How $450m foreign airlines’ funds accumulated 4 years after FG cleared $600m
There is mounting pressure on the federal government to clear the $450 million foreign airlines’ funds which accumulated four years after the country cleared over $600 million, Daily Trust reports.
It would be recalled that a similar pressure was mounted on the government by foreign carriers, especially the International Air Transport Association (IATA), before the funds made from sales of tickets by airlines were repatriated.
Normally, foreign airlines would sell their tickets in naira while the Central Bank of Nigeria (CBN) would convert the money to dollars for the purpose of repatriation by the airlines.
This is part of the Bilateral Air Services Agreement (BASA) Nigeria signed with the airlines and their countries before they began operating to the country.
Between 2016 and 2017, accumulated funds from sale of tickets could not be repatriated due to scarcity of foreign exchange occasioned by drop in crude oil earnings where Nigeria generates most of its foreign currency from.
The then Director General and CEO of IATA, Alexandre de Juniac, at the 74th Annual General Meeting (AGM) and World Air Transport Summit held in Sydney, Australia, said, “We have had some recent successes. The $600m backlog in Nigeria has been cleared.”
Daily Trust further reports that the majority of over 30 foreign airlines operating to Nigeria, including Emirates, Lufthansa, Turkish, Delta, Egypt Air, KLM, Air France and South African Airways, have their funds stuck in Nigeria.
With the development, there are fears that the funds would continue to increase unless the government begins to service them.
Industry stakeholders say the funds accumulated again because the federal government has failed to service them over time.
As at March, 2022, the total funds was $289m, but three months after, they increased to $450m amid pressure from the airlines.
IATA’S Regional Vice President, Africa and the Middle East, Kamil Al-Awadhi, recalled making several trips to Nigeria to meet with Vice President Yemi Osinbajo on the blocked funds.
He said, “We heard that there is a shortage of dollars. It has been a hectic ride. We met with the vice president. We will keep checking. This is going to damage the image of the country. We are hoping that it will go down well. The figure is huge.”
Other nations with blocked funds are Zimbabwe ($100m); Algeria ($96m) and Ethiopia ($75mn).
Already, Nigerian travellers have started feeling the pinch of the blocked funds as airlines have also blocked low fares on their inventories, thereby increasing the cost of tickets.
A tour operator told our correspondent that buying an economy ticket on any international route was like paying for a business cabin.
He said, “The tickets are just too expensive and I fear for summer travellers except something urgent is done to reduce the blocked funds if not entirely cleared.”
Reduce the funds before electioneering – Expert
Aviation analyst, Mr Olumide Ohunayo, charged the federal government to clear the blocked funds before the 2023 electioneering campaigns kick off when there could be increased pressure on the country’s foreign exchange standing.
According to him, unless the federal government clears the blocked funds, Nigerians will continue to pay for higher flight tickets which are not sustainable.
He said, “I have no fear that we will clear it. We had gone through that stage before and we cleared it. I think the concomitance of these trapped funds would continue to bedevil us even when we clear it. These include the high cost of tickets, connecting airlines or other alliances not accepting naira tickets, making it a bit higher and offering tickets in dollars that can be easily remitted.
“Again, it is imperative to address the trapped funds before the elections, because at that period, almost everybody would focus on that and we expect that funds would be disbursed. Though they would generally deny it, but we know we have a dollarised politics. I think that should be addressed as quickly as possible.”
President of the National Association of Nigerian Travel Agencies (NANTA), Mrs Susan Akporiaye, in a statement, said the current situation posed a threat to the industry, and therefore appealed to the CBN, the Ministry of Finance and the office of the vice president to speedily intervene.
She said, “NANTA as a strategic concerned partner in the downstream aviation sector has over the years appealed to the government through the Central Bank of Nigeria and also through the Ministry of Aviation to see to the possibility of reducing the humongous trapped funds which at the month of May, 2022, is estimated at well over $450m.
“The current situation presents a real threat to the industry and the continuity of our business as travel professionals, bearing in mind the potential jobs losses and the attendant national economic losses as we are just gradually coming out of the pandemic era.”