FG Not Paying $300m for 5% Stake in Nigeria Air, Says Sirika

Stakeholders fault establishment of national carrier

Kasim Sumaina Chinedu Eze

The federal government yesterday debunked reports that it would pay $300 million for five per cent stake in the new national carrier, Nigeria Air.

However, Airline Operators of Nigeria (AON) and economists have faulted the government’s plan to invest in the new national carrier, saying the development would be contrary to government’s earlier statement that it would have zero financial commitment in the project.

This is coming as the Nigerian Civil Aviation Authority (NCAA) has called for zero tolerance to flight cancellations and delays, which have plagued airline operations in the country.

The Minister of State for Aviation, Hadi Sirika, said in a statement by the ministry’s Deputy Director of Press, Mr. James Odaudu, that the federal government would not fund the entire project.

According to him, “Government is just providing startup capital in the form of an upfront grant/ viability gap funding. Once the strategic equity investor is in place, they will be expected to build on the initial investment made.”

The minister said the strategic investor will only become known after the public-private partnership procurement process is completed.

On shares to be sold after one year of operations, Sirika stressed that the company’s shares will be sold through an initial public offering after which the government will own five per cent equity.

“Government’s equity share held in trust for Nigerians will be devolved to Nigerians via an IPO. “The government will retain only 5 per cent equity, the list of shareholders then will be available to SEC and the Nigerian Stock Exchange (NSE).

“The rest of the 95 per cent equity of Nigeria Air Limited will then be owned by the strategic equity investor and the public. “At that point, Nigeria Air Limited becomes a public company subject to SEC, NSE and relevant CAMA rules for public companies.”

Meanwhile, stakeholders have faulted the federal government’s plan to invest in the new national carrier.

AON said government is actually establishing a national carrier with its own funds without recourse to the National Assembly noting that no investor has shown firm commitment to the project.

Former boss of Asset Management Corporation of Nigeria (AMCON), Mustafa Chike Obi, said the explanations given by Sirika indicated that the federal government is actually establishing the airline with state funds.

The experts noted that this is also in contrast to the condition given by the Infrastructure Concession Regulatory Commission (ICRC) when it issued Outline Business Case Compliance Certificate for the national carrier.

ICRC insisted that government would have zero investment and management of the airline.

Chike-Obi said, “It appears it (the national carrier) is really a 100 per cent Government Sponsored Enterprise (GSE) that would transform into PPP in the future when the federal government sells down 95 per cent to investors. They should just have said so. Pray the process of selling down the 95 per cent follows all due process.”

THISDAY also spoke to the economist and Managing Director of Financial Derivatives Company Limited, Bismarck Rewane who said that such expenditure on airline by government is misplacement of funds.

Top official of AON said the government would actually spend over $3 billion to establish the national carrier, noting that the $300 million it said it would spend is not realistic.

“The projection is that the airline will operate for five years before it would begin to make profit; so it cannot even go to the stock exchange. But the establishment of the airline to become on-going concern cannot cost less than $3 billion because for the airline to become international carrier, it must have to acquire long-haul aircraft.

“Why do we want to use $3 billion out of our total annual revenue of $26 billion to please one per cent Nigerians that travels by air?

“Boeing B777 costs about $340 million and we need about five units to fly two long haul distant routes successfully. What all these show is that the desire to acquire a national carrier is simply for pride because most of the national carriers we have today are officially bankrupt, except Ethiopia Airlines,” senior official of AON told THISDAY.

Meanwhile, the NCAA has called for zero tolerance to flight cancellations and delays, which have plagued airline operations in the country.

Spokesman of the agency, Sam Adurogboye said the call was made at the just concluded stakeholder’s forum organised by the regulatory authority in Lagos.

Adurogboye said the forum was attended by 13 international airlines, eight domestic airlines, and airport operators, including the Federal Airport Authority of Nigeria (FAAN) and Bi-Courtney Aviation Services (BASL).

During the discussions, officials of the NCAA requested the airline operators to enumerate their challenges that could be the likely causes of delays and cancellations.