How legislation can aid forex accessibility, low interest rates for Nigerian airlines
Nigerian airlines require legislation to aid them in accessing low interest rates, foreign exchange amid currency fluctuations and lower Insurance premium.
Nigerian airlines pay 26 percent interest rates on loans compared to other airlines which pay as low as 3 percent while paying as much as $2m for insurance premium.
These were as some initial summations of the Chairman of Air Peace Barrister Allen Onyema who called for legal frameworks to enable airlines operate
He spoke at a webinar: ‘Repositioning the Aviation Sector in Nigeria for Revenue Generation and Growth: Role of Legislation’ organised by Olisa Agbakoba Legal (OAL).
Onyema said of the over 150 airlines that have come and gone in Nigeria that 5% can be attributed to ownership structure. He however said 95 percent of these failures are solely Government policies and extraneous matters which airlines have no control over.
He said, “Aviation is capital intensive. The legacy airlines access loans at very low, cheap interest rates at 2-3 percent. The Nigerian airline borrows at 26 percent.
“How do you expect these airlines to succeed or compete? Legislation should come in here.”
He called on the government to invest in the industry through legislation, mandating banks under the Central Bank of Nigeria to dedicate certain amounts to be accessed at single digit interest rates.
Speaking on insurance, the Air Peace Chairman said it was skewed against Nigeria as what it pays as premium for an aircraft some pay as premium for six.
He said stigmatisation was used to unofficially snub the country.
Onyema said,” Vice President of IATA recently said what Nigeria pays for one aircraft is what Kuwait pays for six aircraft. We pay as much as $2m for premium while legacy airlines pay $100,000.
On forex, Onyema further lamented the absence or difficulties in accessing this stating that the industry in Nigeria is dollarised with 98 percent operation cost in hard currency.
“We keep hearing that foreign airlines have trapped funds in Nigeria. No one says how some of the airlines in Nigeria have funds trapped in the CBN because of forex.
“We need legislation here to make it possible to have a window where they can secure forex for operations.”
