The Asset Management Corporation of Nigeria (AMCON) has stated that liquidating Arik Air remains a viable option despite its continuous efforts to turn around the airline’s fortunes.
During a press briefing in Lagos, Jude Nwauzor, Head of AMCON’s Corporate Communications Department, explained that the AMCON Act empowers the corporation to manage, dispose of, or liquidate Eligible Bank Assets (EBAs), including Arik Air. Sections 6 and 48 of the Act specifically grant AMCON the authority to appoint a Receiver or Receiver Manager to oversee debtor assets.
“Given the legal powers vested in AMCON, liquidation is a possible route for Arik,” Nwauzor stated. He noted that AMCON has been managing Arik in its insolvent state without financial injections from external parties while grappling with numerous trade debts owed to creditors, technical partners, and aviation experts worldwide.
Financial Challenges and Insolvency
A 2016 KPMG report commissioned by AMCON revealed that Arik Air was balance-sheet insolvent, with a negative equity value of approximately ₦80 billion and liabilities amounting to ₦289 billion as of December 31, 2016. Further audits by PwC Nigeria confirmed that the airline’s liabilities exceeded its assets as far back as 2014.
“By December 2016, Arik’s negative shareholder capital was ₦139 billion, almost equivalent to its debt to AMCON,” Nwauzor explained.
The airline’s financial troubles date back to its dealings with Union Bank of Nigeria, which initially classified Arik’s loans—amounting to $474 million (about ₦70 billion at the time)—as non-performing. These loans were later sold to AMCON, in compliance with Prudential Guidelines set by the Central Bank of Nigeria (CBN).
Claims by Arik’s Founder
Nwauzor also addressed allegations from Arik’s founder, Johnson Arumemi-Ikhide, who has repeatedly denied the airline defaulted on its loan obligations and criticized AMCON’s receivership as premature.
“These claims are baseless,” Nwauzor remarked. “If the loan was performing, why was it classified as non-performing? Why was it sold and restructured? Mr. Arumemi-Ikhide even agreed to the restructuring terms but failed to meet them.”
He added that multiple banks, including Bank PHB (now Keystone Bank), had also sold Arik’s non-performing loans to AMCON, further confirming the airline’s financial difficulties.
Prolonged Negotiations and Future Considerations
Between 2011 and 2017, AMCON reportedly engaged in extensive negotiations with Arik’s management, offering debt restructuring and reductions. Despite these efforts, the airline repeatedly defaulted on its obligations, leaving AMCON to explore various recovery strategies, including liquidation.
While AMCON has kept the airline operational under receivership, Nwauzor emphasized that the possibility of liquidation remains on the table. “Arik’s insolvency persists, and AMCON has the mandate to make decisions that ensure financial recovery and stability,” he concluded.
This ongoing situation highlights the challenges of managing struggling entities in Nigeria’s aviation sector and the delicate balance between preserving operations and addressing financial realities.
