Air Finance: Breaking the African risk premium

With the AfDB and Afreximbank acting as the first loss guarantors, the private sector is finally finding the courage to invest in African skies, writes WOLE SHADARE

For decades, the story of African aviation has been written in red ink, hampered by a risk premium that forced local carriers to pay up to 25% more for aircraft than their global peers.

But as of March 2026, the script is being rewritten. A new, continent-wide financial policy has officially moved from boardroom theory to tarmac reality, signalling the end of the sovereign debt era and the birth of a more bankable, de-risked future.

Affordable capital drawback

Also, for decades, the Achilles’ heel of African aviation hasn’t been a lack of passengers, but a lack of affordable capital.

But as we move into March 2026, the narrative is shifting from sovereign dependence to institutional innovation.

 A new financial architecture is emerging, led by development banks and pan-African platforms designed to finally lower the cost of flying in Africa.

For a long time, the growth of African aviation was tethered to the fiscal health of national treasuries. If the state was broke, the airline stayed grounded—or worse, operated a fleet of flying museums.

Seismic shift

 But as we move into the second quarter of 2026, a seismic shift in aircraft financing is underway. No longer content with being the last frontier for global lessors, African carriers are pivoting toward institutional platforms and innovative risk-sharing models that are finally decoupling fleet growth from sovereign debt.

The biggest headline of the year arrived just weeks ago in Nairobi. The African Development Bank (AfDB), in partnership with AFRAA, officially launched the Integrated Aviation Transformation Program (IATP).

This isn’t just another policy document; it is a $7 billion financing facility specifically designed to modernise African fleets over the next five years.

The IATP addresses the African risk premium—the historical reality where African airlines pay up to 25% more in leasing costs than their European counterparts.

By acting as a de-risking mechanism, the platform enables smaller, privately owned carriers to access fuel-efficient narrow-body aircraft, such as the Airbus A220 or Embraer E2, on competitive terms.

Homegrown leasing giants

We are also witnessing the birth of home-grown leasing giants. Afreximbank has moved beyond its traditional role as a trade financier to launch a dedicated aircraft leasing platform in 2025.

To provide a bridge for airlines that struggle with the high deposit requirements of global firms like AerCap or Air Lease Corp.

We’ve already seen TAAG Angola secure a multi-layered financing package for its Boeing 787-10 fleet through this collaborative model, earning it the Finance Deal of the Year in early 2026.

Nigeria’s drastic steps

In Nigeria, Minister of Aviation Festus Keyamo has been aggressively courting global lessors, recently engaging with AerCap to create a “practical pathway” for local operators.

This new continental policy is finding fertile ground in Nigeria, thanks to a massive leap in compliance with the Cape Town Convention (CTC). As of late 2025, Nigeria’s compliance rating surged to 75.5%—up from a dismal 49% just a few years earlier.

The signing of the Irrevocable Deregistration and Export Request Authorisation (IDERA) procedure has been the “magic wand.” For the first time, global lessors have a clear, enforceable legal path to reclaim assets if an airline defaults.

Keyamo has already leveraged this new rating to initiate high-level talks with global giants such as AerCap and Afreximbank, aiming to replace high-interest commercial bank loans with the IATP’s more sustainable terms.

The goal? To move away from the high-interest (up to 25-30%) commercial bank loans that have historically crippled Nigerian startups.

With nearly $1 billion in airline funds still blocked across the continent—notably in Algeria and Ethiopia—liquidity remains a ghost that haunts many boardrooms.

To counter this, savvy operators are doubling down on Sale-and-Leaseback (SLB) arrangements.

“In a high-interest-rate environment, SLB is no longer a luxury; it’s a survival strategy. It allows us to unlock the equity tied up in our aircraft to fund maintenance and daily operations,” says a Lagos-based CFO.

$72 million structured assets

This trend is attracting institutional lenders such as Absa CIB, which recently concluded a $72 million structured asset finance facility for Aircraft Engine Lease Finance (AELF) to expand its presence across South Africa and regional markets.

Perhaps the most innovative development is the Pooled Regional Sukuk Platform. Unveiled as the second window of the AfDB’s new program, this Sharia-compliant instrument targets airport infrastructure and airspace development.

 It allows multiple states to pool their credit ratings to issue bonds that are far more attractive to international investors than individual national offerings.

The transformation of fleet financing is ultimately a move toward professionalisation. By shifting from government handouts to bankable, de-risked platforms, African airlines are finally starting to look like viable businesses rather than political projects.

However, challenges remain. The global supply chain crunch has pushed the average aircraft age to over 15 years—a record high.

 Financing is now available, but the delivery waitlist is the new bottleneck. For the African aviation industry, the story is no longer where will the money come from?” but rather how fast can these new models be scaled to meet the 6.0% growth in passenger demand?

From Wet-Leasing to Asset Ownership: The Nigerian Case

A significant trend in 2026 is the move toward Naira-denominated debt for aircraft acquisition. We are seeing a shift from wet-lease dependency (renting planes with crew/maintenance) to full asset ownership.

Green Africa Airways recently secured its second fully-owned ATR 72-500 through a Naira-denominated facility from Access Bank. This protects the airline from volatility in the Dollar-Naira exchange rate—a move industry analysts call a strategic risk-mitigation masterstroke.

United Nigeria Airlines, by joining the International Air Transport Association (IATA) clearinghouse, has signalled its readiness for more complex international financing and interline partnerships, moving beyond the traditional “cash-and-carry” model of fleet expansion.

Rise of Regional Sukuks and Private Credit

Innovation is also coming from the “Pooled Regional Sukuk Platform.” This Sharia-compliant instrument allows multiple states to pool their credit ratings to fund airport upgrades and air navigation systems.

For an industry where fuel accounts for up to 40% of costs and airport charges are 15% higher than the global average, these low-cost infrastructure funds are the secret sauce to making the airlines themselves bankable.

The demand is undeniable: Africa represents 18% of the global population but only 3% of air traffic. The gap is the opportunity, and for the first time, the money is finally speaking the same language as the aviators.

Last line

The 2026 policy shift marks a fundamental change in philosophy: aviation is being treated as a trade engine rather than a political trophy.  By creating a unified, de-risked investment environment, the IATP and its partners are finally giving African airlines the financial wings they need to capture the 6.0% growth projected for the continent this year.

Wole Shadare