- Insists on strong corporate governance in the aviation industry
MANAGING Director/Chief Executive Officer, Asset Management Corporation Of Nigeria (AMCON), Mr. Ahmed Kuru has stated that the corporation is willing to exit indebted firms if the owners of the companies pay the debts owed as it does not wish to be in the airline business or indeed any business apart from its legal mandate.
This is just as he advised that regulators in the industry insist that corporate governance is strengthened and sound financial risk management systems is put in place unless airlines will still fail.
AMCON CEO Kuru, who was represented by Mr. Kamilu Omokide, Senior Vice President AMCON made this known Thursday April 26, 2018 at Sheraton Hotel Ikeja, Lagos at 6th Nigeria Transport Awards And Lecture in his paper entitled: “AMCON’s intervention in Transport and Allied Sector; Achievements, Challenges and Prospects.”
According to him, AMCON was created to be a stabilizing and revitalizing tool in the Nigerian economy, towards achieving its mandate, it purchased non-performing loans of about N181 billion from various banks.
He stated that over 90% of this was in the aviation sector and despite plans to aid the companies trajectory upwards by investing N40billion on very good terms.
Unfortunately, according to Kuru, notwithstanding this support, the companies could neither pay the old nor new loans which compelled AMCON to appoint Receiver Managers over a lot of the companies, the biggest being Arik and Aero.
“AMCON was created to be a stabilizing and revitalizing tool in the Nigerian economy. Towards achieving our mandate, we purchased non-performing loans of about N181 billion from various banks. Over 90% 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 BOI) 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.”
Kuru further noted that AMCON’s intervention in sectors including the aviation industry has not come without its challenges which stem from shareholder actions, lack of support by some trade creditors, some foreign lenders, and increased union demands but said these were not unexpected and have been professionally and transparently handled.
“The new management in Arik had to take bold decisions to downsize its operations, especially cutting down all the long haul flights, due to the losses being sustained on those operations, and the lack of equity capital to absorb the losses.”
“Generally there was the need to reassure the traveling public. AMCON is an asset management company, not a consultancy firm to run airlines. So we got professionals to do the job. They are the ones running the airlines. There were skepticism in some quarters earlier on but the narrative has changed. Nigerians are happy with our intervention in the transport sector. However, a lot still needs to be done.”
He however stated that despite the challenges there are prospects and have also been some achievements since AMCON intervened.
“With a population currently estimated to be 180 million and with the abundant human and natural resources of Nigeria, the prospects in the transport sector of Nigeria is huge. Nigeria is naturally endowed geographically to be a global hub. And with the abundance of water and land mass we are able to create a harmonious rail, sea, road and air transport sector to the benefit of our people and economy.”
“In 2017, in nominal terms, the transport sector contributed N1.787 trillion to GDP accounting for 1.57% of total GDP; while the aviation sector contributed N105.86 billion of this number representing 5.92% of the sector. According to the National Bureau of Statistics (NBS) the storage and transport sector controls 3.21% of the labour force. We can build on this.”
On corporate governance, Kuru insisted that regulators in the aviation industry should follow suit on what the CBN and others of its ilk are doing as experience has shown them that without those, whatever capital is thrown at the industry will be an exercise in futility.
Kuru said, “The aviation and transport sector requires solid capital to make it deliver for the good of the Nigerian people. It will require 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. I urge regulators to act with courage by insisting on proper governance in airlines. I recommend they look at the work being done by CBN and Financial Reporting Council to improve the practice in airlines.”