Uche Usim, Abuja
Following a flurry criticisms by concerned Nigerians querying the alleged tardy process of floating a national carrier by the Federal Government in December, the Minister of State, Aviation, Hadi Sirika, on Tuesday, said no amount of sustained attack on the project can deter him from making it a reality.
In a piece shared by the ministry’s spokesman, James Odaudu, Sirika explained how the airline would operate, saying as a start up, the government will own majority equity in Nigeria Air Limited Joint Venture Company.
“A 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. Government will then retain only five per cent equity.
“The rest of 95 per cent 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 concessioned 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,” he explained.
On why the ownership appears shrouded in secrecy, Sirika said, “No secrecy. The entire process is guided by the infrastructure concession regulatory commission guidelines/regulations.
“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 Infrastructure and Concession Regulatory Commission (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 per cent 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”, he explained.
On why government with five per cent equity was funding the gigantic business, Sirika said government was not funding the entire project.
“It’s just providing startup 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.
“The OBC made it clear that the strategic equity investors will not start the national carrier; government has to start it in order to attract credible investors.
He revealed $8 million was required as startup capital for offices and other sundry matters required for takeoff. “But $300 million is the entire airline cash flow funding requirements (aircrafts, 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, government will provide US $55 million upfront grant/viability gap funding to finance startup capital and pay commitment fees for aircrafts to be leased for initial operations and deposit for new aircrafts whose delivery will begin in 2021”, he added.