Aircraft Leasing Company: Can the New Gamble Ease Nigerian Airlines’ Fleet Woes

For decades, Nigeria’s aviation industry has been caught in a vicious cycle. Airlines struggle to acquire aircraft because of prohibitive financing costs, while limited fleet capacity leads to flight delays, cancellations, route reductions, and, in many cases, the collapse of promising carriers.

Successive governments have acknowledged the financing challenge, yet finding a lasting solution has proved elusive. With most Nigerian airlines relying on expensive foreign leasing arrangements, volatile exchange rates and scarce long-term financing, expanding or even maintaining fleets has become an increasingly difficult task.

Shortly after assuming office as Minister of Aviation and Aerospace Development, Festus Keyamo disclosed his intention to work towards ensuring that Nigerian airlines have access to the acquisition of more aircraft to boost their fleet and be able to operate more routes and compete with foreign airlines. Part of that plan was putting in place a policy that would enable the domestic airlines to have access to dry lease (a leasing arrangement where a leasing company provides the aircraft, enabling the lessee or operator to take full operational control).

The Minister stressed that no airline in the world can afford to own 100 per cent of aircraft in their fleet, noting that most of them use dry-lease agreements to boost capacity.

The Centre for Aviation (CAPA) estimates that globally 55 per cent to 60 per cent of the world’s commercial fleet is leased.

In a move to achieve the aim, the minister, alongside the Director General of the Nigeria Civil Aviation Authority (NCAA), Capt. Chris Najomo signed the Irrevocable De-registration and Export Request Authorization (IDERA) in October 2024. The IDERA document is an international requirement to boost Nigeria’s standing among global lessors and financiers.

Towards the end of May 2026, the Federal Executive Council approved the establishment of a Nigerian Aircraft Leasing Company (NALC). The initiative, according to Keyamo, is designed to provide local airlines with easier access to aircraft through domestic leasing arrangements, reduce dependence on foreign lessors and strengthen the country’s aviation financing ecosystem.

Speaking on the sidelines of the inaugural African Air Transport Conference in Lomé, Togo, recently, Keyamo said the proposed aircraft leasing company will enable domestic airlines to acquire aircraft through local arrangements and make payments in naira instead of dollars.

The goal is to save airlines billions of naira currently spent on foreign exchange, a move that industry insiders say could be transformative.

The minister said the Nigeria Aircraft Leasing Company would be privately funded but backed by government guarantees designed to attract investors and reduce risks for aircraft owners and financiers.

According to Keyamo, Nigeria’s implementation of the Cape Town Convention and IDERA gives the NCAA the power to de-register and export any aircraft under dry-lease upon request by a creditor or lessor in the case of default by the operator (lessee).

He said the move is “a big de-risking factor for lessors and creditors,” enabling Nigerian airlines to access aircraft on dry-lease to boost operational capacity.

He said that past events had affected Nigeria’s rating by the international community, leading to the country being blacklisted as an unsafe destination for lessors to bring their aircraft.

Experts had said that reduced interest of global financiers and lessors in the country had slowed aviation growth across the sub-region.

Keyamo stated that the Federal Government would retain a small stake in the company because of the sovereign guarantees it would provide.

“We have floated the Nigeria Aircraft Leasing Company that will be fully privately funded and we have private investors and private SEED investors who are currently talking with ICRO for registration about the cost of registration,” Keyamo stated recently in an interview.

He explained that the sovereign guarantee is informed by the signing of the Cape Town Convention and the amendment of the IDERA, which gives the NCAA the power to de-register and export an aircraft on dry lease within five days of a request by a creditor or lessor in case of default.

To industry observers, the idea is neither entirely new nor without merit. What remains uncertain is whether this latest attempt can succeed where previous interventions have struggled.

Nigeria’s Fleet Financing Challenge

Aircraft remain among the most expensive assets any airline can acquire. A single narrow-body aircraft can cost tens of millions of dollars, while even leased aircraft require substantial security deposits, maintenance reserves and insurance commitments.

For Nigerian airlines, these obligations are compounded by high domestic lending rates, foreign exchange instability and limited access to dollar financing.

Airline operators say most commercial banks in Nigeria are reluctant to finance aircraft purchases because of the industry’s perceived risk profile and the long repayment periods required for aviation assets. Where loans are available, interest rates are often significantly higher than those obtainable in advanced aviation markets.

As a result, many operators rely almost exclusively on operating leases from foreign lessors, exposing them to exchange-rate fluctuations and strict lease conditions. During periods of economic instability, several lessors have either increased lease costs or become reluctant to place aircraft in Nigeria due to concerns over asset recovery, regulatory uncertainty and the country’s risk profile.

Air Peace Chairman Allen Onyema had, while speaking during a ceremony to mark the arrival of the airline’s first dry-leased Boeing 737-700 NG at the Murtala Muhammed Airport, Lagos, last year, stated that most big airlines don’t own all the aircraft they use. He noted that while global giants like Ryanair routinely lease aircraft, every airline owner in Nigeria is expected to buy their own aircraft. “That is why you see one airline having about 400 planes. In Nigeria, every airline owner is expected to buy their own aircraft,” he had stated.

The result is a shortage of available aircraft, forcing domestic airlines to operate thin fleets with little operational flexibility.

Whenever one aircraft develops a technical fault or enters scheduled maintenance, flight disruptions ripple across entire networks.

Passengers bear the immediate consequences through delays, cancellations and higher airfares.

“It’s not only their businesses that will benefit from this move. Once they acquire more aircraft, it will help to cut down on the constant cancellation of flights we are currently familiar with and force down the price of airfares,” Keyamo stated while highlighting the benefits.

Why Government Wants a Local Leasing Company

The proposed Nigerian aircraft leasing company seeks to bridge this financing gap.

Rather than individual airlines negotiating directly with foreign leasing firms, the local leasing company would acquire aircraft and lease them to Nigerian operators under arrangements expected to be more flexible and better aligned with domestic realities.

Analysts who support such a model argue that it could lower acquisition barriers, improve fleet availability and create a more sustainable financing structure for indigenous airlines.

It could also reduce the industry’s exposure to exchange-rate volatility if part of the financing structure allows payments in naira or through more flexible currency arrangements.

Beyond airline financing, proponents see wider economic benefits.

A domestic aircraft leasing company could stimulate investment in aviation finance, insurance, maintenance services and technical expertise while positioning Nigeria as a regional aviation hub.

If properly structured, it could also attract institutional investors, pension funds, and international aviation financiers into a specialised sector that has remained largely untapped.

Managing Director of Ibom Air, George Uriesi, said the aircraft leasing company would offer relief to airline operators, who are grappling with the financial burden in acquiring aircraft. He noted that Nigerian airlines are often disadvantaged by exorbitantly high financing rates, but the leasing company unties their hands by providing competitive interest rates and payment stability.

Lessons from Previous Attempts

The proposal, however, comes against the backdrop of several aviation initiatives that generated excitement but ultimately failed to deliver their intended objectives.

Industry analysts insist that success will depend less on announcing a leasing company and more on establishing one with sound commercial principles.

They argue that past interventions often struggled because they were burdened by political interference, inadequate funding, weak corporate governance or shifting government priorities.

The aviation industry is littered with ambitious projects that failed to achieve sustainability after initial enthusiasm faded.

Aviation Experts, Lanre Bamgbose and Group Capt. John Ojikutu expressed support for the establishment of the leasing company but warned against over-involvement by the government. They strongly advised that the company remain entirely privately driven to avoid going the way of defunct state carriers.

They stressed that it must operate independently, maintain strong corporate governance, and attract experienced aviation finance professionals capable of managing complex leasing transactions.

On his part, aviation expert Samuel Caulcrick stated that while establishing the leasing company is a significant step towards improving access to aircraft for local airlines, there are areas of concern.

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According to him, the sovereign guarantee only addresses concerns about the security of invested funds, but does not automatically guarantee the returns expected by investors.

In a chat with Pinnacle Daily, Caulcrick, who is a former rector of the Nigeria College of Aviation Technology (NCAT), Zaria, highlighted structural challenges faced by the Nigerian aviation market, which he said could affect the viability of the leasing company if not resolved. The challenges, according to him, include multiple taxes and charges imposed on airlines, high operating costs, fuel procurement, and low passenger traffic growth.

According to Caulcrick, these challenges could negatively impact airlines’ capacity to generate the cash flows required to meet lease obligations and assure profitability for the SPV’s investors.

He therefore called on the government to review regulatory charges, including Ticket Sales Charge (TSC), landing, parking and navigation charges, among others.

He also stressed the need for the adoption of measures that would ease foreign exchange challenges facing airlines, particularly with access to dollars for aircraft leasing and maintenance.

Winning the Confidence of Global Lessors

Another major challenge will be credibility.

Nigeria has, over the years, faced concerns from international aircraft lessors regarding the repossession of leased aircraft, availability of foreign exchange and compliance with international leasing standards.

Although recent reforms have improved the country’s standing, restoring investor confidence remains a gradual process.

A well-capitalised domestic leasing company backed by transparent governance and internationally recognised financing structures could help improve Nigeria’s reputation within the global aircraft leasing market.

Such credibility would also make it easier to attract partnerships with established international lessors and export credit agencies.

The aviation minister assured that with the implementation of the Cape Town Convention and signing of IDERA, lessors can easily repossess their leased aircraft and export them within a few days after a formal request to the NCAA.

Beyond Financing

Industry experts note that solving Nigeria’s fleet shortage requires more than creating a leasing company.

Aircraft financing represents only one component of a broader aviation ecosystem that also requires efficient maintenance facilities, stable aviation fuel supply, predictable regulatory policies, access to foreign exchange and improved airport infrastructure.

Without complementary reforms, even the most innovative financing model could struggle to achieve its objectives.

Similarly, airlines themselves must strengthen corporate governance, financial discipline and operational efficiency to qualify for sustainable leasing arrangements.

Analysts believe that the unveiling of the aircraft leasing company could become a game changer the industry has long awaited if the government addresses the existing challenges and creates a more stable operating environment.