By Chijioke Ohuocha
LAGOS Feb 11 (Reuters) – The founder of Nigeria’s largest airline Arik Air, placed in receivership earlier this week, accused the government of seizing Arik to meet a political goal of creating a “national carrier” and said he would challenge the move in court.
State-owned “bad bank” AMCON said on Thursday the move arose from Arik’s inability to pay workers and creditors. Arik is West Africa’s biggest airline by passenger numbers but has been hard hit by Nigeria’s currency crisis as its customers are invoiced in naira but fuel suppliers are paid in dollars.
Arik founder Michael Arumemi-Ikhide said he believed the government staged the move after a team travelled overseas in search of partners but were turned down and advised to work with the decade-old Arik.
“This (takeover) was designed by the government. Ever since this government came into power there has been the ambition to have a national carrier,” Arumeni-Ikhide told Reuters. “We are going to challenge the forceful takeover in court. By earlier next week we will be filing the case.”
Analysts say the dispute showcases the complexity of doing business in Nigeria, with some suggesting it could damage Nigeria’s efforts to shake off its image as a risky frontier market for international investors.
Arumemi-Ikhide said AMCON had used armed police to take control of the airline on Thursday, but that shareholders have retained their shares. AMCON said it had a court order to take over Arik and had to use policemen and bailiffs to carry it out.
Arumeni-Ikhide said the action recalled 2010 when British billionaire Richard Branson pulled out of Virgin Nigeria, a 10-year partnership with the Nigerian government he helped set up, citing alleged interference by politicians and regulators.
AMCON said on Thursday a receivership manager had been put in charge of Arik as the airline had been fallen into a “precarious situation largely attributable to its heavy financial debt burden (and) bad corporate governance”.
Arumemi-Ikhide denied this. He said Arik’s debt had been secured as a Union Bank guarantee to buy new planes through European export banks. But he said the dollar guarantee was turned into a more expensive naira loan without recourse for Arik when Union Bank was rescued by AMCON in 2010 to help stem a financial crisis.
That brought Arik’s total indebtedness to 147 billion naira ($484 million). But Arumemi-Ikhide said Arik had grown rapidly and had been planning to raise equity capital of as much as $1 billion in the second quarter and then a possible stock market listing in Lagos and London, rather than sourcing debt.
He said Arik had an enterprise value of around $4 billion.
In 2015, the Nigerian government set up a committee on establishing a national airline, in fulfilment of campaign promises which brought President Muhammadu Buhari’s All Progressive Congress (APC) to power.
An APC transition paper seen by Reuters had proposed merging a dozen debt-laden airlines on AMCON’s books into a single carrier. It would include Arik and operate in partnership with a global airline to serve the West and Central African region. ($1 = 304.00 naira) (Editing by Mark Heinrich)