By Dipo Olowookere
More details are beginning to emerge on the newly launched national carrier for the nation, Nigeria Air.
According to reports, federal government, which announced having five percent stake in the new company, Nigeria Air Limited, said it would run the firm for one year before listing the shares through an Initial Public Offering (IPO).
Nigeria Air is expected to finally begin operations by December 2018 after obtaining at least five airplanes of the 30 it plans to have.
It was earlier disclosed by the Minister of State for Aviation, Mr Hida Sirika, that about $300 million would be needed to operate the national carrier.
“At start up, government will own majority equity in Nigeria Air Limited Joint Venture company that would be very similar to Nigeria LNG Limited. Nigeria LNG Limited is a huge JV success that is private sector managed so will Nigeria Air Limited.
“After one year of operations, government will through an IPO divest her equity for purchase by Nigerians subject to approval of the Securities and Exchange Commission (SEC).
“Government will then retain only five percent equity. The rest of 95 percent equity of Nigeria Air Limited will then be owned by the strategic equity investor and the general public.
“Majority ownership must however remain with Nigerians so that the national carrier can benefit from BASA and other bilateral agreements which require local beneficial ownership as a condition precedent.
“Management of the national carrier will be concessional to the strategic equity investor with no step in rights and management control by government. Signed up acceptance and approval of the management concession agreement will be a condition precedent for the IPO,” the Ministry of Aviation was quoted as saying.
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He said the project is not shrouded in any secrecy affirming “There is no secrecy. The entire process is guided by the infrastructure concession regulatory commission guidelines/regulations.
Speaking on the $300 million needed to fund Nigeria Air, it was clarified that, “Government is not funding the entire project. It’s just providing start-up capital in the form of an upfront grant/viability gap funding.
“Once the strategic equity investor is in place, they will be expected to build on the initial investment made.”
It was further stated that, “$8 million represents startup capital for offices etc required for takeoff. But $300 million is the entire airline cash flow funding requirements (aircraft, operations and working capital) for three years (2018, 2019 and 2020).
“This funding can be in the form of equity or debt. The financial model estimates cash flow requirements as follows 2018 ($55 million – $8 million is included here), 2019 ($100 million) and 2020 ($145 million).
“In order to ensure take-off of the airline in 2018, the government will provide $55 million upfront grant/viability gap funding to finance startup capital and pay commitment fees for aircraft to be leased for initial operations and deposit for new aircraft whose delivery will begin in 2021.”
Furthermore, it was emphasised that because it’s a PPP, it has three stages – the project development stage, procurement stage and implementation stage. The project development stage was just concluded with the approval of the Outline Business Case, which the ICRC issued a certificate of compliance.
“Once the process gets to the PPP procurement stage, there will be an RFQ, Information Memorandum and RFP bidding process which will be made public, competitive and transparent. It is only after the PPP procurement process that the strategic equity investor will be known.
“At that stage the JV partners will be government and the strategic equity partner. Government’s equity share held in trust for Nigerians will be devolved to Nigerians via an IPO.
“The government will retain only 5% equity, the list of shareholders then will be available to SEC and the Nigerian Stock Exchange. At that point Nigeria Air Ltd becomes a public company subject to SEC, NSE and relevant CAMA rules for public companies.
“All PPP procurement and ownership moves will be made public. Signed up acceptance and approval of the management concession agreement will be a condition precedent for the IPO.”
