The Nigerian government has taken control of West Africa’s most-used airline after the company began to buckle under the weight of its spiralling debts.
Nigeria’s Arik Air was taken over by the Asset Management Corporation of Nigeria (AMCON), established by the government in 2010, yesterday to prevent the company from going bust.
Arik Air, which had the biggest passenger turnover of all airlines in West Africa, has built up a debt pile worth almost $100bn, with money due to AMCON as well as foreign creditors.
Jude Nwauzor, a spokesperson for AMCON, reportedly told AFP that the takeover had been necessary because Arik was “in a mess”.
Staff salaries have gone unpaid and the company had defaulted on payments for insurance, repairs and the servicing of its planes. It had been forced to suspend its service to New York and ground several other planes.
Passengers reportedly besieged the company’s headquarters earlier this week, angry about repeated delays and cancellations.
Nwauzor said the government’s intervention was intended to stop “all this nonsense” and stabilise Arik’s position before it goes under.
Arik could not be reached for comment but is planning to challenge the takeover, according to reports in the Nigerian press.
A number of other Nigerian carriers are struggling to survive amid the country’s first recession in 25 years, with foreign currency shortages causing particular challenges for purchasing fuel.
The government is also grappling with significant deficit and record spending plans.
Nigeria returned to the international bond market for the first time in four years yesterday, selling $1bn worth of 15-year bonds.
The once-booming economy began faltering after oil prices collapsed in 2014. The sustained drop in prices, which have only just begun to recover, decimated the oil receipts on which Nigeria relied for both growth and public revenues.
By Emma Rumney. This report first appeared in Public Finance International.