VZCZCXRO2720
RR RUEHMA RUEHPA
DE RUEHOS #0130 0520625
ZNR UUUUU ZZH
R 210625Z FEB 07
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC 8537
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 8365
RUEHWR/AMEMBASSY WARSAW 0158
RUEHCD/AMCONSUL CIUDAD JUAREZ 0138
RUEHIT/AMCONSUL ISTANBUL 0141
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS LAGOS 000130 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED - HANDLE ACCORDINGLY 
SIPDIS 
STATE PASS FAA FOR ACONLEY, 
TRANSPORTATION FOR FAA; TRANSPORTATION FOR KEVIN SAMPLE; 
ROME PLEASE PASS TO TSA REP JOHN HALINSKI 
 
E.O. 12958: N/A 
TAGS: EAIR EINV PREL NI
SUBJECT: NIGERIAN AIRLINES FACE INCREASED CAPITAL REQUIREMENTS 
 
¶1. (SBU) Summary: Beginning in April, Nigerian airlines will have to 
meet new capitalization requirements or cease operations. Nigerian 
Civil Aviation Authority (NCAA) Director, Air Transport Regulations 
Alfred Famodimu predicted that, of Nigeria's 22 domestic airlines, 
five major airlines would successfully complete the recapitalization 
exercise. End summary. 
 
¶2. (U) As of April, airlines will have to meet new capitalization 
requirements or cease operations. On January 18, Aviation Minister 
Femi Fani-Kayode announced the new requirements: airlines flying 
domestic routes will need a capital base of N500 million, as opposed 
to the current N20 million; those flying regional routes, which 
include Africa and the pilgrimage routes to Saudi Arabia and 
Jerusalem, will require N1 billion, up from N500 million; and 
operators of international and intercontinental routes will need a 
capital base of N2 billion rather than the current N1 billion. NCAA 
Director, Air Transport Regulations Alfred Famodimu explained an 
airline's capital base would be valued to include all existing 
assets, such as office space, hangars, and aircraft. Airlines with 
more capital would have better insurance coverage, Famodimu 
explained, and would be more likely to have better equipment, 
maintenance, and crew training than smaller airlines. 
 
¶3. (SBU) Nigerian Civil Aviation Authority (NCAA) Director General 
(DG) Harold Demuren confirmed that the recapitalization requirements 
would take effect April 1. Of the current 22 domestic airline 
operators, Famodimu said he expected five major airlines - Virgin 
Nigeria, Arik Air, Bellview, Aero Contractors, and Chanchangi - 
would successfully complete the recapitalization exercise. Those 
that would be most negatively affected are the small one- and 
two-aircraft operators that operate the heavily traveled Lagos-Abuja 
and Lagos-Port Harcourt routes. 
 
Comment 
------- 
 
¶4. (SBU) Comment: Following recent air crashes in the country, there 
have been calls for the GON to impose on the aviation sector the 
type of recapitalization requirements similar to the one that led to 
consolidation in the banking sector. Incorporated into the 
recommendations of the Presidential panel on aviation, the 
recapitalization is expected to help improve safety and security to 
the extent that more funds would be available for operators to 
procure and maintain equipment and train personnel. While laudable 
and welcome, this policy is not enough. The GON needs to focus on 
reforms to the aviation regulatory bodies (NCAA, Nigerian Airspace 
Management Agency, Federal Airport Authority of Nigeria, and 
Nigerian Meteorological Agency) to make them independent of the 
Aviation Ministry and funded sufficiently to carry out their 
statutory functions. End comment.