Indications emerged on Monday that domestic airlines and banks operating in the country might soon clash over what airline operators called “fresh requirements” being demanded by banks before they can access the N300bn Intervention Fund that the Federal Government recently established for the aviation and power sectors.
The Central Bank of Nigeria had about two months ago announced the setting up of a N300bn fund to bail out the aviation and power sectors.
The bail-out, according to the CBN, is meant to assist the airlines to refinance the heavy loans, which they took from the banks. The bail-out loan is to be repaid by the airlines at an interest rate of seven per cent over a period of 10 years.
The airlines are to access the fund through their various banks.
Investigation by our correspondent, however, revealed that the airline operators were not happy with the banks, which they accused of trying to frustrate the purpose for which the fund was set up by requesting for fresh collateral before the loans could be accessed.
Findings revealed that the airlines, under the aegis of the Airline Operators of Nigeria, had written to the government to intervene in the matter.
The General Secretary, AON, Captain Muhammed Joji, who confirmed the development, also noted that the airlines had asked the Ministry of Aviation to intervene.
Joji said, “The banks are requesting for fresh collateral that is equal to the amount of money we are taking from the intervention fund.
“We had told them earlier that if the loan would be asset-based, then let it be floating asset; let the planes be used as assets. But to make the matter worse, they are asking for properties as collateral. Why are they requesting those things now? If I have to put all those things down, then it is a different ball game entirely.”
Speaking on the development, the General Manager, IRS Airlines, Mr. Yemi Dada, said that if the banks maintained their current position on the loan, it would be virtually impossible for the airline industry to benefit from the bail-out fund.
The reason, he said, was because domestic airlines‘ current indebtedness to the banks had increased to about 500 per cent.
Hence, he argued that it would be impossible for the airlines to raise fresh collateral that could cover the current value of their indebtedness and the new loan to be accessed from the N300bn intervention fund.
Dada explained, “The challenge is that they are taking additional collateral; and, like I pointed out earlier, due to the controversial penalties imposed on previous loans, the money that most airlines borrowed from the banks has increased to about 500 per cent.
“Airlines will not be able to meet up with the fresh collateral because what they had collateralised was about 120 per cent; and now, it has reached 500 per cent. In addition to this, the banks are also asking for additional collateral before the airlines can access the intervention fund. So, that brings the key issue because the airlines will not be able to collateralise the money that is not in use.”
When contacted, the Head, Corporate Affairs, CBN, Mr. Muhammed Abdullahi, said that the guidelines for accessing the N300bn intervention fund did not make provision for any fresh collateral.
He said, “I don‘t know where the issue of fresh collateral is coming from. The intervention fund is meant for the airlines to refinance the heavy loans, which they owe the banks, it is a kind of financial benefit to bail them out.”
Source:http://www.punchng.com/Articl.aspx?theartic=Art201011161461959
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