More revelations on happenings that led to the take-over of Arik Air were made on Wednesday by the Asset Management Corporation of Nigeria(AMCON).
AMCON Managing Director Mr. Ahmed Kuru, in his presentation in Abuja to the Senate Committee on Banking, Insurance and other Financial Institutions said Nigeria’s biggest Airline lacked accountability and goood corporate governance.
He accussed the owner, Johnson Arumemi-Ikhide of neglecting good corporate governance, saying decisions were taken solely by him as the airline does not have a management structure.
He described Arik Air as a serial delinquent debtor, adding that the airline and the other companies belonging to its owner, are owing N263.7bn.“This figure excludes Arik’s indebtedness to other banks, aviation authorities (local and foreign), vendors, contractors and workers,” said Kuru.
He said Arik Air was badly distressed to a point that Ethiopian Airline that was invited to manage it under a management contract declined after gaining knowledge of its state of affairs.
“Currently, based on the analysis and the reports that we received from outside, Arik Air is confronted with some of these challenges: they have consistently defaulted in servicing all their loans; they have consistently defaulted in making all the lease payments; they have consistently defaulted in paying even insurance premium; they have failed to meet other service providers’ obligations,”Kuru said.
He addded, “There is total lack of accountability, because nobody knows what is happening there financial-wise. And they have also accumulated regulatory debts, some of which we couldn’t verify before, but which we now know to be N26.4bn, including $3.3m. These are debts to the NCAA, FAAN, NAMA, etc.”
The AMCON chairman said Arik Air airline was earning about N7bn monthly.“And they have failed to even pay staff salaries. They are owing salaries for periods ranging between five and seven months, depending on the department,” he added.
Kuru disclosed AMCON bought the airline’s non-performing loan of N71bn from Union Bank of Nigeria Plc and N14bn from Keystone Bank Limited.The loans were for the purchase of additional aircraft and refinancing of existing term loans,but the airline defaulted. The default, according to him, has ”posed systemic threat to the banks and, indeed, the Nigerian economy.”
“The principal promoter of Arik Air is Sir Johnson Arumemi-Ikhide. Apart from AMCON, Arik is also currently indebted to other commercial institutions in Nigeria, including Standard Chartered Bank, Zenith Bank, Ecobank and Access Bank to the tune of circa N165bn; N26bn is owed to the federal aviation agencies and regulators; $11m is owed to European aviation agencies and service providers; and $20m owed to Lufthansa Technique.
“AMCON also acquired three other non-performing loans of companies in which the principal promoter is Sir Johnson Arumemi-Ikhide, namely: Rockson Engineering (N107bn), Ojemai Farms Limited (N8.6bn) and Ojemai Investment Limited (N1.9bn). The total exposure of Sir Arumemi-Ikhide to AMCON is N263.7bn.”
Kuru made more revelations, “In May 2013, AMCON sourced N26bn of the Central Bank of Nigeria’s Power and Aviation Intervention Fund through the Bank of Industry on behalf of Arik. AMCON disbursed N21.38bn of the BoI loan to Arik as working capital. Out of this amount, N2.4bn was meant for the reconfiguration of two aircraft from passenger to cargo carriers. This was never done as the funds were diverted by the Arik management and is now the subject of EFCC investigation. Both aircraft were abandoned in the UK.”
Senator Rafiu Ibrahim, who is the Chairman of the committee,in his opening remarks, said his committee was in support of AMCON’s take over of the airline.