The federal government is considering granting domestic airlines discounts on debts owed to aviation agencies as part of efforts to cushion the impact of the ongoing aviation fuel crisis.
A debt discount or discounted payoff (DPO) is a negotiation
framework in which a lender or creditor agrees to accept less than the full
amount owed to settle a debt.
This means paying a reduced amount of what is originally
owed.
Festus Keyamo, minister of aviation and aerospace
development, spoke in Abuja on Wednesday after a high-level meeting convened to
address the sharp rise in aviation fuel costs.
Keyamo said President Bola Tinubu, who was briefed on the
outcome of the meeting, directed that a proposal be sent for immediate
consideration.
“He mandated us to quickly bring a request to him. The first
request that he will consider and grant is a generous discount on the debts the
airlines are owing the aviation agencies, NAMA, FAAN, NCAA, and so on,” the
minister said.
“The percentage of discounts and all that Mr President will
decide.”
Keyamo also said the president would set up a committee to
review multiple taxes, levies, and charges imposed on domestic tickets, in
order to reduce the burden on passengers.
“This request has been on for a long time. Mr President will
put the team together, and he will give them a deadline to report to him as
quickly as possible on the government fees and charges and levies that we can
take off domestic tickets for now to give respite to Nigerians who are also
buying their tickets,” he added.
“He will consider a date for the airline operators to meet
him one-on-one for the other more robust discussions regarding access to
capital and all of that.”
‘MARKETERS MUST BE BROUGHT TO BOOK’
Also speaking at the meeting, Allen Onyema, the chairman of
Air Peace, said the aviation crisis was driven largely by the steep increase in
Jet A1 prices, which he described as disproportionate to the rise in the cost
of crude oil globally.
Onyema said airlines are under severe financial strain,
noting that operators have been forced to rely on borrowing to sustain fuel
purchases while struggling to maintain other critical aspects of operations,
including safety and maintenance.
“The truth is that the marketers must be brought to book to
explain how they got about the 300 percent increase,” he said.
“Even Dangote is surprised, because what he is selling to us
still remains the cheapest, and some of them lift from there. So why the
astronomical rise?
“We appreciate Mr. President for coming to our rescue, but
we want to say that instead of the president deciding which discount to give
us, we are asking for a total waiver of all the debts we owe, and at the same
time, a suspension of further payment until Hormuz is open.”
The chairman further urged the government to address high
interest rates on aircraft financing in Nigeria, arguing that single-digit
lending, “common in other jurisdictions”, would help strengthen the industry’s
long-term viability.
“All over the world, they acquire at 3 percent. In Nigeria,
we acquire at 30 to 35 percent. This is killing. That’s why airlines owe FAAN,
owe NCAA, owe everybody,” Onyema said.
“We ask Mr. President to please fund the Bank of Industry.
That is the only bank that is still doing single-digit or at least 10 percent
interest to airlines but they don’t have funds now.”
On April 14, the Airline Operators of Nigeria (AON)
threatened to suspend operations from April 20 over the rising cost of Jet A1.
The operators said the price of aviation fuel has increased
from N900 per litre as of February 28 to N3,300 per litre — representing a rise
of over 300 percent.
However, in a subsequent development, AON announced a
temporary suspension of the planned suspension following appeals by the
minister.
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