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Project Financing: FAAN assures banks, contractors of its credit worthiness

Management staff of FAAN and contractors in a group photograph at the dialogue between FAAN, Contractors and Commercial Banks aimed to enhance their operations in project financing held today, Tuesday, December 11, 2018 at the Radisson Hotel, Ikeja.

…Gives a payment tenor of between 90 and 180days

Federal Airports Authority of Nigeria (FAAN) has given the assurance of its credit worthiness to financial houses willing to provide funds for contractors handling its projects. It said any contractor handling its project has a tenor of between 90 and 180 days to get paid

The assurance was given today at a collaborative meeting organised by FAAN for some selected financial houses and FAAN’s contractors.

Managing Director of FAAN, Engr. Saleh Dunoma given the assurance  said the collaboration  is to   develop a financing mechanism for prompt execution of FAAN  projects without impacting negatively on its cash flow.

Dunoma who was represented by the director of engineering services in FAAN, Engr. Salisu Daura said the collaboration was aimed at  developing  a financing mechanism  that would optimize the cash flow of FAAN  as well as providing the much needed funds to enable its contractors access opportunities for working capital enhancement.

He affirmed that the move was in line with the Federal Government’s innovative step at ensuring and encouraging better access to funding for Small and Medium scale Enterprises (SME’s)  to deepen opportunities for Gross Domestic Product (GDP) growth and diversify the  economy

“The objective of the program is to develop a financing mechanism, which optimizes the cash flow of FAAN and at the same time provides the much-needed support to our contractors, to enable them access opportunities for working capital enhancement.

“The scope involves working with selected financial institutions, in order to provide liquidity to our major FAAN Contractors, through direct and contingent funding

“This gathering is in tandem with the Federal Government’s Innovative step at ensuring and encouraging better access to funding especially for Small and Medium scale Enterprises (SME’s) and others, in order to deepen opportunities for Gross Domestic Product (GDP) growth and diversify our economy,” He said.

Speaking with journalists at the venue Engr. Daura explained that FAAN as a service provider in the aviation industry needs a lot of funds to meet up with the demand of quality service  delivery, he however regretted that such funds were not readily available because of lack of the collaboration between the  financial houses and contractors.

Daura who noted that project financing is no longer easy for contractors to come by these days, said, “FAAN as a service provider in the aviation industry in Nigeria must be on its toes to render the services. We have to employ contractors across board. We need these contractors to provide quality services to the travelling public. We also realize that these contractors cannot perform optimally if the are cash starved. That is one of the reasons FAAN is going out of its ways to assure the banks that these contractors have our backings provided they delivered. But that does not exempt the bank  from carrying out their due diligence before advancing any form of credit either in short, medium or long term”

He said with the new move, which though does not stop the banks from carrying out their own diligence on the contractors, funding would no longer be a problem to project financing in FAAN.

Also speaking at the occasion, General Manager Finance, FAAN, Mrs. Funmilayo Olonisakin said the collaboration was put in place to ease cash flow of FAAN and to provide more finance for contractors. “Right now”, she said, “We are opening new terminals and we also need to operate the old ones. The essence of the collaboration is to have funds for the contractors who would help in upgrading the facilities. We want to reassure the public that FAAN is credit worthy. That is why we have put a tenor of between 90 to 180 days. 180 day is the maximum. Between 90 to 180 days we ensure that payments are made to the banks. This would no doubt ease our own cash flow and provide more funds for the contractors”.

Also making his contributions at the meeting a contractor to FAAN,  the Managing Director of Alluvial resources limited,  Otunba Atoyede Oyeleke who lauded the idea as noble and first of its kind in the industry   noted that the package  would ease liquidity problems the contractors are having as well as enhancing productivity of both the contractors and the banks.  He however said if the banks would assist by lower their interest on facilities. Oyeleke who lamented that some banks take as much as 29 per cent on loans besides 2 per cent on facility said no project is profitable operating  with a loan of 30 per cent.  He reasoned that if this is achieved it is going to translate to low cost of doing business in FAAN’

Meanwhile, a banker at the meeting who denied that banks charge outrageous  interest rates said, the interest rates charged by the banks is a reflection of the macro economy situation and also the issue of treasury bills by the Central Bank at a particular time among other things  impact on the lending rate for the banks.

He, however, said the ancillary businesses the banks can get from that business. Banks he said would give more affordable and attractive rates if they are getting more businesses from the file.

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