How the new aircraft leasing company – FG will be financed

The Minister of Aviation and Aerospace Development, Festus Keyamo, has revealed that 95% of the new Nigerian aircraft leasing company will be funded by private investors and development finance institutions across Africa and beyond.

Speaking during a meeting with representatives of Airline Operators of Nigeria (AON) in Abuja, Keyamo said development finance institutions, including private investors, are already showing interest in providing the necessary financing to the aircraft leasing company.

According to him, the Special Purpose Vehicle (SPV), recently approved by President Bola Tinubu and the Federal Executive Council (FEC), would operate as a substantially private sector-led company, while the President has tasked four ministers – Finance, Aviation, Industry, Trade and Investment, as well as the Attorney General of the Federation – to ensure its smooth take-off.

He said the government’s role will be limited to providing strategic support and sovereign guarantees for the safety and recovery of the planes, while the majority of funding will come from investors and financial institutions.

“The company will basically be private. We are bringing in almost 95-99% investment from external governments through development banks and private investors from within and outside the country,” he said.

The minister explained that the initiative was designed to alleviate the persistent challenge local airlines face in accessing affordable aircraft and financing.

He said the SPV will acquire aircraft through dry lease agreements and rent them to Nigerian operators in Naira, thus reducing pressure on demand for foreign currency and protecting airlines from exchange rate volatility.

Keyamo noted that the facility would also streamline transactions for international lenders, who would interface with a single Nigerian entity instead of multiple local airlines.

He added that government support would ensure smooth recovery processes for lessors and financiers in the event of default, a move that should boost investor confidence in the Nigerian aviation market.

The minister further revealed that he has already aligned himself with the initiative under his Continental Aviation Financing Programme.

According to him, Nigeria has been selected as one of the pilot countries for the program, which has a funding package of about $7 billion dedicated to aviation development across Africa.

Keyamo also revealed that he has been appointed as the program’s ambassador across the continent by the AfDB.

He said discussions with investors and financial institutions are already underway, while the process of setting up the special purpose vehicle is expected to be completed within a few weeks.

Ibom Air CEO George Uresi commended the Federal Government for the initiative, describing it as a major intervention that could lower financing costs, improve airline operations and reduce the frequency of flight delays and cancellations in the country.

He said the minister addressed three major challenges that have plagued the industry for years, highlighting the most important steps which include the Cape Town Convention, aircraft insurance and now access to aircraft financing in Naira and at a reduced interest rate.

He said: “We are not forced to use the leasing company, but when it offers lower interest rates and repayments in naira, it makes sense.”