Foreign airlines trapped funds in Nigeria increases to $743 million

The International Air Transport Association (IATA), the top global airline trade association, has called on the Nigerian government to allow international airlines to repatriate funds trapped in the country.

The association said the number of airlines unable to return from the country rose to $743.7 million in January from $662 million last December.

IATA raised the concern on Tuesday during a courtesy visit to the minister of Aviation, Hadi Sirika, in Abuja.

In his words, the IATA Area Manager, West and Central Africa, Samson Fatokun, who led the team stated that Nigeria has been the country with the highest amount of blocked airline funds in the world for more than a year. He also warned that development could lead to further deterioration of the country.

“IATA and the global airline community are pleased to request your special intervention to resolve the issue of airline blocked funds in Nigeria.

“In January 2023, airlines “blocked funds in Nigeria have increased to $743,721,097 from $662m in January 2023 and $549m in December 2022,” he said.

Mr. Fatokun explained that the increasing number of international airline funds being blocked in Nigeria sends a disturbing message about Foreign Direct Investment (FDI) in the country.

He emphasized that potential investors read from the situation of the airline that may not be able to recover funds from Nigeria, while Nigeria expects more investment.

The group explained that foreign airlines fly to Nigeria under the legal framework of the Bilateral Air Services Agreement (BASA), signed between their country and the Federal Republic of Nigeria.

“It was agreed in BASAS that Nigeria will facilitate the repatriation of airline funds of other parties. Nigeria is violating this contractual obligation by not adequately facilitating the repatriation of airline funds,” said the IATA manager.

Due to the difficulty of repatriation in the repatriation of trapped funds, Mr. Fatokun said some airlines have decided to reduce the number of trips or seats available for sale in the Nigerian market to reduce the amount of funds trapped in Nigeria and its impact. cash flow is the same.

This, he said, has reduced the access of people and cargo to Nigeria, and e-commerce that depends on flights for fast delivery will be affected in the country.

“What’s more, under the law of supply and demand, a reduction in airline inventory in the Nigerian market will result in an increase in fares that will burden the average Nigerian and take air travel out of the reach of many Nigerians,” he said.

Scarcity of FX

In recent months, Nigeria’s foreign exchange crisis has worsened amid a shortage of foreign reserves.

The forex crisis has had a major impact on the aviation sector, especially when domestic and international airlines are also facing an increase in aviation fuel prices.

During an emergency meeting with airline operators, last year, Mr Sirika said, “there is no immediate solution” to the ongoing crisis in the sector because what is affecting the industry is a global problem.

At the time, IATA warned that the number of airlines unable to return from the country continued to rise. This has led some international airlines like Emirates to repeatedly threaten to suspend operations to and from Nigeria.

In an effort to address the situation, the Central Bank of Nigeria (CBN) last August released $265 million to airlines operating in the country to meet outstanding trapped funds from ticket sales.

At the meeting on Tuesday, Susan Akporiaye, the National President of the National Association of Nigerian Travel Agencies (NANTA), also called on Mr. Sirika to facilitate the resolution of the airline’s blocked funds.

He explained that the downstream sector of the airline industry (Travel Agents, Ground Handling Companies) is highly dependent on the capacity of airlines to stay in business.

“If airlines are forced to further reduce capacity, their business will be negatively affected, resulting in job losses. Negative indirect impacts will also affect ground transportation (taxi, car rental), hotels and restaurants,” he said.

In response, Mr. Sirika said Nigeria is committed to the BASA agreement and that the ministry is concerned, and will do his best to resolve the issue of blocked funds as soon as possible.

However, the minister reiterated that the problem of blocked funds lies with the Central Bank of Nigeria.

He urged International Airline Operators to consider when addressing the issue bearing in mind the ripple effect of the COVID-19 and recession on the country’s economy.