Experts in the air transport and allied ecosystems have called on policymakers and financial institutions to rethink airline financing emphasising the need for frameworks that reduce risk for local banks while allowing carriers to tap into offshore capital.
They said if the regulatory and financial structures are not adjusted, Nigerian airlines will continue to be disadvantaged in both domestic and international markets.
They said while innovative financial instruments exist globally, local regulations and economic volatility restrict Nigerian carriers, affirming that without deliberate intervention, domestic airlines risk stagnation.
Speaking in separate interviews in Lagos, Chief Executive Officer, TopBrass Aviation , Captain Roland Iyayi , Managing Director and Chief Executive Officer of Fidelity Bank, Dr. Nneka Onyeali-Ikpe and Managing Director of Ibom Air, Mr George Uriesi said if access to funding and cost of operations is not restructured, the air transport industry will face more challenges.
On his part, Iyayi said the long term sustainability and competitiveness of local carriers is threatened because of hurdles bordering on accessing alternative funding.
He said Nigeria’s financial and regulatory framework makes offshore financing very challenging, because such funds require in-country guarantees.
“When a local airline goes abroad to secure offshore funding using, for instance, a U.S. export bank, which requires in-country guarantees, the local banks must first provide that guarantee.”
The CEO said Nigerian banks face regulatory and capacity limitations, as guarantees exceeding a bank’s obligor limits are sometimes converted into loans by the Central Bank of Nigeria (CBN).
“What that means essentially is that a local airline now services two loans,” Iyayi explained.
Iyayi warned that this dual-loan system undermines competitiveness.
“Imagine having a four-and-a-half per cent interest rate offshore and then being asked to pay another 26 per cent locally. Invariably, the competitive edge is no longer there, and more often than not, the local airline will fail. That’s basically where we are at this point,” he said.
He stressed that the lack of access to alternate funding affects fleet modernisation, route expansion, and the ability to compete with foreign airlines enjoying easier access to capital.
According to Iyayi, this alternate funding bottleneck also limits infrastructure investment, reduces operational efficiency, and slows overall sector growth.
He said :” There is a need for frameworks that reduce risk for local banks while allowing carriers to tap into offshore capital.
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He further noted that while innovative financial instruments exist globally, local regulations and economic volatility restrict Nigerian carriers.
“Addressing these alternate funding challenges is not just about survival. It’s about ensuring that Nigerian airlines can compete on a level playing field globally, attract investments, and support the country’s economic growth,” Iyayi concluded.
On her part, Onyeali – Ikpe said commercial banks cannot lend to Nigerian airlines at single-digit interest rates because they borrow funds at about twenty percent.
“Commercial financing by commercial banks… it’s absolutely impossible to lend at nine percent when your deposit cost is twenty,” Dr. Onyeali-Ikpe said.
“It is just not possible for banks to lend at single digits. The industry needs to borrow at single-digit rates to keep up with the kind of expense they have to deal with.”
She said banks face high deposit costs and cannot bridge the gap without incurring heavy losses.
She explained that the financial spread collapses when banks borrow at twenty percent and then attempt to lend at nine percent.
She said: “Therefore, the aviation sector must not rely on commercial banks alone for long-term funding. “If commercial banks attempt to provide single-digit interest rates from their balance sheets, the spread simply wouldn’t favour the bank. That’s the truth,” she said. “This is why we need a combination of specialised financial institutions, government support, and innovative funding structures.
“Given the constraints of commercial banking, alternate funding arrangements have emerged as critical solutions.”
Dr. Onyeali-Ikpe identified dry lease agreements as a “game changer” for airlines.
“The dry lease arrangement has been approved for Air Peace,” she explained.
“With a dry lease, you save over 30 per cent of costs compared to a wet lease, where the lessor provides crew, maintenance, and insurance, which is more expensive. For airlines to qualify, they must meet specific criteria, including insurance and regulatory compliance. It’s a tall order, but it’s the easiest way to put aircraft in the hands of airlines.”
She said Fidelity Bank is also exploring international funding avenues.
“Through our Fidelity Bank London, we’re exploring funds from DFIs in Europe, where borrowing rates are as low as 3-4 per cent Once we secure these funds, we can structure them to benefit Nigerian airlines, providing another viable alternative to high-interest local financing,” Dr. Onyeali-Ikpe said.
Government-backed guarantees like the National Credit Guarantee Company (NCGC) scheme, provide additional relief.
“The NCGC guarantee scheme covers 60 per cent of bank lending to SMEs. Applying this to aviation could ease the burden on banks and make low-interest borrowing more feasible,” she noted.
Therefore, she urged policymakers to consider such adjustments as part of a broader sector reform strategy.
She said :” The demand for long-tenor, low-cost funding continues to rise as Nigerian airlines expand fleet capacity and passenger numbers grow. However, high deposit costs remain the strongest barrier to single-digit interest rates.
“Therefore, the sector must adopt a blended approach involving government intervention, specialist institutions, and innovative lease structures.”
Dr. Onyeali-Ikpe concluded that aviation remains a high-value industry requiring stable financial planning.
She said: “In the interest of the country, the airlines need to borrow at single-digit rates.
“But the reality is that commercial banks cannot lend at nine percent from their balance sheets. That is why we need a combination of specialised financing institutions, government support, and innovative structures to keep the industry moving forward.”
On his part, Uriesi said
Nigerian airlines face severe financial strain from overseas aircraft maintenance.
He described routine checks sent abroad as “unsustainable” , noting that planned budgets of $1.5 million often escalate to $3-4 million per aircraft.
“Every time we maintain our aeroplanes outside, planning becomes extremely difficult, and costs soar beyond reason,” Uriesi said.
He warned that this practice undermines airline profitability despite operational growth.
“We are being taken advantage of. It is a systemic problem for Nigerian airlines,” he added.
Uriesi stressed that enhancing local aircraft maintenance capability is critical for long-term airline sustainability.
“We need to start maintaining our aircraft inside Nigeria, at least partially. The current approach of aircraft maintenance is financially crippling and operationally inefficient,” he said.
“Relying entirely on foreign service providers puts airlines at the mercy of international pricing.
“Ibom Air operates modern Airbus A220 aircraft, all purchased brand-new. European carriers often secure financing for the same planes at 3-4 percent interest over 15 years, but Nigerian airlines pay roughly 30 percent over seven years.
“A European operator might pay $100 per month for an aircraft; we pay $500,” Uriesi explained.
He said this massive disparity inflates costs and restricts fleet expansion.
He said :” High insurance premiums further exacerbate financial pressure. Ibom Air pays nearly twice what international peers pay for equivalent risk coverage. “Why is Nigeria treated differently?” he asked.
“The risk level is identical, yet our costs are double. This challenge must be addressed for Nigerian airlines to survive. Taxes and regulatory fees add another layer of difficulty. For example, Lagos-Accra flights incur roughly $185 in combined taxes, while the Nigerian Civil Aviation Authority plans to add $11.50 per flight.
“When you factor in ground handling, fuel, landing fees, and overflight charges, pricing tickets profitably becomes almost impossible,” Uriesi said.
He noted that these costs affect both profitability and consumer fares.
Despite these hurdles, Ibom Air has achieved an 88 percent compounded average revenue growth since 2019. Uriesi credited interventions by the Minister of Aviation for reducing some bottlenecks in aircraft acquisition. “Ministerial efforts have helped, but systemic challenges remain, particularly in aircraft maintenance and high-dollar-denominated costs,” he noted.
Uriesi highlighted the broader aviation ecosystem, including manufacturers, lessors, insurers, and fuel suppliers, noting that airlines bear the brunt of inefficiencies.
“The airline is the heavy lifter,” he said.
“We earn in naira but pay in dollars. Every inefficiency in the system inflates costs. Solving maintenance inefficiencies could immediately improve financial outcomes.”
Uriesi described achieving sustainable profitability in Nigeria as a uniquely difficult obstacle course. “Profitability isn’t just revenue minus costs here. It’s navigating a complex, dollar-based ecosystem with infrastructure, regulatory, and operational hurdles stacked against us. Addressing aircraft maintenance inefficiencies and other bottlenecks could transform the financial health of Nigerian airlines almost overnight,” he said.
