Sanusi

Troubled airlines got a breather yesterday. 

The Central Bank of Nigeria (CBN), said it was extending a N500 billion fund meant to stimulate credit to the power and manufacturing sectors to support the beleaguered aviation industry.

Airlines have gone through rapid expansion in recent years and are heavily indebted to the banks, which are just recovering from the impact of a N600 billion bailout last year.

Higher prices for jet fuel have forced some airlines to ground some flights.

"These airlines can now partake from the fund and those that are indebted to banks can refinance their loans and amortise them over a period of 10-15 years," said the apex bank spokesman, Mohammed Abdullahi.

"This, we believe will help put off a feared financial crisis in the aviation industry," he said.

Nigeria’s airline industry has become highly competitive in recent years, particularly on domestic routes, with new carriers, such as Arik Air and Dana Air, springing up to compete with older firms such as Aero Contractors and IRS Airlines.

British billionaire Richard Branson’s Virgin Atlantic [VA.UL] has said it is looking to sell its 49 percent stake in Virgin Nigeria, which recently changed its name to Nigerian Eagle Airlines and said last year it needed fresh capital.

The airline, last year suspended its loss-making long haul flights to Britain and South Africa to focus on domestic and regional operations, under pressure from one of its main financial backers, United Bank for Africa.

Analysts have warned some Nigerian airlines are in such financial dire straits that they could end up being forced to merge or face collapse.

The CBN said last Friday that N200 billion of the fund would allow banks to refinance loans to manufacturers. The remainder will be used to finance power projects.

Abdlluahi said several airlines are indebted to banks, and, therefore, require financing package that would see them out of the doldrums.

He said CBN had three months ago, worked out modalities to galvanise the economy.

He noted that the Monetary Policy Committee (MPC)’s meeting has in the past few months been trying to assist the growth of critical sectors.

He said the Bankers’ Committee had met with governors to explore the possibilities of helping them in financing some of their projects.

Delta and Lagos have already approached the CBN for joint financing of projects.