The African Export-Import Bank (Afreximbank) has announced an ambitious plan to support Nigerian airlines with 25 aircraft through its leasing subsidiary, leveraging a dry lease financing model.
This initiative, revealed by Mrs. Helen Brume, Director of Project and Asset-Based Finance at Afreximbank, during the Airline Economics Growth Frontiers Global conference in Dublin, aims to address critical gaps in Nigeria’s aviation infrastructure.
While this development is being celebrated as a significant step toward boosting the competitiveness of Nigerian airlines, experts have noted that it addresses only a fraction of the industry’s deep-seated challenges.
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Dry lease financing, which allows airlines to lease aircraft without additional services such as crew, maintenance, or insurance, provides operators with greater operational control and flexibility.
“This initiative aims to provide Nigerian airlines with access to dry-leased aircraft, enabling them to better service Bilateral Air Service Agreement (BASA) routes and domestic operations,” said Brume.
She highlighted Afreximbank’s extensive history of supporting African carriers such as Arik Air, Kenya Airways, and TAG Airline.
The announcement aligns with recent reforms championed by Nigeria’s Minister of Aviation, Festus Keyamo, under President Bola Tinubu’s administration. Keyamo has prioritized creating a more favorable environment for Nigerian airlines to secure dry-lease aircraft, marking a departure from the wet lease agreements that have long dominated the industry.
Aircraft Are Not the Core Problem
Although the initiative has been lauded, industry experts have pointed out that the Nigerian aviation sector is plagued by more fundamental issues that cannot be resolved solely by increasing access to aircraft.
Nigeria’s aviation sector has long suffered from inconsistent policies and a lack of coherent long-term planning. Regulatory bottlenecks, overlapping responsibilities among agencies, and a lack of transparency in decision-making processes have hindered progress in the sector.
With over 60% of Nigerians living in multidimensional poverty, many simply cannot afford air travel. The high cost of flight tickets, exacerbated by inflation and surging operational costs, has resulted in low patronage. Airlines are struggling to fill seats, especially on domestic routes, making it difficult to achieve profitability.
The ongoing FX crisis has placed immense pressure on airlines, which rely heavily on foreign currency to lease aircraft, purchase spare parts, and pay for other operational expenses. The inability to access FX at competitive rates has driven up operational costs, leading to a cycle of debt and inefficiency.
Beyond aircraft, the aviation sector faces severe infrastructure challenges, including outdated airport facilities, inadequate maintenance hangars, and insufficient navigational aids. These issues undermine operational efficiency and safety, limiting the sector’s potential for growth.
However, in recent months, the aviation sector has made commendable strides in addressing some of these issues, particularly in compliance with international standards. Nigeria’s compliance with the Cape Town Convention, which governs international aircraft financing and leasing, has significantly improved. The country’s score rose from 49% to 75.5%, earning it a High category rating and positioning it as Africa’s leader in compliance.
These reforms have been instrumental in removing Nigeria from the Aviation Working Group (AWG) watchlist in October 2024, opening the door for Nigerian airlines to access global aircraft leasing markets. Key contributions include the issuance of the Federal High Court Practice Direction in September 2024, introducing binding rules and timelines for enforcing foreign court orders, and partnerships with Boeing and global financiers to secure aircraft insurance for Nigerian airlines, a critical step toward facilitating dry lease agreements.
While the initiative by Afreximbank to provide 25 dry-leased aircraft represents a potential game-changer, it is only part of the solution. Experts reveal that addressing the broader challenges requires streamlining regulations, improving governance, and ensuring consistency in aviation policies to build investor confidence.