At the 29th Annual Conference of the League of Airport and Aviation Correspondents (LAAC) in Lagos, industry stakeholders gathered to examine the financing challenges confronting Nigeria’s aviation sector. Among the panelists was the Chief Executive Officer of Air Peace, Allen Onyema, who used the platform to highlight the hurdles faced by local carriers and to propose pathways for sustainable growth.
Aviation as a Capital-Intensive Industry
Onyema, who has led Air Peace for more than a decade and also serves as Vice Chairman of the Airline Operators of Nigeria (AON), described aviation as one of the most capital-intensive industries in the world. He stressed that while airlines in advanced economies access loans at interest rates of 2–5 percent, their Nigerian counterparts face rates as high as 35 percent, alongside tough collateral demands from banks.
“Even while borrowing at that level, an airline can be told to dig its grandmother’s grave as collateral,” he remarked, lamenting that such conditions make survival difficult for operators. Despite these challenges, he insisted Nigerian airlines deserve respect for keeping operations afloat, often at personal and financial sacrifice.
The Question of Integrity
Onyema argued that part of the problem lies in Nigeria’s past, when some borrowers misused loans and defaulted on repayments, leaving banks wary. This, he said, led to excessive collateral demands that punish even responsible businesses.
“The problem in this part of the world is lack of integrity,” he noted. “When you take money and direct it into other things than what you borrowed the money for, there are bound to be problems.”
For Air Peace, he said, financial discipline and integrity have been crucial. By demonstrating accountability over time, the airline has earned the trust of banks. “Today, if I want to invest in anything, I can pick up my phone and call the bank. They will ask, ‘How high do you want us to jump?’” Onyema said, urging other operators to embrace similar financial discipline.
Government’s Role in Creating a Stable Environment
Onyema acknowledged recent government efforts to stabilize foreign exchange and provide dry leasing options for airlines, describing them as “game changers” for the sector. He praised President Bola Tinubu and the Minister of Aviation, Festus Keyamo, for showing an understanding of the unique needs of aviation businesses.
He called on government to go further by creating dedicated financing windows, offering airlines access to dollars at more affordable rates, and guaranteeing loans for both local and international financing. “If airlines are given succour to borrow money at single-digit interest rates, no airline will fail in this country,” he asserted.
Breaking the Blacklist Barrier
Highlighting a breakthrough for the industry, Onyema revealed that for the first time in 12 years, Nigeria is set to receive its first dry-leased aircraft—an arrangement common among leading global airlines. He said Nigeria had been “unofficially blacklisted” from such deals due to past defaults, but recent reforms are reversing that stigma.
According to him, dry leasing is far cheaper than the wet leasing arrangements Nigerian carriers have been forced to rely on, and will help boost fleet capacity, improve efficiency, and cut costs.
Shared Responsibility Between Operators and Government
While urging government to support the industry, Onyema emphasized that airlines themselves must undertake honest self-assessment. He advised operators to define their business models carefully—whether premium service, budget carrier, or regional focus—before seeking loans, in order to avoid overborrowing and financial collapse.
“Aviation should not be treated the way other sectors are being treated,” Onyema concluded. “It is a critical sector with low returns on investment but enormous importance to the economy. Both government and operators must work hand-in-hand to strengthen it.”
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Airlines’ Responsibility in Strengthening the Sector
Onyema emphasised that while government support is vital, airlines themselves must also take responsibility. He urged operators to demonstrate financial discipline and integrity, stressing that this is the only way to build trust with both local and international financiers.
“Two things: on our own, we must show some financial discipline; government can step in through the Central Bank of Nigeria,” he said. According to him, this dual approach would allow airlines with international ambitions to expand beyond Nigeria’s borders while also enabling others to scale up capacity in the domestic market.
The Case for Liberalising Funding
The Air Peace boss argued that aviation should not be subjected to the same stringent financing conditions as other sectors of the economy, given its global importance and capital-intensive nature. He described the current 35 percent lending rate for airlines as “dead on arrival,” insisting that Nigerian carriers need access to single-digit interest loans similar to those available to their counterparts abroad.
“Aviation is a critical sector with a very low return on investment worldwide,” Onyema said. “If Nigerian airlines are given succour to borrow at single-digit interest rates, no airline will fail in this country.”
Guaranteeing Loans for Airlines
Onyema also appealed to the federal government to consider guaranteeing loans for Nigerian airlines, both domestically and internationally. Such a move, he explained, would reduce risk for lenders and open access to much-needed capital.
However, he cautioned that airlines must do some “self-introspection” before taking on such commitments. “It is not that after government guarantees, there is disappointment in repayment,” he said. Operators, he advised, must carefully define their business models—whether premium, budget, or hybrid—while avoiding overborrowing.
Towards a Leasing Company for Nigerian Airlines
Looking ahead, Onyema disclosed that the federal government is already working on setting up a dedicated leasing company that would acquire aircraft and lease them to Nigerian carriers at single-digit rates. This, he said, would be a transformative intervention in a sector long plagued by unfavourable lease terms and the stigma of past defaults.
“I cannot thank President Tinubu enough for looking the way of the airlines and allowing Festus Keyamo to do the things he is doing,” Onyema remarked. “Financing is not only when you go out there to borrow money.”