Abuja - (09)2780300
Lagos - (01)2773210



FG, Aviation Sector And Why AMCON Should Not Be Vilified

16th May 2023

As a Nigerian resident outside of the country, but deeply concerned about Nigeria’s mismanagement and its spluttered development, across different sectors of the economy, I am never proud to openly boast among my circle of friends from other countries of my Nigerian heritage. The reason is simple.  

Since 1960 when the country gained her independence from the British colonial administration, successive governments in Nigeria both military and civilian have struggled to reposition Nigeria, a country with great potential among the comity of fast developing nations of the world. Infrastructure such as stable electricity generation and distribution, good road network, effective and functional rail lines, a thriving aviation sector, banking, healthcare, education have all struggled to measure up to global standards. 

In addition to this plethora of challenges, insecurity of lives and property, extremism, and senseless killings, kidnapping for ransom, armed robbery, fraud, and dubious exhibitions carried out by some desperate unemployed youths (known in Nigeria as Yahoo Boys), corruption, nepotism, tribal bigotry and so many other vices have held the country down. Travelling across Nigeria by road is extremely dangerous, it is not safer by rail and the aviation sector is expensive and bedevilled by all sorts of difficulties that tend to snuff life out of the operators as soon as they start operations. To say the least, life in Nigeria is brutish, hellish, and almost not guaranteed, which accounts for why most Nigerians have embraced the now popular Japa phenomenon (citizens fleeing the country). 

Before I decided to seek for greener pastures many years back, I worked in the aviation sector for over a decade, and even here in Europe, I still play key role in the sector. Make no mistake, the aviation business anywhere in the world is no easy venture – from America to Europe, Aisia to Africa, running an airline is a capital-intensive venture. The business is even made worse for operators, and investors in Nigeria because of the exchange rate, which is unavailable, unstable, and unpredictable. Nigeria has a multiplicity of exchange rates for different things, which makes one question the mindset of economic leaders in Nigeria. But that is a story for another discussion. 

As a practitioner in the aviation sector in Nigeria and in Europe with over 30 years’ experience, establishing an airline is one of those investments one would never make even if one had N1trillion in one’s bank account. So, it is important the public understands the magnitude of the challenges of running an airline anywhere in the world especially in Nigeria with its heavy-laden business hitches even though the incumbent administration of president Muhammadu Buhari has consistently claimed, and chanted the ‘’ease of doing business’’ mantra. Doing business in Nigeria remains one of the most difficult things for investors both local and foreign. 

So, you can tell how happy some of us were when Arik Air Limited came on board after it was created in 2004 by Joseph Arumemi-Ikhide from the ashes of Nigeria Airways, which the Federal Government liquidated in 2002 after the Nigerian Airways was totally rundown. Fast-forward, in August 2006, the Federal Ministry of Aviation granted Arik Air authorisation to fly to Trinidad & Tobago, Amsterdam, London, and Madrid in Europe. So, it was good news for the aviation community in Nigeria, and beyond because Arik as we witnessed grew to become the biggest carrier and accounted for about 60 per cent of the passengers in the country. And, looking at the list of dead airlines in the country, one could not at the time give kudos to the founder of Arik for daring to float the airline.  

Those following the evolution of the business of aviation in Nigeria would remember some dead airlines such as ADC Airlines, African Trans Air, Bellview Airlines, Dasab Airlines, Harco Air Services, Kabo Air, Okada Air, Slok Airlines, Sosoliso Airlines, Wings Aviation and Vergin Nigeria. The aviation burial ground also contains the remains of Afrijet Airlines, Air Nigeria, Afrimex, Albarka Air, Axiom Air, Al-Dawood Air, Capital Airlines and Chrome Air Services. The list is endless. One common fact with the life and time of the dead airlines is that their longevity averaged just 10 years. 

But like many other failed investors in the aviation business before him, Sir Joseph Arumemi-Ikhide did not learn from history, he forgot that airline business is complex, capital intensive, low naira return on capital with very low tolerance for failure and incompetence. He borrowed endlessly from banks with no proper repayment plan. His management of Arik lacked proper corporate governance, which was why most of his decisions rather than help Arik ended up destroying the airline. Therefore, he was also not able to avoid some of the mistakes that led to the death of other airlines in Nigeria, which was why the federal government of Nigeria mandated the Asset Management Corporation of Nigeria (AMCON) to take over the airline in February of 2017. 

As Nigerians, we forget in a hurry, just as our record keeping processes are questionable because no matter what anybody thinks of the management of AMCON led by gentleman Ahmed Lawan Kuru, and their involvement in Arik, it should be recalled that at the point of intervening in Arik, the airline witnessed  a high spate of flight cancellations of nearly 50% , on-time performance (OTP), which measures the promptness of schedule flights fell to as low as 15%. Staff, including pilots were owed salaries, in some cases for up to six months. Arik was a loss-making airline as far back as 2015. 

As a result, staff morale was therefore understandably low. Several service providers including fuel marketers, maintenance and spare part companies were withdrew services or were unwilling to extend credits to Arik. There were indeed significant concerns at various governmental cycles for safety and the possible impact of the collapse of the company on the economy. These facts are there and are verifiable across the regulatory corridors of aviation in Nigeria. But as Nigerians, which is a big concern to some of us who still have interest in the development of Nigeria and its aviation sector because of the positive impact it has to the economy, even those who should know better are joining the band wagon of those who want to vilify AMCON for doing the job the government directed them to do. 

The question discerning minds should ask is how did AMCON end up in Arik, or became a major player in the aviation sector in Nigeria, which is Africa’s most populous nation? The answer is simple – the global financial crisis of 2008/2009, which had adverse effect on the economy of nations across the globe also affected Nigeria. At the onset of global financial crisis, there were foreign portfolio withdrawals of credit lines and investment from Nigeria. The stock market also collapsed leading to loss of about 80% of its value just as there was a major banking crisis due to poor risk management that led to increase in the non-performing loans of the banks. 

To cushion the effect, AMCON was basically created by the Nigerian government as an interventionist agency – to Acquire Eligible Bank Assets (EBA) from Eligible Financial Institutions (EFI) and to purchase or otherwise invest in equity securities on such terms as the Corporation deems fit in accordance with the provisions of the Act as amended. These facts are also in public domain. AMCON was also to efficiently manage and dispose EBAs acquired by the Corporation in accordance with the provisions of this Act; and obtain the best achievable financial returns on EBAs or other assets acquired by it having regard to protecting or enhancing the long-term value of assets, among others. 

AMCON towards achieving its mandate, according to reports purchased non-performing loans of about N181 billion from various banks. Unfortunately for AMCON a huge per cent of the purchase was in the aviation sector. To place the companies in a position to recover and generate adequate cash flow, AMCON gave additional un-lending facilities (in collaboration with CBN and BOI) of almost N40billion on very good terms. Unfortunately, notwithstanding this support, the companies could neither pay the old nor new loans.  

On that note, AMCON was compelled to appoint Receiver Managers over a lot of the companies. Arik was one of them. The Corporation also intervened in Aero Contractors. 

The truth, which seemed to have been forgotten by those that are sponsoring the so-called media analysis against AMCON is that Sir Joseph Arumemi-Ikhide unequivocally mismanaged Arik despite the support provided by AMCON. He should be seen as an incompetent business manager who made losses and destroyed his companies (not just Arik) and expect the Federal Government to give him a national honour for his misbehaviour. At the time AMCON took over the airline in 2017, Arik’s financials of 2015, and 2016 (as audited by PWC) showed that the books of the airline as a company that is not just operating at a heavy loss but bugged by huge debt profile of over N270billion. 

Reading recent articles especially from journalists in Nigeria who ought to know better vilifying AMCON is shocking to some of us given the fact that AMCON `because of their mandate have tried to preserve Arik because of the strategic importance of Arik at the time. AMCON had the option of liquidating Arik and moving on. Afterall, AMCON is a debt recovery agency, and so, if not for the Federal Government AMCON’s first consideration upon intervention would be to liquidate the airline. Arik is, and remains a bottomless pit because it was run down before AMCON showed up. 

Having made various good-intended moves to rescue Arik without the support of both the Federal Government that sent them on an errand, and the cooperation of Sir Joseph Arumemi-Ikhide, one cannot understand what the public wants AMCON to do. It was because the government considered Arik as a critical component to the development of aviation and the economy at the time, that AMCON’s intervention through the instrumentality of Receivership was watered down to stabilising the operations of the Arik, put the airline in a position to generate positive cash flow, then resolve their debt situation through either the owners paying the debts or the sale of the companies/underlining assets. It is no secret that if Sir Joseph Arumemi-Ikhide was more responsible in his relationship with AMCON, and not join the league of recalcitrant debtors, AMCON’s intervention in Arik would have been value adding and non-destructive. 

The fact is that Sir Joseph Arumemi-Ikhide’s hard stance and uncooperative attitude was responsible for why AMCON opted to exit Arik via the proposed NG Eagle vehicle. If the Federal Government through the aviation authorities had done what they ought to and supported AMCON all the way, AMCON would have since ended its intervention in Arik gloriously. But is on record that various ministries, departments, and agencies of the President Muhammadu Buhari-led government have the untreatable habit of fighting itself. So, nobody should vilify AMCON over whatever becomes of Arik. That is my position.

(01) 2773210
(09) 2780300
Contact Us Today! Contact Us