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Business News of Monday, 20 June 2022

Source: www.thisdaylive.com

At $450mn, Nigeria owes 25% of global airlines’ blocked fund, says IATA

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The International Air Transport Association (IATA) has disclosed that airline unremitted revenues from Nigeria (known as blocked funds) have risen to $450 million, representing 25 percent of the total amount of international carriers’ funds held back by central banks of many countries put at $1.6 billion by end of April 2022.

IATA Regional Vice-President, Africa, and the Middle East, Kamil Alawadhi who made this known yesterday in Doha, Qatar, at the 78th IATA Annual General Meeting and World Air Transport Summit, said airfares charged by international carriers are three times higher than what obtained in other countries that do not retain airlines’ revenues and expressed fear that the fares might continue to rise until Nigerians would not be able to afford international travel and that would eventually weaken the nation’s economy.

Other countries in Africa that hold on to the huge amount of airlines’ revenues include Zimbabwe – $100 million; Algeria – $96 million; Eritrea – $79 million and Ethiopia, $75 million.

Alawadhi explained that airlines were charging higher fares to Nigeria so that they could make a profit from one leg of the trip, as most trips are charged on a return ticket.

For example, if a passenger buys an Emirates ticket in Dubai to travel to Nigeria, the payment is fully received by the airline, but if a passenger buys a similar ticket from Lagos to Dubai, the money is allegedly held down by the Central Bank of Nigeria, so the airline would charge a higher fare in order to make profit from tickets bought outside Nigeria.

Alawadhi said that although Nigeria was the biggest economy in Africa and also a major oil producer, it was bogged down economically by its depreciating currency, hence the inability of the West African nation to remit airline earnings.

According to him, some other countries may have other reasons why they are unable to remit such funds, including political turmoil.

He further said IATA would go to Nigeria to renew negotiation for the remittance of the funds.
“The continuous holding of airlines funds and the high fares charged Nigerian passengers would eventually damage Nigeria down the road. We are not expecting that Nigeria will pay the money in one single shot, but it should start paying the money because blocked funds will continue to accrue as traffic goes up.

“Average Nigerian traveller is paying the price, as airfares in Nigeria have increased; so it is not helping the average Nigerian to travel. The price (fares) is two to three times higher. It will come to a time Nigerians will not be able to travel. It will come to a time it will collapse Nigeria’s economy.

“I don’t think Nigeria is intentionally trying to hold back the funds, but every central bank of any nation has its priorities; so maybe aviation is not Nigeria’s priority. Nigeria should make aviation its priority so that it would pay airlines their money.

“Airfares will continue to go up. Airlines cannot break even if they sell tickets at low fares because they operate to make profits. I am heading an airline I will operate a flight almost certain that I will make a profit. The only way to operate in Nigeria is to put up the price so that Nigerian passengers will pay for the ticket,” the Regional IATA Vice-President said.

Reiterating the importance of air travel, Alawadhi said connectivity was precious and noted that the COVID-19 pandemic has demonstrated that everybody suffers when aviation stops.

“A financially viable air transport sector supports jobs and must be a driving force for Africa and Middle East economic recovery from CONVID-19. A priority is releasing blocked funds. As of April, globally, there is a total of $1.6 billion in funds blocked by 20 countries worldwide.

“Of this, 67 percent is blocked in Africa for a total of $1 billion, tied up in 12 African countries. Zooming a little more, Nigeria alone is holding back $450 million. It is the most amount blocked by any single African country, and the amount is rising every week.

“Cash flow is key to airlines’ business sustainability-when airlines are unable to repatriate their funds, it severely impedes their operations and limits the number of markets they can serve,” he said.

He also stated that the consequence of reduced air connectivity includes the erosion of that country’s competitiveness, diminished investor confidence, and reputational harm caused by a perception that it is a high-risk place to do business.

“Strong connectivity is an economic enabler and generates considerable economic and social benefits. We call on the government to prioritise aviation in the access to foreign exchange on the basis that air connectivity is a vital key economic catalyst for the country,” Alawadhi said.