Foreign airlines trapped funds in Nigeria increases to $743 million - IATA

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

The association said the amount airlines have been unable to repatriate from the country rose to $743.7 million in January from $662 million it stood last December.

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

In his remarks, IATA Area Manager, West and Central Africa, Samson Fatokun, who led the team hinted that Nigeria has been the country with the highest amount of airline blocked funds in the world for over a year. He also warned that the development may cause the country more damage.

“IATA and the global airline community will like to appeal for your special intervention for the resolution of airlines` blocked funds issue in Nigeria.

“As of 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 an increasing backlog of international airlines blocked funds in Nigeria sends a disturbing messages about Foreign Direct Investment (FDI) in the country.

He emphasised that potential investors are reading from the plight of airlines that they may not be able to repatriate their funds from Nigeria, at a time when Nigeria is expecting more investments.

The group explained that Foreign airlines fly into Nigeria within the legal framework of the Bilateral Air Service Agreement (BASA), signed between their countries and the Federal Republic of Nigeria.

“It is agreed in those BASAs that Nigeria will facilitate the repatriation of the funds of the other party`s airline. Nigeria flouts this contractual obligation by not facilitating enough the repatriation of airlines’ funds,” the IATA manager said.

Due to the lingering difficulties in the repatriation of trapped funds, Mr Fatokun said some airlines had decided to reduce the number of their trips or seats made available for sale in the Nigerian market to mitigate the increasing backlog of funds trapped in Nigeria and its impact on their cash flow.

This, he said, has reduced person and cargo access to Nigeria, and that e-commerce that relied on aviation for speedy delivery would be impacted in the country.

“Moreover, going by the law of demand and supply, the reduction of airline inventories in the Nigerian market will lead to ticket fare increase which would further burden average Nigerians and take air travel away from the reach of many Nigerians,” he said.

FX Scarcity

In recent months, Nigeria’s foreign exchange crisis has worsened amidst depletion of its foreign reserves.

The forex crisis has significantly impacted the aviation sector, especially when the domestic and international airlines are also faced with increase in aviation fuel price.

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

Within that period, IATA hinted that the amount airlines have been unable to repatriate from the country has been on a steady rise. This prompted some international airlines like Emirates to repeatedly threaten to suspend its operations to and from Nigeria.

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

At the meeting on Tuesday, Susan Akporiaye, the National President of the National Association of Nigeria Travel Agencies (NANTA), also urged Mr Sirika to help facilitate the resolution of airlines’ blocked funds.

She explained that the downstream sector of the aviation industry (Travel Agencies, Ground Handling Companies) rely heavily on airlines’ capacity to grow to remain in business.

“Should the airlines be compelled to further reduce their capacity, those businesses would be negatively impacted, leading to job loss. The negative indirect impact will also affect ground transportation (taxi, car hire), hotels and restaurants output,” she lamented.

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

However, the minister reiterated that the issue of blocked funds sits with the Central Bank of Nigeria.

He urged the International Airline Operators to be considerate when dealing with the issue bearing in mind the ripple effects of COVID-19 and recession on the nation’s economy.