations. We noted that the operating cost of these airlines in Nigeria is too high; there was high parking fees and aviation fuel was costly and instead of sourcing revenues from non-aeronautical sources all the charges were heaped on the airlines,” Benebo said.
The Chairman of the House Committee on Aviation, Hon. Nkiruka Onyejeocha said that the objective of the public hearing was to find practical solutions to solve the problems of the aviation industry and to stop Nigerian airlines from going under and then to stop foreign airlines from leaving the country.
Many presenters identified major problems plaguing the airlines to include high cost of foreign exchange, inadequate supply and high cost of aviation, exorbitant charges and poor infrastructure.
