Nigeria’s Proposed Aviation Leasing Company: Making the Structure Bankable for Global Lessors, Financiers and Investors.

As an Aviation enthusiast and a commercial lawyer with a bias for Aviation and Aircraft leasing, I was not too surprised when I heard the Honourable Minister of Aviation and Aerospace announce recently the plans he has in place to set up a Nigeria Aviation Leasing Company. I had watched and listened with keen interest the enthusiasm he showed when he attended the Air Finance Economics Conference in Dublin in January 2025, and the views he expressed at the meetings, so this development is no surprise.

Nigeria’s proposed government-backed Aviation Leasing Company may become one of the most significant developments in African Aviation Finance in recent years. The Federal Government’s intention to establish a Special Purpose Vehicle (SPV), supported by sovereign participation through the Ministry of Finance Incorporated (MOFI) and private sector investors, reflects an important recognition of what is required for the Industry to grow. Nigeria’s Airlines require sustainable access to aircraft lease if the aviation sector is to expand meaningfully.

For years, Nigerian operators have faced persistent challenges in accessing aircraft on commercially competitive terms and because of the lack of understanding the specialized nature of what it takes to sustain the relationship with Global Lessors. International lessors and financiers have remained cautious due to concerns around Foreign exchange convertibility and repatriation; Enforcement and repossession risks; Creditworthiness of local operators; Practical implementation of protections under the Cape Town Convention; Sovereign and regulatory uncertainty. The proposed platform therefore presents a compelling opportunity.

However opportunity alone cannot create what is required to sustain the intention neither does it create Bankability. The real question is whether the proposed structure can be designed in a manner that International lessors, Financiers, Export Credit Agencies, and Institutional investors will regard the proposed idea as commercially credible, enforceable, and operationally reliable.

That distinction matters because in aviation finance, transactions are not priced based on optimism. They are priced based on risk allocation, cash flow certainty, and worst-case enforcement scenarios.

The proposed company, which hopefully becomes a veritable platform for Aviation leasing in Nigeria and potentially the sub-Saharan Africa could achieve several important objectives simultaneously; some of which would immediately Improve fleet access for Nigerian and possibly airlines within sub-Saharan Africa; Reduce dependency on expensive short-term leasing structures; Improve fleet quality and operational reliability; Attract long-term aviation capital and investment opportunities into Nigeria; create a local aviation finance ecosystem with potentially regional significance.

If properly structured, the initiative may also help reposition Nigeria as a more credible Aviation Finance jurisdiction within Africa. However, the success of the initiative will depend less on policy announcements and more on transaction architecture and structure that is put in place ahead of its execution. It is useful to understand that the corporation can only function based on its reliance on International lessors and therefore it is important to understand what the core concern for such global lessors are.

The principal concern of global lessors is rarely whether aircraft demand exists in Nigeria. The demand is obvious. The demographics speak for it, the budding economic growth over the years, the trade and social travel culture all clearly show Nigeria is a vast space with yawning opportunities. I am certain that the teams working for the Federal Government of Nigeria are pretty much aware, however highlighting some of the issues purely from a global perspective is important.

The concerns for International Global Lessors are what happen if and when a transaction becomes distressed? The questions that immediately arise is whether lease rentals can continue to flow in hard currency; aircraft can be repossessed efficiently; contractual rights can be enforced predictably; sovereign support obligations can be relied upon wholeheartedly; political or regulatory disruptions can be managed efficiently etc.

In practical terms, Lessors are asking a simple question: “Can this structure withstand stress?” That question sits at the centre of Bankability. One of the most important issues likely to arise in the proposed structure is the role of the Federal Government guarantee. Government support undoubtedly improves investor confidence. However, sophisticated aviation financiers do not rely solely on sovereign guarantees. This is because guarantees, while valuable, do not independently resolve FX liquidity constraints; payment timing concerns; insolvency exposure; repossession delays; operational airline risk, including political terrain risks.

In many emerging markets aviation transactions, guarantees are most effective when used as credit enhancement mechanisms rather than as the primary source of repayment security. This distinction is critical as a bankable aviation finance structure depends not only on who promises to pay, but on whether the transaction mechanics themselves would ultimately ensure payment certainty.

On transaction tables it is often argued that the Government Guarantee means little as it is no different from every contract that still requires judicial consideration to determine its enforceability. So it is important that the structure at the outset focuses on its Bankability and the seamless nature for enforcement.

I am aware if the tremendous amount of work that had been done by the current Minister in ensuring that the Cape Town Convention issues is given considerable attention in pursuit of its practical execution. The issuance of a practice direction of the Federal High Court (Cape Town Convention and Aircraft Protocol) in 2024 aimed at streamlining the enforcement of aircraft repossession in Nigeria, but the practical reality execution remains a challenge. The attitude of the judiciary and the users of the judicial service is critical to the achievement of the objective set by the protocol and the practice direction. This in my view still requires an immeasurable level of trust, specialized training and education on both sides.

One of the most significant structural elements that should be considered in any aviation leasing company or platform is the structure of the entities. This is whether the Leasing entity should operate exclusively through a Nigerian SPV or through a hybrid offshore/onshore structure. From an international financing perspective, a purely domestic SPV may create concerns for the payment waterfall. A payment waterfall determines the legally binding order in which transaction revenues are distributed. For international Lessors and Financiers, this issue is central. This proposed structure reduces dependence on discretionary payment decisions and improves lender confidence. Importantly, sophisticated lessors price transactions based on cash flow control rather than policy assurances alone.

Another key issue is whether the leasing company should operate exclusively through a Nigerian SPV or through a hybrid offshore/onshore structure. I am conscious that parties engaged in the development of the proposed leasing structure have the experience and are indeed internationally exposed, however it would still be worth proffering what I think might be useful to know.

From an international financing perspective, a purely domestic SPV may create concerns for International lessors around matters such as insolvency exposure; exchange control risk; creditor protection; enforcement predictability etc. For reasons such as listed above, many globally financed aviation structures utilise an offshore leasing SPV (often in Ireland, Mauritius, or another recognised finance jurisdiction) and layered alongside a local operating entity responsible for regulatory interface and local operations. Such structures are not designed to avoid Nigeria, rather, they are designed to align the transaction with international financing expectations and improve investor comfort.

The objective should not merely be to establish a National Leasing Company; the objective should be to establish a Leasing Company or platform capable of attracting global aviation capital at commercially competitive pricing. The adoption of the Cape Town Convention by Nigeria was an important development for aviation finance, and a great boost to international lessor confidence in the Nigerian Aviation Project as I term it. However the practical reality needs to be paid particular and close attention.

In theory, the Convention and its adoption with the ancillary practice direction of the Federal High Court Nigeria (the Cape Town Convention and Aircraft Protocol) Practice direction 2024 issued, to aid the process and eliminate judicial impediments is naturally expected to improve creditor protection; repossession rights, deregistration procedures, priority of security interests etc. However, international financiers often distinguish between the legal framework and practical implementation.

In practice, issues such as administrative delays, operational coordination (a very critical element), judicial timelines, and regulatory execution still materially affect enforcement confidence. For example an alignment with the relevant department of the Nigeria Customs Service in relation to the mode, method and requirements for the immediate export of any deregistered aircraft should be seamless and less cumbersome and must be in alignment with the NCAA’s requirements. The Customs department and the NCAA should work in tandem to make such matters seamless. This means that practical implementation of IDERA protections and repossession protocols will be critically important to the success of the proposed Nigerian Aviation Project. The difference between a theoretically compliant jurisdiction and a practically efficient one is significant in aviation finance pricing and no issue is more important to international lessors than the ability to seamlessly repossess a leased aircraft and foreign exchange certainty.

These two elements should remain central and pivotal to the success of any structure under consideration by the protagonists of the Nigerian Aviation Project. The Nigerian polity has taken the hit from volatile foreign exchange control issues and the Nigerian aviation market like any other business has historically not been insulated from experiencing periods of severe FX stress. This includes concerns around delayed remittances; trapped funds; pricing volatility; debt service disruption etc. Therefore, a useful solution that may be worth considering in tweaking the structure for any successful aviation leasing platform may likely require a deliberate mechanic in terms of the revenue structure and credible FX protections even as strong sovereign support may not sufficiently reduce pricing concerns.

If properly structured, Nigeria’s Aviation Leasing initiative could become more than a domestic financing programme. It could evolve into a regional aviation finance hub; a platform for African fleet financing; a catalyst for broader aviation sector reform; a long-term institutional aviation asset platform. But achieving this outcome will require a disciplined and mechanically deliberate structuring; credible governance; investor-focused transaction design; practical enforcement confidence.

In aviation finance, structure is strategy and in emerging markets, bankability is ultimately determined not by announcements, but by execution. A professionally managed platform with transparent governance standards will attract significantly more investor confidence than a politically managed structure. This is particularly important where public and private capital coexist. PPP structures succeed when risk allocation and governance rights are clearly defined from inception.

In conclusion, Nigeria’s proposed Aviation Leasing Company represents a potentially transformative development for the country’s Aviation sector. The opportunities are substantial. But global lessors, financiers, and investors will evaluate the initiative through a simple lens: Is the structure sufficiently bankable to withstand stress, protect assets, ensure payment certainty, and support enforceability? Answering that question successfully will determine whether the initiative becomes a policy aspiration; or a globally credible Aviation finance Company. The difference in my opinion will lie in the structure.

*Patrick Osu is a Partner at Ajumogobia & Okeke, a Commercial Lawyer and an Aviation Finance and Cross-border Transactions Lawyer advising international Aircraft lessors, Financiers, and Investors on Nigerian Aviation transactions, Enforcement strategy, Sovereign-backed structures, and Aircraft leasing risk allocation.