Minister:Why local insurance firms can’t cover big aircraft
Minister of Aviation and Aerospace Development, Mr. Festus Keyamo lamented that many of the insurance firms in Nigeria cannot insure many of the aircraft in the fleet of Nigerian airlines.
The Minister disclosed to journalists in Lagos that the lack of capacity and the high premiums by the insurance firms had led to a hike in airfares.
He disclosed that the new rule of the National Insurance Commission (NAICOM) is that every risk must be placed in the local market to enhance our local insurance companies, adding that by bending a bit to ensure that they give lessors the assurance that they can place the risk in the international market and let the operators bring their aircraft in.
It is understood that even if an airline purchases an aircraft, it is an international requirement that it has to be insured, but no insurance company can do that in Nigeria, especially for bigger aircraft.
The other one on insurance is that there is no capacity internally to do big aircraft insurance in Nigeria. So many lessors are not operating in Nigeria because of insurance, a situation that is killing business.
Aside from that, even though airlines want to do indigenisation, they cannot do that with another person’s assets.
The escalating costs in airline operations, which have grown rapidly, have become one of the problems of airlines in the country.
Keyamo said, “But then, I apologise to say that most of them don’t have the capacity. So when you give them they go and reassure again and that is a double amount for them too. That is why you are seeing a rise in the cost of tickets. The cost is too much. That is what is translated to these high fares, and ticket prices we are seeing.
So we apologise to Nigerians, but then we have a lot to do so that the prices will come down.”
He further noted that over the past four decades, numerous domestic airlines have failed to sustain operations and gone bankrupt and in some cases, airlines even obtained Air Operating Certificates (AOCs) but never launched their services.
This trend, he reiterated reflects broader issues within the sector, including financial instability, regulatory challenges, and operational inefficiencies.
The Minister inferred that the inability of these airlines to remain viable underscores the urgent need for comprehensive reforms to ensure the long-term health and sustainability of Nigeria’s aviation industry.
“For so many years we have had a lot of high mortality rates in the aviation industry, in terms of airlines coming and going under with very high mortality. I think more than 100 airlines have come and gone under in the last 40, or 50 years. We have had some AOC holders who never came at all. They have AOC, but they never want to come at all.”
“We need to enhance their capacities. In the absence of a national carrier, in the absence of our airlines, aviation, then we should have flag carriers within the aviation who will make us proud. And we, of course, will service our reciprocal rights under all the different BASAs that we have.”
“In fact, of course, we need to enhance capacity in the industry, capacity for development. Train and retrain our technical people within the industry. And ensure that we raise their standards to global standards. And of course, somebody just talked about revenue optimization. Without imposing extra taxes on people, let us just optimize revenue. That is why I took a memo to the council”, he added.
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