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Nigeria’s Aviation Sector Hits Turbulence

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Arik Airplane - Investors King
  • Nigeria’s Aviation Sector Hits Turbulence

Nigeria may consider itself a regional aviation hub but years of mismanagement and now recession have blighted domestic airline operations, making delays and cancellations the norm.

Industry experts say the sector needs a fundamental overhaul, pointing to opaque management practices, rampant corruption and risks for passengers from security and dilapidated infrastructure.

Arik Air, which has a 60 percent share of domestic flights and is the country’s biggest private carrier, has found itself increasingly in the firing line of disgruntled passengers.

Earlier this month, irate passengers beat up one of its executives at Lagos international airport after the third consecutive cancellation of their flight to Johannesburg.

In December, Arik operations were grounded by a 24-hour strike by employees demanding the payment of seven months arrears in salary.

There was no response from Arik when asked to comment on the situation by AFP.

Other domestic operators are struggling. Aero Contractors, the second biggest carrier, stopped services for four months at the end of last year because of “serious financial difficulties”.

For John Ojikutu, an aviation security consultant, most Nigerian airlines run their businesses like a grocery store.

“They just want to make profit,” he told AFP.

The result is airlines in Nigeria generally have a short life span: in 35 years more than 40 operators have gone bust, including Nigeria Airways, which collapsed in 2003.

– Dollar shortage –

Ojikutu said the airlines are heavily in debt and “taking advantage” of the country.

“People are… operating without paying the fuel marketers, without paying their staff, without paying for the services they’re given (insurance, maintenance),” he said.

“If they are not making profit, the question is what do they really do with all this money?… They are selling tickets every day.

“As long as we don’t have a strong, credible, independent regulatory agency we cannot have a viable aviation industry in this country.”

In their defence, the airlines blame a lack of foreign currency that has left them unable to pay fuel suppliers or, in some cases, landing charges at airports outside Nigeria.

Nigeria is one of Africa’s main oil producers but is forced to export crude and import petroleum products because of a lack of domestic refining capacity.

The fall in the price of crude on international markets has seen the naira currency lose value against the dollar and Nigerian banks no longer have enough liquidity.

Foreign airlines such as United and Iberia have stopped flights to Nigeria because of difficulties in repatriating profits in dollars.

In September last year, members of the House of Representatives asked the government to declare a state of emergency in the aviation sector, saying 160,000 jobs were at risk.

Lawmakers also called for an investigation into the alleged misappropriation of 120 billion naira (357 million euros) of public funds in 2012 meant to modernise the sector.

– Airport closure –

Two years ago, the Nigerian state got on the board of several airlines, including Arik and Aero, through its Asset Management Corporation of Nigeria.

But according to Ojikutu, no serious audit has been carried out to evaluate the real financial situation of the companies.

“Funders and banks may have been too lenient in granting credit to Nigerian airlines for excessive expansion on the basis that somehow government (or AMCON) will step in to protect banks from failing due to non-performing loans to airlines,” added Joachim Vermooten, an expert in transport economics at the University Johannesburg.

Another major challenge is upgrading ageing infrastructure which cannot handle the millions of passengers who now travel every day through Nigerian airports.

From early March for example, the airport in Abuja will close for six weeks for major resurfacing work on the only runway serving the federal capital.

The runway, which was built in 1982 with a life span of 20 years, is now “completely gone” and “unsafe for operation”, according to the aviation minister Hadi Sirika.

“The entire structure of the runway has failed,” he has said.

Passengers for Abuja will have to land at Kaduna, some 200 kilometres to the north, and transit to the capital by bus on a road known for frequent kidnappings.

The airport closure is the talk of Abuja, underlining not just Nigeria’s reliance on air transport but the lack of a viable alternative.

AFP

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Oando Targets 100,000 Barrels Per Day Production by 2028

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Oando Plc

Nigerian energy company Oando is targeting a production of 100,000 barrels per day by 2028, following its acquisition of Eni’s Nigerian Agip Oil Company (NAOC) earlier this year.

This was disclosed by Oando Executive Director Alex Irune during an exclusive Fireside Chat at the ongoing African Energy Week: Invest in African Energies conference with Bloomberg News Correspondent Jennifer Zabasajja.

He shared the company’s future expansion plans and role in Nigeria’s energy transition and plans by the company to contribute to the 2 million barrels per day.

Mr Irune also highlighted the growing role of indigenous firms in the sector, particularly as international oil companies (IOCs) divest from onshore and shallow water assets.

“In the space of 24 months, you’re going to see about 60 percent-70 percent [of Nigeria’s production] by indigenous players, just based on the transition of IOCs to the deep offshore and the acquisitions we have seen, whether it’s Seplat, our deal or the ongoing Renaissance deal,” he said.

He also revealed that Oando is focused on maximizing the development of assets acquired through its deal, which increased its stake in OMLs 60, 61, 62 and 63 to 40 percent and nearly doubled its reserves to one billion barrels of oil equivalent.

The company’s ownership in NAOC’s joint venture assets will also grow, including 40 oil and gas fields, 12 production stations, and key infrastructure including pipelines, processing plants and the Brass River Oil Terminal.

He also noted that Oando remains open to future mergers and acquisitions across the continent.

“We’re always looking to do a deal. We stay where we have a comparative advantage, but we don’t rule out any markets. Nigeria is the first place we look – we have an immense amount of potential. As a leading energy company, we owe it to the country to reach that potential.”

Mr Irune also discussed the role of Nigeria’s Petroleum Industry Act (PIA) in strengthening the investment case, particularly for gas in Nigeria and fostering industry synergies.

The Oando-NAOC deal was the first M&A transaction following the PIA’s implementation and the company plans to leverage the deal to boost oil and gas production, with a view to supporting Nigeria’s energy transition in the future.

“In the immediate term, our focus is on producing every drop of oil we can to be able to fund that transition journey. We will use gas as a transition fuel – our assets are largely gas assets as a company, and Nigeria is largely a gas province as a country.”

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Alleged Bankruptcy: AMCON Withdrawals Case Against Dapo Abiodun’s Petroleum Company

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Asset Management Corporation of Nigeria (AMCON) has said it has withdrawn the case it instituted against Heyden Petroleum Limited.

The Corporation had approached the Lagos Division of the Federal High Court and prayed for the court’s approval to takeover Heyden Petroleum Limited owned by the Ogun State Governor, Dapo Abiodun.

AMCON had accused the company of bankruptcy, saying it was moving to acquire it in order to save it from further risk.

The presiding judge of the Federal High Court, Justice Ambrose Lewis-Allagoa had, after reviewing AMCON’s motion and supporting documents, agreed with it and ordered an interim takeover of the petroleum company.

Meanwhile, in a swift reversal, AMCON, in a statement issued by its Head of Corporate Communications, Jude Nwauzor, disclosed that the Asset Management Corporation had discontinued the matter, noting that “AMCON is not in dispute with Heyden Petroleum.”

Nwauzor said, “Our attention has been drawn to a publication in the media regarding to the pending litigation between the Asset Management Corporation of Nigeria (AMCON) and Heyden Petroleum Limited

“We hereby notify the general public that AMCON and Heyden Petroleum Limited have settled all issues between them amicably, and Heyden Petroleum Limited has demonstrated commitment to meeting their obligations and has been making payments accordingly.

“Given this latest development, AMCON has formally discontinued its pending litigation against Heyden Petroleum Limited, particularly Suit No. FHC/AMC/67/2024.

“As a responsible debt recovery agency of the Federal Government of Nigeria, it is not the practice of AMCON to engage in a media trial of obligors who are meeting their obligation. Accordingly, the general public is urged to disregard any negative commentaries on the relationship between AMCON and Heyden Petroleum Limited.”

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N1.3bn Fraud Allegation: Court Orders Arrest of Dana Air MD For Not Showing Up For Arraignment

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Mr. Hathiramani Ranesh

A Federal High Court in Abuja has ordered the arrest of the Managing Director of Dana Air, Mr. Hathiramani Ranesh for failing to appear in court for his arraignment in the alleged N1.3 billion fraud preferred against him by the Office of the Attorney-General of Federation (AGF).

The Federal Government had on October 10, 2024, asked the court to issue a bench warrant for the arrest of Dana Air after failing to honour invitation for his arraignment.

The AGF had filed a six-count charge against Ranesh and two others and marked Dana Group PLC and Dana Steel Ltd as the 2nd and 3rd defendants, respectively.

The prosecution argued that Ranesh and the two companies, along with others still at large, committed a felony between September and December 2018 at the DANA Steel Rolling Factory in Katsina.

They were accused of conspiring to remove, convert, and sell four units of industrial generators—three units Ht of 9,000 KVA and one unit of 1,000 KVA—valued at over N450 million. These assets were reportedly part of the Deed of Asset Debenture used as collateral for a bond, which remains valid.

The defendants and others at large were said to have conspired to fraudulently divert N864 million between April 7th and 8th, 2014, at House No. 116, Oshodi-Apapa Expressway, Isolo-Lagos.

This sum, reportedly part of the bond proceeds from Ecobank intended for revitalizing production at Dana Steel Rolling Factory in Katsina, was allegedly diverted for unauthorized purposes.

They were also accused of conspiring to transfer N60,300,000 to an Atlantic Shrimpers account (No: 0001633175) at Access Bank, fraudulently diverting funds earmarked as part of the Ecobank bond proceeds for resuming production at the Katsina factory.

The cumulative amount involved in the charge totals N1,374,300,000. Each offense is said to be contrary to and punishable under Section 516 of the Criminal Code Act, Laws of the Federation of Nigeria, 2004.

After Mojisola-Okeya Esho, counsel to the Federal Government, had requested for bench warrant to be issued against Ranesh, the defence lawyer, B. Ademola-Bello, disagreed with Esho, saying that they had filed a preliminary objection challenging the jurisdiction of the court to hear the matter and that the prosecution had already been served.

Delivering ruling on the application, Justice Obiora Egwuatu, agreed with Esho that Ranesh’s arrest was necessary due to his failure to appear in court despite being served with the charge and several proceedings having taken place.

Justice Egwuatu held that, according to Section 184 of the Administration of Criminal Justice Act (ACJA), 2015, the court has the authority to issue an arrest warrant against any defendant who fails to attend court sessions.

Egwuatu ordered that Ranesh must appear before the court on January 13, 2025, before any objections can be raised.

Consequently, he adjourned the matter till January 13, 2025, for hearing.

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