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Published On: Thu, Feb 8th, 2018

National carrier: FEC drops Lufthansa as consultants

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• Approves AMG, Avian Solution as replacement

By Lawrence Olaoye

The Federal Executive Council (FEC) has approved the proposal for the substitution of Messrs Lufthansa Consulting with AMG (Air Management Group) and Avian Solution GE to join others in providing transaction advisory for the proposed national carrier.
The Council chaired by President Muhammadu Buhari also approved the sum of N483.210 million for the procurement of patrol vehicles for the Nigeria Immigration Services.
This came as the Council also okay the reappointment of consortium of banks for the management of the $2.5 billion Eurobond.
Briefing newsmen after a long weekly FEC meeting yesterday, Minister of State for Aviation, Hadi Sirika, explained that the consultancy cost still stands at the sum of N341.200 million.
On why Lufthansa Consultancy was dropped, he said “fundamentally, there are two reasons. One, that particular member of consortium, Lufthansa Consulting, in the wisdom of the council we felt that consulting is an appendage of the airline group and that might bring conflict of interests. Because Lufthansa themselves may want to join, partner or help in the process during the procurement phase of this transaction. And of course they are members of Star Alliance, members of One World and members of Sky team, others may feel shortchanged the person advising us set up this airline which is going to be private sector driven, is a member of an alliance which they are not part of.
Secondly, since we appointed the transactions advisers in various aviation projects in May 2017, about six of them, five of them have gone ahead, the one for construction of airport, the one for aeropolise and the one for MRO and so on and so forth. Most of them have produced the outline business cases and we are on our way to doing the full business case. However, Lufthansa Consulting, did not accept the offer neither have they signed any contract. They countered the offer instead. One of the conditions they put is that we should pay them 75 percent of the total cost, which is against our procurement law, they also wanted us to change the contract from Naira to Euro. They also wanted us to open an Escrow account in an internationally recognized bank outside the country where the money will be domiciled etc.
So we found that that was against our procurement law and we have been going back and forth for seven months to see whether they can accept the terms of conditions and even if they had done at a time and they didn’t uptill today. We couldn’t continue with them because it will compromise the system which we thought should be transparent. So that is why we sought the approval of council to substitute them with a neutral person and someone who will accept the terms and conditions given, to accept payment in Naira, to accept 15 percent payment of the entire cost as against 75 per cent etc.”
Minister of Interior, Abdulrahman Dambazau, who spoke on procurement for the patrol vehicles for Immigration, said “For the first category of procurement including five percent VAT is N14.490 million and second category which is 25 of them is N8.347,500
The total including painting in immigration colours N4.095 million, totaling N483.210 million.”
Minister of Finance, Kemi Adeosun, said the government has announced the appointment of a consortium of banks including Citi Group, Standard Chartered, StanbicIBTC, Whitten-Case and African Practice to handle the $2.5b Eurobond.
While speaking on the impact of the use of the Proceeds of the USD500 million issued in November 2017, she disclosed that the proceeds about N162.50 billion were used to redeem Nigerian Treasury Bills (NTBs) which matured in December 2017.
“The immediate impact was a significant drop in the Bid Rates at the Auctions of both NTBs and FGN Bonds. In December 2017 and January 2018”
The NTBs, she disclosed dropped from about 16% to 13%, while the Bonds dropped from about 16-16.50% to 13.50%
According to her, this “translates to savings for Government on new borrowing while also making the cost of borrowing for the real sector cheaper since the sovereign rate serves as a benchmark for other borrowers
The government announced potential Savings on the proposed USD2.5 billion Refinancing, estimated at N64b per annum
“The estimated proceeds of the N762.5 billion will be used to redeem NTBs.
“At estimated current NTB rates of 15% (following mop-up operations by the CBN), the savings from the refinancing of N762.5 billion of Domestic Debt using external capital raising is about N64 billion per annum,” she stressed.

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