Nigeria Air and the 300 million dollar question

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The unveiling of the National carrier, Nigeria Air, has received quantum applause just as it has garnered criticisms and tongue lashing.

In a recent social media survey, African Probe discovered that Nigerians seem to have taken up debate sessions on Twitter and other social media handles to question the reason behind investing so much for a little stake in a start-up airline.

Inaugural CEO of the Asset Management Corporation of Nigeria, Mustafa Chike-Obi on Saturday, 21st July, in a tweet, questioned the rationale behind investing 300 million dollars for just 5 percent of a start-up airline while Air France/KLM paid 286 million dollars for 31 percent of Virgin Atlantic.

His point was corroborated by a Twitter user, Val Mary, who noted that the Aviation minister is not a smart man, as he thought that Nigerians will be carried away with the euphoria of unveiling the Logo of Nigeria Air. She also lauded former Education minister, Oby Ezekwesili’s controversial comment which hinted towards praying for the failure of the airline, saying that Ezekwesili saw the whole fraud and condemned it but people didn’t understand her position and the illiterate ones tagged her evil.

Recall that on 19th of July, Oby Ezekwesili had tweeted thus; “I actually believed that at some point the FG would have advised itself and known that the so called National Carrier project is a waste. Sadly, not so as they are determined on what is clearly a wrong priority. It shall fail. For the sake of the country, it must fail. Let me reiterate it now, I fundamentally consider a National Carrier project a waste. Before we once again sink scarce public resources into a wrong-headed prestige project like an airline, I am glad to stand alone on this.”

Again, on 20th July, she reaffirmed the statement that has sent Twitter on fire, by saying that If she were President of Nigeria, and the Aviation Minister sent her a Memo asking approval to set up a ‘National Airline’ with initial capital of federal government’s $300million and acquire airplanes, she will instantly send him a reply. It will be: Goodbye. Please hand over the Ministry to the Permanent Secretary.

Ezekwesili’s position is said to have come on the premise that previous attempts to fly successful airlines ended in fiasco. Her opinion was in tandem with Onome Ohwovoriole’s article published in August 31, 2017 on Nairametrics.

The article explored asset sales by government which never saw the light of day. In September 2004, the Nigerian Government and Virgin Atlantic signed an agreement to launch a National carrier, which was christened Virgin Nigeria. As part of the terms of agreement, Virgin was granted the right to use the Murtala Mohammed International Airport (MMIA) as its base. In 2008, Virgin Atlantic decided to sell its stake in the airline following disagreements with a new administration. Nigerian businessman, Jimoh Ibrahim bought Virgin’s stake in the airline in 2010, but shut down the airline in 2012 following a dispute with workers.

In the same vein, Thisday columnist of ‘Behind the Figures’, Ijeoma Nwogwugwu, in her most recent article, ‘Requiem for Nigeria Air’ in a manner of painstaking dissection, analysed the whole process of unveiling the National Carrier and the part Aviation minister, Hadi Sirika played.

According to her, Mr Hadi Sirika’s announcement was a statement of intent and a well masterminded political gimmick geared towards fooling the public into believing that the administration was sticking to its campaign promise to establish a carrier flying the Nigerian flag.

She admonished Sirika to bury his ill-fated attempt to start an airline from scratch, adding that the Nigerian government does not need a 5% stake in any airline, nor does it need to provide a take off grant of $300 million.

However, as clarification to the question raised by Chike-Obi, another Twitter user, Ìmọ̀ràn se kókó pointed out that as much as the question is a good one, the comparison is misplaced in that they are two different transactions with one’s initial capital outlay larger than the other. “You’re also conflating investment with stake the investor gets. They’re not necessarily correlated,” she said.

Going further to back up her assertion, she extracted a 2017 article by Natasha Bach from Fortune.com which stated that “Air France-KLM is paying Branson’s Virgin Group 220 million pounds ($286 million) for a 31% stake in the venture. Delta will retain 49% control, leaving Virgin with 20%. Branson will remain chairman of the airline and the airline is expected to continue to fly under the Virgin brand. At the same time, Delta and China Eastern will pump some 375 million Euros ($439 million) each into Air France-KLM, both in return for a 10% stake. That will cut the French government’s stake in the group to 14% from 18%.”

Ìmọ̀ràn reiterated that the amount invested isn’t necessarily correlated to stake and the federal government’s $300m investment for 5% isn’t determinative of value.

Although, Chike-Obi acknowledged the comments on his post, he however remains relentless and unperturbed by several insults and shades generated from the post, noting that “For further clarity, Delta bought 49% of Virgin Atlantic in 2012 for 360 million dollars,” he went further to ask if investing 300 million dollars for 5% of a start-up airline is a matter of national pride, a sensible economic decision, or something else entirely?

Source African Probe

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