On 7th May, shortly after E&VAI went to press, Evergreen Apple Nigeria (EAN), the premier FBO in Nigeria, was due to hold a ground breaking one-day conference, The Emerging Market in Business Aviation,” with an emphasis on financing the acquisition of business jets. The event is being held at The Wheatbaker, one of the finest boutique hotels in Ikoyi, Lagos. The whole idea is the brainchild of EAN CEO Segun Demuren, who is looking to help overcome one of the major obstacles to the rapid growth of business aviation in Africa, namely ready access by potential owners to aircraft financing. We spoke to Segun about his aspirations for the event.
Q: What made you decide that the time was right to hold a major one day conference in Lagos on financing business jets in emerging markets?
A: We pay a great deal of attention to the feedback that we get from owners and potential owners of executive jets in Nigeria and the surrounding countries. We are always on the lookout for ways to both help our clients and facilitate increased ownership of business jets in Nigeria and Africa generally. What we found was that our survey of clients, which included a number of potential buyers, produced a wide range of concerns around advice, planning and financing as well as operating executive aircraft. It was clear to us that the best way of addressing all these issues would be to get everyone together for a day and therefore a one day conference that involved the major financing houses, Nigerian banks, aircraft brokers, the OEMs, high net worth individuals and operators, looked to be the ideal way to go. You can get a tremendous amount done when you get the right people together in a single room and that is what we are aiming to achieve. We have had a great response to the conference and we are expecting about 120 to 150 delegates.
- What are the chief difficulties or challenges potential owners face when it comes to financing their purchase of a business jet and are these difficulties unique to Nigeria?
- There are a number of challenges and they are common across emerging markets generally. Often an individual may be extremely wealthy, but his wealth may consist of a large number of holdings in companies that are not required to produce audited accounts, or in properties where the values and returns are not immediately obvious to a traditional western bank. Or he may simply not want to disclose a great deal of detail about his portfolio and his holdings. So although we get a good number of jets being purchased into the Nigerian market, the vast majority of these are not financed.
There is no developed specialist business aviation financing infrastructure here in Lagos or in Nigeria generally. None of the big institutions here has a desk or department that is specifically targeting business aviation. This leaves potential owners here without a funding product they can turn to and they have to go outside the country, to specialist European or US finance houses to explore funding options. That is quite a major hurdle for them to cross and when they do engage with finance houses abroad, often they are repelled by the traditional due diligence processes of those institutions, which want far more detail on their affairs than they are prepared to give. What we are hoping for from the conference, at the very least, is that it will be a lot clearer to potential local buyers who they can approach for funding and what they can expect to have to provide. Similarly, funders will gain a great deal of knowledge about the local market, all of which should open up a lot more options. We are also bringing the specialist finance companies and the local Nigerian banks together for the event and something very good may come from that as well, since the local banks clearly know their clients very well, and can be a very useful information source, with the client’s approval, for a potential funder.
Typically a finance house is very interested in a customer’s cash flow, not just in their asset portfolio. The funder wants to know that the customer will be able to meet the annual financing costs from cash flow and again, that is something that local banks can perhaps speak to. A lot of the Nigerian buyers have their businesses in the country and local banks can vouch for their cash flow status. So if they and the finance houses can work out a way of exchanging information that is approved by the client, then that would help to expedite funding and could stimulate the whole market.
Q: Some finance houses specialising in corporate jets are happy if the individual pays half the cost of the jet, because they then feel that they have a sufficient asset to act as collateral. Do you see that as a way forward for potential Nigerian executive jet buyers?
A: Possibly, but half the value of a jet is a lot of money to come up with, particularly in the mid to large cabin aircraft. Most of the aircraft sales we see here in Nigeria are medium cabin sales. We are seeing more purchases of aircraft such as the $28 million Bombardier Challenger 605s and the Gulfstream G450s and upwards.