AMCON blames rising collapse of local airlines on lack of corporate governance

Asset Management Corporation of Nigeria (AMCON) has blamed the incessant failure of local airlines on operators’ lack of corporate governance and financial risk management.
AMCON, which is the Federal Government’s special debt recovery vehicle, said despite the imperative of friendly business environment and the financial backing airlines had lately enjoyed, the carriers will continue to be in distress without quality governance and management standard in day-to-day air transport operations.

Managing Director and Chief Executive Officer of AMCON, Ahmed Kuru, at the sixth Nigeria Transport Awards and Lecture in Lagos at the weekend, said there was no doubt that the aviation and transport sector requires solid capital to make it deliver for the good of the Nigerian people, coupled with a measure of policy consistency and governmental support to thrive.

“However, from our experience, no matter the capital thrown at the sector, if corporate governance is not strengthened, it will still fail. The absence of governance or quality governance and sound financial risk management systems is at the heart of the failures that are common in the sector,” Kuru said.

It will be recalled that about 40 commercial airlines have been registered to operate by the Nigerian Civil Aviation Authority (NCAA) in the last 18 years, out of which only eight are still in operation.

Arik Air and Aero Contractors among the eight have been taken over by AMCON to save them from the brink of collapse and restore stability.

Kuru urged the regulators (NCAA) to introduce stiffer sanctions and act with courage, by insisting on proper governance from airlines’ operators.

He recommended that the NCAA shoud look at the work being done by the Central Bank of Nigeria (CBN) and Financial Reporting Council (FRC) to improve the practice of airlines business in the country.

He added that AMCON does not wish to be in the airline business or indeed any business apart from its legal mandate. “So, AMCON will be willing to exit the firms if the owners of the companies pay the debts owed. Where this does not happen, the Corporation will seek to strengthen the intervened companies and undertake a responsible exit in a manner that reinforces the sector,” Kuru said.

Senior Vice President at AMCON, Kamilu Omokide, earlier said AMCON was created to be a stabilising and revitalising tool in the Nigerian economy. Towards achieving the mandate, AMCON purchased non-performing loans of about N181 billion from various banks.

“Over 90 per cent of this was in the aviation sector. To place the companies in a position to recover and generate adequate cash flow, we gave additional un-lending facilities (in collaboration with CBN and Bank of Industry) of almost N40billion on very good terms.

“Unfortunately, notwithstanding this support, the companies could neither pay the old nor new loans. We have therefore been compelled to appoint Receiver Managers over a lot of the companies, the biggest being Arik and Aero.