Thursday, 27 September 2012

Nigeria Bans Loans To Two Of Its Airlines

Nigeria's central bank has banned loans to 113 firms, including the country's two major airlines, which have failed to repay debts after a 2009 financial crisis that nearly brought down the banking system.
The ban covers firms whose bad debts were absorbed by state-backed "bad bank" AMCON as part of efforts to draw a line under a credit crisis that nearly sank nine lenders. The companies have yet to make good on those loans, an internal document obtained by Reuters said.
Nigeria's central bank injected USD$4 billion in 2009 to support nine lenders it judged to be so weakly capitalised they posed a threat to the whole economy. Since then, a number of banks have been restructured, and AMCON, the Asset Management Company of Nigeria, absorbed their toxic assets.
"As part of the Central Bank of Nigeria (CBN)'s efforts at strengthening financial stability, it has become necessary to stop debtors who failed to repay their loans to banks and had those loans transferred to AMCON from further enjoying credit facilities... until they fully repay," the memo said.
"Banks are prohibited from approving or disbursing any new credit facilities to all persons and organisations on this list," it said, adding that any breach would be punished by a fine equal to the value of the loan and possibly additional penalties.
The list includes Nigeria's biggest carrier, Arik Air, with 85 billion naira (USD$560 million) in debts.
A spokesman for Arik Air, Ola Adebanji, said the company had not been informed.
"There is a relationship between Arik and AMCON... We have not received any document from CBN concerning that," he said.
Arik suspended its operations last week over a spat with unions, the airport authorities and the aviation ministry, partly over alleged unpaid dues, leaving thousands of passengers stranded. The airline resumed flights on Sunday.
Nigeria's only other functioning major airline, Aero Contractors, was also on the list but was not immediately reachable for comment.

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