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CBN bailout for airlines

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A few years ago, the Central Bank of Nigeria (CBN) bailed out ailing airlines with N100 billion soft loans to restore them to good health.

Barely three years after that infusion of funds, the apex bank has again packaged a similar facility for the aviation companies.

There is no doubt that the loans, offered at low-interest rates as against prevailing market charges, are meant to address the financial problems of these airlines.

But, the challenges facing the institutions go beyond periodic injection of capital by the CBN. Until the fundamental problems facing the airlines are tackled, no amount of fiscal assistance can make a difference.

There are simply too many unresolved structural and infrastructural problems troubling the aviation sector in Nigeria. Considering the state of the airline industry, what is required transcends routine mechanistic rescue operations by the CBN, or indeed any other governmental agency.

What the CBN is doing amounts to an attempt at curing a disease without a proper diagnosis of its causative factors. It is necessary to ask several questions at this point.

How, for example, was the first capital inflow facilitated by the CBN utilised? Was there any forensic audit of the use to which the funds were put? Which of the airlines defaulted in repayment and what sanctions were imposed on them?

Was any evaluation done to determine the impact of the soft loans on the operational efficiency of the airlines? Answers to these questions will help in steering these organisations out of financial distress. Already, four of the carriers have been reported to have a total debt burden of N120 billion which has led to their takeover by the Asset Management Company of Nigeria (AMCON). One of the leading ones is in the throes of an industrial crisis.

This is in addition to the fact that virtually all the airlines are suffering economic downturn. For some of the affected airlines, procurement of new aircraft as being planned by the Federal Government may be a secondary need.

Nevertheless, we expect that the 15-year bailout programme will help the beneficiaries overcome their challenges. Apart from air safety, which is paramount, there are many other sore points that need to be sorted out. Flying in Nigeria should not be a horrendous experience.

Elsewhere, airline services are automated and planned in such a way that travelling by air is pleasurable. We hope that the Ministry of Aviation and other critical stakeholders are involved in the latest initiative to reposition the airlines.

The Nigerian Airspace Management Agency (NAMA), the Federal Airports Authority of Nigeria (FAAN) and the Nigerian Civil Aviation Authority (NCAA) should play major roles in the current re-engineering of the companies.

This is pertinent because the CBN may not have requisite expertise in aviation matters like these specialized agencies that have technical know-how and pedigree. It is obvious that the direct administration of these funds by the CBN, instead of channeling them through the supervisory ministry, is to ensure compliance with repayment, hence the involvement of AMCON.

Beyond the CBN initiative, government should evolve a comprehensive blueprint for the revival of the airlines, which appear to have become overwhelmed by the challenges of the industry. Passengers’ harrowing travelling experiences should be mitigated. Although ongoing structural works at some of the airports are commendable, the quality of service is still below standard. In aviation matters, there cannot be compromise or shortcuts.

All operators in the sector should be safety conscious. As airlines begin to access these funds, they must ensure that they get their acts together so that flying can be a pleasure, and air safety guaranteed. This is the minimal benchmark for the sector.

Ultimately, too, these carriers should ensure that they are not perpetually dependent on bailouts. The only way to avoid this is for them to be competitive and businesslike in the management of their organisations.

The Sun

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