Govt denies plans to invest N108b in new national carrier

The Federal Government has denied plans to invest $300 million (N108 billion) in the new national carrier, clarifying that the sum was the startup capital of ‘Nigeria Air’.

The Minister of State for Aviation, Hadi Sirika, said contrary to misconceptions from some quarters, government would invest $8.8 million (N3.2 billion) to get the airline off the ground in December.

He reiterated yesterday that government was not funding the entire project, but “we are just providing startup capital in the form of an upfront grant or viability gap funding.”

The minister said once the strategic equity investor is in place, they will be expected to build on the initial investment.

Sirika noted that the $8.8 million is for offices and logistics for the smooth take-off of the airline, adding that the $300 million was its entire cash flow funding requirements (aircraft, operations and working capital) for three years – 2018, 2019 and 2020.

He stated: “This funding can be in the form of equity or debt. The financial model estimates cash flow requirements are as follows 2018 ($55 million – $8 million is included here), 2019 ($100 million) and 2020 ($145 million).

“In order to ensure the take-off of the airline in 2018, the government will provide $55 million upfront grant or viability gap funding to finance startup capital and pay commitment fees for aircraft to be leased for initial operations and deposits for new aircraft whose delivery will begin in 2021.”

The minister further revealed that the strategic investor would only become known at the completion of the public-private partnership procurement process.

He went on: “The company’s shares will be sold through an initial public offering (IPO) after which the government will own five per cent equity. Government’s equity share held in trust for Nigerians will be devolved to the citizens via the offer.

“The government will retain only five per cent equity while the list of shareholders will be made available to the Security and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE).

“The rest of the 95 per cent equity of Nigeria Air Limited will then be owned by the strategic equity investor and the public. At that point, the airline becomes a public company subject to SEC, NSE and relevant CAMA rules for public companies.”