Feelers from the Infrastructure Concession Regulatory Commission (ICRC), the government agency saddled with the responsibility handling the process towards the newly established national carrier, Nigeria Air Limited, shows that the national carrier will be financed through a mix of government budgetary provision, private equity debt arrangement and finance syndication from a consortium of regional and international banks.
President of the African Export-Import Bank (AFREXIMBANK), Benedict Oramah also confirmed this development in Abuja during the recent 25th anniversary celebrations of the Bank.
Specifically, Oramah hinted that part of its priority agenda in 2019 is to provide part of the syndication loan to finance a Nigerian national carrier.
Other development finance institutions that have also indicated interest in funding the initiative include the African Development Bank (AfDB) and the Islamic Development Bank (ISDB).
According to the ICRC, the estimated $300 million funding for the entire airline start-up operations in 2018, out of which the federal government will provide $55 million upfront grant/viability gap funding.
Out of the amount, $8 million would take care of acquisition of offices for the official take-off of operations, cash flow requirements, payment of commitment fees for aircraft to be leased for initial operations and deposit for new aircraft.
The airlines’ financial model shows about $100 million would be required for 2019 operations and $145 million for 2020, with the remaining financing to be determined by equity contributions expected from the strategic equity partners.
To be modeled after the Nigeria LNG joint venture structure, the ICRC said at start-up government would own majority equity in Nigeria Air Limited, with management to be concessioned to the strategic equity investor.
After one year of operations, government would be expected to divest her equity by issuing an initial public offer (IPO) approved by the Securities and Exchange Commission for Nigerians acquire shares in the airline.
“Government will retain only 5% equity (after the IPO), while the rest of 95% equity will be owned by the strategic equity investor and the general public,” the commission said.
To enable the airline benefit from the bilateral air services agreements (BASA) and other such agreements requiring local beneficial ownership as a condition, the law expects Nigerians to own majority stake in the company.
During the procurement stage, requests for qualification (RFQ) and proposal (RFP) would be issued to pre-qualify and select PPP partner, after which information memorandum and RFP bidding process would be published.
“It is only after the PPP procurement process that the strategic equity investor will be known. At that point, Nigeria Air Ltd will become a public company subject to SEC, NSE and relevant CAMA rules for public companies,” the Commission said.
To ensure its viability, the ICRC said the Federal Ministry of Transportation would facilitate a Bill to be sponsored in the National Assembly for an Act making it mandatory for public officials to use the airline for their official trips.
“The Act will demand that any official travelling on a ticket bought with public funds must travel on a Nigerian carrier, unless the route is not served by a Nigerian carrier,” the commission said.
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