How to fix challenges of financing in aviation sector, by experts

• Quarterly capital importation hits highest level since Q1 2020

Experts in the  investment financing  and air travel eco- system have prescribed pills needed to address the challenges of access to capital for projects/ ventures and businesses in the aviation industry.

They said the fragmented nature of the industry with insufficient capital base and low returns on investment requires a holistic overhaul of the funding structure requiring offshore intervention and consistent policy framework from the Federal Government to attract investor confidence.

The experts : Managing Director, Financial Derivative Company Limited, Mr Bismark Rewane ; Chief Financial Officer of InterGuide Group, Dr. Mary Olowo- Sokeye and Chairman/ Chief Executive Officer of Air Peace, Mr Allen Onyema spoke in separate interviews in Lagos.

They said unless issues bordering on financing is tackled,  the much anticipated growth in the air transport value chain remains elusive.

On his part, Rewane said  fixing aviation sector financing in Nigeria is not optional, it is critical to national progress.He said Nigeria with 32 airports, yet only four handles between 92 percent  and 96 percent  of total traffic.

The domestic passenger volume dropped to 11.5 million in 2024, marking the second straight year of decline.

Rewane blamed this on inefficiency, over-politicisation, and poor project viability.

 “We are duplicating infrastructure while traffic shrinks,” he noted. “The truth is, aviation sector financing in Nigeria is being driven by prestige, not performance.”

Lagos’ Murtala Muhammed International Airport processed 6.5 million passengers in 2024 with an estimated $1.75 billion investment. In contrast, Dubai International handled 92 million passengers with $4 billion. Also, in the same period Los Angeles International Airport had a staggering 76.5 million passengers investing $3.5 billion. Heathrow and Chicago’s O’Hare International both had 83.9 and 58 million passengers investing $15.6 and $4.5 billion respectively.

“Why should we spend so much and get so little?” Rewane asked.

“This misalignment highlights systemic issues in aviation sector financing in Nigeria that can no longer be ignored.”

Rewane noted that several state-backed ventures including airlines like Enugu Air, Cally Air, and the defunct Air Nigeria, represent failed experiments rooted in mismanagement and political interference.

According to him, all launched despite viability concerns. “These projects are capital-intensive and inherently risky. Without autonomy and proper structuring, they drain public coffers with little or no return,” he said.

“Several states are building airports with no passenger base to justify the cost. This is a misapplication of scarce resources and a poor model for aviation sector financing in Nigeria,” he said.

The Financial Derivatives CEO compared Nigeria with California to illustrate how misaligned investment in aviation can stifle development. California, he noted, handles over 600,000 passengers daily across 25 airports, while Nigeria manages barely 43,000 with 32 airports.

 “This mismatch is symptomatic of the deeper issues with aviation sector financing in Nigeria, poor capital allocation, inefficient spending, and lack of economies of scale,” he said.

Rewane presented global trends in aviation that emphasise profitability, consolidation, and alliances.

 He cited the rise of bundled services, joint ventures, and open skies agreements as strategic tools that have driven efficiency elsewhere. “Airlines globally are becoming leaner and smarter. Profit margins are at 3.7 percent , and major players are evolving through code-share deals and mergers,” he stated.

In contrast, aviation sector financing in Nigeria continues to be weighed down by state obsession with ownership rather than enabling frameworks.

 He argued that rather than building new airports or state airlines, efforts should be concentrated on policies that incentivise private investment and reduce regulatory bottlenecks.

“Government should not be in the business of running airlines or building airports,” he said. “Its role must focus squarely on regulation, safety, and creating an environment for capital to thrive.”

To move forward, Rewane called for a competitive hub system, particularly in Lagos and Abuja, backed by strong and independent regulators.

 “Airport concessions, MRO investments, and simulator training hubs should be driven by PPPs. This model has worked globally and can reframe aviation sector financing in Nigeria for long-term sustainability,” he said.To solve the problem, Rewane proposed consolidating air services around competitive hubs, starting with Lagos and Abuja.

 He noted that successful global carriers such as Ethiopian Airlines leverage hub efficiency, autonomy, and diversified revenue.

“We need fewer, stronger airports, not more underused ones. That’s how to structure sustainable aviation sector financing in Nigeria,” he advised.

Rewane urged local operators and policymakers to adopt global best practices:  by shifting  from bilateral air agreements to open skies.

Invest in training, safety, and local Maintenance, Repair & Overhaul (MRO) capacity.

These, he argued, are essential to recalibrating aviation sector financing in Nigeria in line with international expectations.

Rewane underscored the role of public-private partnerships (PPPs) in unlocking capital and reducing government fiscal burden.

He recommended: Prioritising airport concession; focusing government resources on regulation, not operations and ensuring consistent policy to attract aviation investors.

“All future plans for aviation sector financing in Nigeria must be anchored on transparency, autonomy, and investor confidence,” he concluded.

Without urgent reform, Rewane warned, Nigeria risks becoming irrelevant in global aviation. “We cannot afford business as usual. A revamp of aviation sector financing in Nigeria is no longer just necessary it is overdue.”

On her part,  Olowo-Sokeye called for bold, innovative funding strategies to reverse the operational inefficiencies threatening the sustainability of the sector.

“Aviation is the lifeblood of trade and tourism—but without financing, it simply cannot fly,” Olowo-Sokeye declared.

Olowo-Sokeye—who brings over two decades of financial experience, including work with GE Capital’s aviation division—outlined the stark contrast between Nigeria’s aviation performance and global standards. “Nigeria’s operational success rate stands at just 48 percent, far below the international benchmark of 81 percent,” she said.

 “This gap isn’t due to a lack of talent or passengers—it’s a financing problem.”

She cited key reasons for the poor performance: aging aircraft, inadequate maintenance, infrastructure deficits, and economic pressures such as fuel scarcity and exchange rate volatility.

She said operators could explore  traditional and non-traditional aviation financing models.

She called on the government and private sector to build the frameworks necessary to unlock this potential.

She also pointed to existing local support mechanisms such as the Power and Aviation Intervention Fund (PAIF) and the Central Bank of Nigeria’s N3 billion credit facility, urging operators to access available resources to shore up their operations.

Olowo-Sokeye offered a checklist for airline executives: including a review of financial health and liquidity.

“Cost reduction should never compromise safety. Nothing destroys an airline faster than an accident,” she cautioned.

“If we fix our financing, we can fix our aviation sector. The skies can be safer, our airlines more competitive, and our economy stronger,” she concluded.

Also speaking, Onyema said banks have become more strict in providing funding because people lack integrity where they borrow money and do not pay back.

“In Nigeria, funding is very expensive with 35 percent interest rate and it’s not even available to everybody. People are asked to also bring collateral that is almost impossible to get. We need the banks but the conditions being imposed are very far from being helpful,” he said

Onyema said government can help by creating a window for the airlines to access foreign exchange through the Central Bank of Nigeria or through the Bank of Industry.

“Egypt has done it. Some other countries have done it. The good thing this government has done for us is that it has made foreign exchange rates now stable. You can plan now, which is a good thing for the aviation sector.

“However, at the Central Bank level, they can create a window for airlines to acquire dollars at a slightly cheaper rate, because we are operating from a disadvantaged position when we operate from Nigeria,” he suggested.

How to fix challenges of financing in aviation sector, by experts - The Nation Newspaper