How AMCON Wasted ₦50billion In Aviation, Wants FG To Bailout Sector

AMCON AMCON[/caption Asset Management Corporation of Nigeria (AMCON) has disclosed that it has sunk about N50billion into the aviation sector in the hope to stabilize airline operations in the country between 2012 and 2020.
This disclosure was made by Mr. Aminu Ismail, the Executive Director, Operations at AMCON.

Ismail said AMCON’s intervention led to the purchase of about US$1 billion Non-Performing Loans (NPL’s) from Nigerian banks owed by major Nigerian airlines including Aero Contractors, Arik Air amongst others. Although the aviation sector accounts for around 8 per cent of AMCON’s restructuring portfolio, Ismail explained that the AMCON’s actions in restructuring the loans of airline operators protected a critical sector of the economy for Nigeria.

Given the critical nature of the essential services rendered to the economy by the sector, he explained that the intervention objective of the government recovery agency was to stabilize the operations of the airlines rather that realize the assets of the airlines in settlement of their outstanding debt. In the process, he stated that the huge cashflow, which is needed to run the sector effectively and efficiently, additional loan was further advanced for the purpose of providing support towards growth of the airlines, fleet expansion, job retention and job creation.

However, Ismail said when the airlines failed to repay the loans, AMCON was left with no other choice, which necessitated the appointment of Receiver Managers to manage the airlines pending AMCON’s divestment.

However, aviation sector obsrvers and analysts have faulted AMCON’s claims insisting that the corporation lacked a proper understanding of the needs of the sector hence the funds were not channelled into the right sources.
Again, they argued that AMCON did not consider the capital intensive nature of operations in the sector as well as the gestation period of operational equipments hence the desired results could not be attained.

Admitting the failure of AMCON in this regard, Ismail said, “Aviation in Nigeria has historically been fraught with many challenges including poor capital structure, difficulty in accessing finance, difficulty in accessing cost effective leases, high insurance costs, difficulty in accessing FOREX for maintenance and spare parts, multiple taxation by government agencies, weak corporate governance structure, lack of airport infrastructure and very marginal share of the lucrative regional flights of under 20 per cent’ hence the difficulty in impactong the sector significantly.

He admitted that the advent of the dreaded Coronavirus (COVID-19) pandemic has tripled the challenges of the sector adding that the leadership of any airline that wants to stay afloat must think differently and strategically to ensure that the airlines survives.

He stated that despite the low income levels of the government occasioned by a huge fall in crude oil prices, which is Nigeria’s major revenue source, AMCON is in support of industry stakeholders urging the federal government’s provision of bailout packages to airlines who are currently threatening to reduce staff number by as much as 60 per cent.
This cal it is believed will make up for the failed AMCON intervention in tlaviation.
But as government contemplates the bailout proposal, Ismail advised the federal government to be guided and more strategic this time around given that the previous bailouts that were given to domestic airlines in the country between 2009 and 2012 failed to restore vibrance to the sector