Political Uncertainty Stalls Investment in Aviation Sector

The heightened political tension in the country ahead of the 2019 general elections is negatively affecting foreign investments, aircraft leasing deals as well as other negotiated agreements in the aviation sector, THISDAY has learnt.

THISDAY’s investigation revealed that potential foreign investors in the sector are unwilling to go ahead with deals they have already signed because of concerns of over political risks.

The Managing Director of Medview Airline, Alhaji Muneer Bankole, confirmed this in an exclusive interview with THISDAY.

According to Bankole, foreign business partners are presently apprehensive about Nigeria’s forthcoming elections, and are unwilling to negotiate and commit business agreements with their Nigerian partners.

He also said those who had initially wanted to invest in Nigeria have withdrawn their investment because of concerns of political risks.

“Investors are apprehensive about the current political transition going on and it is affecting investment and even business negotiations between us and the outside world. This is because they are not confident that things will be okay in the business environment.

“What is happening now is giving investors concern and I am aware that some people are pulling their capital away; we should not make political transition an issue. Foreigners are skeptical about our politics and we have read recently that a lot of money is being moved out of the country.

There is a threat because our politics is looking unstable and this has made investing in Nigeria a big risk,” Bankole said.

Also speaking on the issue, the Chief Executive Officer of Aero Contractors, Captain Ado Sanusi, disclosed that investors who initially wanted to invest in Aero Contractors pulled out after negotiations had reached 90 per cent conclusion.

“It is true that investors are apprehensive about the coming election and that is what is affecting the sale of assets by the Asset Management Corporation of Nigeria (AMCON). Three organisations had earlier indicated interest to invest in Aero, but they pulled out after negotiation had reached almost 90 per cent conclusion. They are worried about political uncertainty and continuity,” Sanusi said.

On his part, the Chief Operating Officer of Dana Air, Obi Mbanuzuo, told THISDAY that it was difficult to secure credit facility from international financiers because they cite political uncertainty of the country.

“We have been talking with investors, financiers and we have got good interest rate in accessing credit facility, but they always consider the political environment which they describe as unpredictable.

“They would say, if they give you long term credit facility it may not work because the political environment is unpredictable. This affects our business. Anytime we are closer to a deal, they express fear over unpredictable environment.

“These are long-term thing but the environment in this country is unpredictable. “Once after election there comes an in-fighting about the budget and all the attendant policking. This affects the thinking of the international financiers.

“We at Dana Air have negotiated for aircraft and things work out well because they believe in us; we have goodwill but policy summersault, unstable political environment make financiers and lessors see Nigeria as high risk place to do business,” Mbanuzuo said.

He also said Nigerian airlines pay higher premium, up to 75 per cent on aircraft leasing because of political uncertainty, which according to him, is why many Nigerian airlines buy aircraft outrightly and because they cannot afford modern aircraft, they buy older equipment.

“For example, if a lessor agrees to even lease aircraft to you, you will pay about 75 per cent higher than airline that leased same aircraft type in the United States. They may charge US airline $120,000 a month but you will be charged $200,000 a month.

“You pay more for what they call Nigeria risks. So, they put a higher premium on us. We leased B737 and it is going to cost us about $200, 000 a month. If I were in the US I would probably pay $120,000; $110,000.

“They know that in the US their assets are protected. Nigerian airlines buy aircraft out rightly and because they cannot afford modern aircraft, they go for classics, while others are going for Boeing 737 MAX,” he said.

Investment and aviation lawyer, Emeka Nwigwe, in his contribution on the matter, pointed out that aircraft leasing companies (lessors) are unwilling to lease aircraft to Nigerian airlines because they are not sure of the safety of their equipment and are also anxious about Nigeria’s economy.

“In terms of investment in the aviation sector, people are skeptical about investing in the sector. The market is on the downgrade and this will not change till towards the end of next year after election and this also depends on government policy. Foreign investors are shunning the Nigerian market because of obvious fears.

“Monies coming into Nigeria are still institutional funds, like pension funds from the West and the fear is that if they invest money in Nigeria if there is crisis after the election, the money is gone. These institutions are not charity organisations; they want profits for their investment.

“The country is losing money. Nobody is bringing money from outside. What are available are contracts and that is what the Chinese are doing, and they get bonds, which are like cash. In terms of investment people are sceptical,” Nwigwe explained.