Despite the controversy that trailed previous intervention fund meant to rescue troubled airlines in the country, the Federal Government is again proposing a fresh package of financial stimulus for domestic airlines. We want to believe that the proposed fund will be a wise investment that should be utilized for that purpose and not another round of bazaar.
The Minister of Aviation, Stella Oduah, while speaking on the new intervention fund, gave assurance that it would be different from the previous N100 billion that was diverted to other uses. Although details of the exact amount of the new financial plan is yet to be disclosed, the aviation minister explained that it would involve a 16-year repayment facility with a single digit interest rate aimed at boosting the airlines’ operations. Unlike the previous one, the repackaged intervention fund would be paid directly to aircraft manufacturers abroad or lessors to acquire new aircraft.
The plan looks attractive given the explanation of the minister that the mode of administering the fund would involve a three-way process. The first step will be coordinated by the Ministry of Finance, while the Central Bank of Nigeria (CBN) will channel the fund to the aircraft manufacturers or leasing companies. The supervision aspect will be done by the Aviation ministry. The aircraft manufacturers or leasing companies will in turn deliver the aircraft to the airline operators in Nigeria. Besides, the aircraft, according to the arrangement, should be brand new or relatively new ones. Government’s plan to deal directly with aircraft manufacturers instead of the former arrangement of allowing local airlines direct access to the fund is a welcome idea.
Looking back now, it is obvious that the previous intervention fund was riddled with monumental fraud. The intent and purpose of the new intervention plan are noble, provided government and the relevant supervisory agencies have learnt the hard lessons from the previous fund in which few deceitful individuals took undue advantage of the lapses in the system to divert the fund for personal use. It is therefore instructive not to ignore the lessons of the past to avoid a repeat. The misappropriation of the past intervention fund was a clear case of stealing of public fund. It has become expedient to take early precautionary measures this time around.
It needs recalling that under the former intervention fund, all manner of local airlines had access to the fund, once they were certified duly incorporated under the Company and Allied Matters Act of 1999. Also, under the old intervention fund, all commercial banks and Development Financial Institutions (DFIs) were included as participating institutions in the disbursement of the fund. The fact that the airlines were charged 7 percent interest did not prevent its abuse.
This time around, it is vital to plug all loopholes that permitted such under-hand practices. There is no doubt that the aviation sector is very critical to the economy and the image of the country. Therefore, all due processes should be scrutinized before any airline is deemed qualified to benefit from the fund. In that regard, there is need to draw a red line which all local airlines must not cross. The CBN also needs reminding that it has a crucial role to play in ensuring that the fund is applied judiciously. It must not yield to the tricks that some airlines might use in order to shortchange the process
. In this regard, we advise that suitably qualified and competent persons should be appointed to manage the processes leading to getting the facility. Adequate mechanism should be put in place to make that work. Many airlines are currently insolvent, and some of them are reported to be shopping frantically for funds to recapitalise, especially now that the CBN has barred financial institutions in the country from extending further credit to them.
There is no doubt that our aviation sector is going through tough times. Official figures show that domestic airlines are indebted to banks in excess of N250 billion. It will be a good development if our aviation sector will come alive again, but not by using the fund to repay their debts.
We commend the aviation minister for her efforts to improve the sector through a fresh intervention fund which is equivalent to a ‘sinking fund’ that the Federal Government has set up for the economy. Its success or failure will depend to a large extent on how the fund is utilized for the purpose it is intended.