The Infrastructure Concession Regulatory Commission (ICRC) has expressed concern over the 16 per cent of the equity in the Nigeria Air project that remains unallotted, hindering progress required to seal the deal.
In a recent memo to the National Assembly, the Commission, which is leading the negotiations for the deal, stated that Ethiopian Airlines has 49 per cent, MRS Oil and Gas Limited has 15 per cent, SAHCO has 15 per cent, the Federal Government has five per cent, while 16 per cent is yet to be allocated.
The national carrier project was initiated by the Ministry of Transportation in 2016 as part of the Aviation Sector Roadmap, which was approved by then-President Muhammadu Buhari. The project was structured to be implemented as a public-private partnership initiative, for which the Infrastructure Concession Regulatory Commission’s regulatory guidance was sought.
According to the memo, the ICRC provided the required guidance for the implementation of the project in line with the requirements of the ICRC Establishment Act 2005 and the National Policy on Public-Private Partnership (PPP).
“Following the guidance provided, the following milestones were achieved: the constitution of a project steering committee and a project delivery team to guide the implementation of the project, and also the appointment of a Transaction Adviser. This was done in compliance with the Bureau of Public Procurement Act. Lufthansa Technik was initially procured but later changed to Airline Management Group/Traniero after obtaining FEC approval.”
The ICRC said its Certificate of Compliance to the Outline Business Case (OBC) confirmed the viability and creditworthiness of the project. “It is important to note that the OBC was presented to FEC six times before it was approved.
“This was due to the insistence by FEC that the Federal Government will not contribute any funds to the take-off of the airline as initially structured. FEC requested that the project should be fully and privately financed since it’s viable and bankable,” the memo stated.
The ICRC revealed that after 10 weeks of advertisement, only the Ethiopian Airlines consortium submitted a bid, and the project proceeded to the negotiation stage, based on Section 5 (a) of the ICRC Establishment Act 2005.
“The section states that if after advertisement in accordance with Section 4 of this Act, only one contractor or project proponent applies or submits a bid or proposal, or only one contractor or project proponent meets the prequalification requirements, the ministry, agency, corporation, body may undertake direct negotiation without competitive bidding for any contract to be entered into, pursuant to Section 1 of the Act.”
Also, in the memo, the Commission lamented that stakeholder agreement documents were yet to be signed by the appropriate partners. “Several preparatory meetings were held as a prelude to negotiations between the Ministry of Aviation and other government stakeholders before engaging with the Ethiopian Airlines Consortium.
“The commission thereafter requested the implementation of the following before negotiations: the consortium to be a Special Purpose Vehicle, the consortium to sign a shareholders’ agreement/updated consortium agreement, the 16 per cent unallotted shares to be fully allotted in compliance with CAMA 2022 and transparency principles, and the project to adhere fully to the requirements of the request for proposal document.”
The memo said that in trying to bring all stakeholders on the same page in the course of the project, “a meeting of the government representatives was convened at the ICRC to harmonize the position of the government before engaging in any discussion with the private proponent.”
The ICRC revealed that the meeting agreed that every member of the consortium would be required to sign the PPP agreement individually, as well as the shareholders’ agreement.
The memo said that the meeting further agreed that the 16 per cent unallotted shares must be fully allotted, that the project must have a duration to comply with the requirements of the ICRC Establishment Act, and that all clauses that allocate financing and regulatory risk to the government must be reviewed and adjusted appropriately.
According to the ICRC, it wrote a regulatory position to all members of the consortium on April 17, 2023, with a review and highlighted issues that needed to be addressed and corrected before the shareholders’ agreement could be signed.
The Commission further stated that the ministry convened a negotiation meeting on April 18 and 19, 2023, at the ministry “but could not proceed as the representative of the Federal Ministry of Justice cited a court order restraining any action on the project.”
Furthermore, the memo indicated that the next step was for all shareholders to sign the shareholders’ agreement and that negotiation should resume and be concluded once the court order was lifted.
Nigeria Air was unveiled on the 26th of May, 2023, in Abuja by the then Minister of Aviation, Hadi Sirika. Since the launch of the airline, many stakeholders have criticized the process that produced Ethiopian Airlines as the winner of the bid.
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