The Central Bank of Nigeria (CBN), said it was extending a N500 billion fund meant to stimulate credit to the power and manufacturing sectors to support the beleaguered aviation industry.

Airlines have gone through rapid expansion in recent years and are heavily indebted to the banks, which are just recovering from the impact of a N600 billion bailout last year.

Higher prices for jet fuel have forced some airlines to ground some flights.

“These airlines can now partake from the fund and those that are indebted to banks can refinance their loans and amortise them over a period of 10-15 years,” said the apex bank spokesman, Mohammed Abdullahi.

“This, we believe will help put off a feared financial crisis in the aviation industry,” he said.

Nigeria’s airline industry has become highly competitive in recent years, particularly on domestic routes, with new carriers, such as Arik Air and Dana Air, springing up to compete with older firms such as Aero Contractors and IRS Airlines.

British billionaire Richard Branson’s Virgin Atlantic [VA.UL] has said it is looking to sell its 49 percent stake in Virgin Nigeria, which recently changed its name to Nigerian Eagle Airlines and said last year it needed fresh capital.

The airline, last year suspended its loss-making long haul flights to Britain and South Africa to focus on domestic and regional operations, under pressure from one of its main financial backers, United Bank for Africa.

By Special correspondent