Fly Nigeria Bill and Aircraft Leasing: Balancing Local Content Aspirations with Global Financing Realities

Introduction

Nigeria’s aviation market presents one of Africa’s most compelling growth opportunities, but also one of its most complex financing environments. As the Federal Government advances the Fly Nigeria Bill to promote local airlines, a critical commercial question emerges: can Nigeria increase local participation without disrupting the foreign capital that keeps its aviation sector airborne?

Nigeria, with a population of over 200 million, is Africa’s largest economy and depends heavily on Air transport to support trade, investment, tourism, and regional connectivity. Despite this strong demand profile, the aviation sector continues to face structural constraints, including limited access to long-term financing, persistent foreign exchange volatility, and a heavy reliance on foreign-owned aircraft and aviation services. These challenges have historically constrained the growth and competitiveness of domestic carriers.

Against this backdrop, the proposed Fly Nigeria Bill seeks to strengthen local participation through targeted local content measures. In parallel, initiatives such as the Nigeria Aircraft Leasing Company, a private sector-led, government-backed Special Purpose Vehicle (SPV), are being positioned to address longstanding financing gaps and build domestic capacity across the aviation value chain.

While these initiatives are commercially significant, modern aviation remains deeply dependent on global financing and leasing structures. Airlines rely extensively on international lessors, financiers, insurers, and manufacturers to sustain operations. The long-term success of the Fly Nigeria Bill will therefore depend on striking a careful balance between promoting local participation and preserving the conditions required to attract and retain international investment.

The Commercial Case for the Fly Nigeria Bill

The Fly Nigeria Bill is not novel on the global stage. This policy is mainly modelled on similar initiatives implemented in other climes that aim to bolster domestic airlines’ localisation by requiring government officials and agencies to prioritise local carriers where available.

The policy aims to redirect an estimated ₦22.6 billion in annual government travel spending toward domestic airlines, creating a predictable revenue base that could materially improve airline balance sheets and creditworthiness. This figure represents a robust market opportunity that could essentially turn around the financial viability of Nigerian carriers if successfully implemented, monitored, and enforced. Hence, the Fly Nigeria Bill represents Nigeria’s attempt to establish a comprehensive aviation local content policy legal framework.

It is also important to note that the Fly Nigeria Bill is not a novel initiative in Nigeria. There are at least two previous attempts to establish this policy, which faded somewhere between announcement and implementation. The failure of the previous attempts has been attributed to the unsupportive attitude of legislative members who failed to back the passage of the Bill and the unreadiness of the Nigerian aviation sector to cater to the ensuing need if the Bill is passed.

The Fly Nigeria Bill is essentially powered by several socio-economic and developmental objectives: retaining a greater share of aviation-related economic value within Nigeria, creating predictable demand to support the growth of domestic airlines, and encouraging investment and employment across the aviation value chain, including maintenance, training, and logistics.

Despite its projected benefits, the implementation of the Bill raises pivotal questions regarding how local content aspirations can be effectively pursued without adversely disincentivising the foreign investment and cross-border commercial relationships upon which the sector heavily depends.

Aircraft Leasing In Nigeria As The Foundation Of Modern Aviation

Aircraft leasing remains the main route for fleet acquisition in Nigeria due to the massive capital strain of an outright purchase. The Civil Aviation Act 2022 and the Nigerian Civil Aviation Regulation govern operations, recognizing dry, wet, and damp leases.

Aircraft are expensive and capital-intensive, and outright ownership is commercially unviable for most airlines operating in emerging markets like Nigeria. Leasing, therefore, allows airlines to access aircraft and adjust fleet capacity without the upfront capital expenditure of direct ownership.

For Nigerian airlines, leasing is not merely a commercial preference but often a survival lifeline. Domestic operators are confronted with limited access to long-term local financing, high-interest yielding loans, and significant foreign exchange difficulties. As a result, many airlines rely heavily on foreign lessors and international financing institutions to acquire and maintain their fleets.

While there are concerns that the Fly Nigeria Policy may face opposition from foreign financiers and lessors, the policy, if properly executed, could enhance the financial viability of local airlines, which in turn would improve their ability to meet lease repayment obligations.

The Tension Between Local Content And Global Aviation Finance

The primary hurdle facing the actualization of the Fly Nigeria Policy lies essentially in reconciling local content objectives with the requirements of international aviation financers and lessors.

Encouraging greater local participation by Nigerian airlines is a strategic socio-economic and developmental vision. However, this may create a level of friction with international lessors and financiers whose primary concern is the protection of investment and the ability to recover assets in the event of default.

Aircraft financing transactions are highly sensitive to legal and regulatory risk. Lessors examine several factors before committing aircraft to a jurisdiction, including its Nationalisation and Expropriation track record, creditor protection mechanisms, enforcement procedures, foreign exchange regulations, and the overall stability of the regulatory environment. Where these factors are perceived as uncertain, financing costs increase, and access to aircraft may become more restricted.

Also, for a volatile economy like Nigeria, Foreign exchange risk presents an additional challenge. Most aircraft lease obligations are denominated in United States dollars, while the revenues of Nigerian airlines are primarily earned in naira. Currency depreciation, therefore, has an immediate impact on the financial viability of airline operations. Therefore, any local content framework that has the potential of increasing operational costs without addressing mainstream financing constraints may ultimately place additional pressure on domestic operators, devastating the entire sensitive structure of the aviation sector in its entirety.

A further, and perhaps more immediate, source of friction lies beyond commercial risk-pricing altogether: Nigeria’s existing treaty architecture. Nigeria is a signatory to over ninety Bilateral Air Service Agreements (“BASAs”), many of which were negotiated without adequate consideration of their long-term impact on the domestic aviation industry, and are consequently skewed in favour of foreign carriers. A domestic mandate that compels government-funded travel onto Nigerian carriers could, depending on how individual BASAs are framed, sit uneasily with reciprocity and fair-competition clauses that several of these agreements contain.

The precedent offered by the United States’ own Fly America Act is instructive here: notwithstanding its general requirement that federally funded travel be carried on U.S. flag carriers, the Act does not override bilateral or multilateral agreements to which the United States is a party, and travellers may rely on a qualifying Open Skies Agreement as a recognised exception. A Nigerian equivalent that fails to build in similar carve-outs risks generating treaty friction with key aviation partners or being challenged as inconsistent with Nigeria’s obligations under existing air services agreements. The drafting of the Fly Nigeria Bill must therefore grapple expressly with how it is reconciled against this pre-existing web of treaty obligations, rather than treating BASA compliance as a peripheral implementation detail.

While Nigeria has ratified the Cape Town Convention, compliance with the Cape Town Convention on International Interests in Mobile Equipment remains an important indicator of investor confidence in its own right. The Convention was designed to provide greater certainty regarding the creation, enforcement, and priority of security interests in aircraft assets, and lessors are inclined to favour jurisdictions offering predictable, efficient mechanisms for asset recovery.

Building A Sustainable Path Forward

Local content ambitions in the aviation sector and foreign investment are not mutually exclusive, and the policy debate should focus on creating a framework in which both can coexist and reinforce one another.

A practical starting point should be the continued strengthening of both the institutional and legal framework in the enhancement of aviation finance. Enhancing creditor protections, reforming enforcement mechanisms, and maintaining compliance with international obligations can help reassure lessors and financiers while supporting indigenous players, alongside a clear-eyed review of how the Fly Nigeria Bill is reconciled with Nigeria’s existing BASA commitments.

Lawmakers should also engage in the reform of indigenous aviation finance capacity, including encouraging domestic participation in aircraft leasing, creating a conducive environment for Public-Private Partnership arrangements, and developing specialised aviation finance vehicles. Over time, such initiatives could reduce over-dependence on foreign financing while preserving access to global capital markets.

Conclusion

Nigeria’s aviation sector has reached a critical juncture where policy adventurism intersects with financial pragmatism. The Fly Nigeria Policy ultimately signifies a paradigm shift in Nigeria’s commitment to bolster greater local participation in the aviation sector, thereby amassing a larger share of value creation and retention in the domestic economy. Its objectives are both legitimate and commercially crucial to the diversification of the volatile economy.

Irrespective of the laudable nature of the policy, the aviation industry operates within a highly interconnected global ecosystem where unfettered access to aircraft depends largely on international financing and remains constrained by treaty obligations Nigeria has already assumed. Consequently, the critical challenge for policymakers lies not in whether to prioritise local participation or international capital, but in how to create a regulatory synergy that accommodates both.

Sesugh Famave is a Senior Associate in the Transportation Sector at Stren & Blan Partners, while Babatunde Oyewole, Ebenezer Ogunwole and Izidor Adutchay are Associates in the same sector.

Stren & Blan Partners is a full-service commercial Law Firm that provides legal services to diverse local and international Clientele. The Business Counsel is a weekly column by Stren & Blan Partners that provides thought leadership insight on business and legal matters.

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