The inability of foreign airlines operating in Nigeria to repatriate their trapped $800 million from sales of flight tickets is causing disquiet in the aviation sector. Not even the recent release of $61 million by the federal government to pay the airlines will resolve the matter because they deem such amount as paltry and inadequate. The airlines have threatened to review their flight operations or exit the country like Emirates and Etihad. The only way the government can stop their imminent exit is to ensure that they repatriate their trapped funds.
Their recent meeting with the Minister of Aviation and Aerospace Development, Festus Keyamo, could not resolve the matter. The President of the Association and Representative of International carriers in Nigeria, Kingsley Nwokoma, explained that the $61 million released by the government was too insignificant to offset the trapped funds.
According to the International Air Transport Association (IATA), as of August 2023, Nigeria accounted for a substantial amount of $783 million of airlines’ blocked funds. For example, in July 2022, it stood at $462million, an increase of $14million from what it was in May 2022. The amount has since surpassed the $783million.This is despite recent effort to alleviate the situation with the release of $61million, which represents less than 10 per cent of the trapped funds reportedly domiciled in some commercial banks in the country.
Since 2022, foreign airlines operating in Nigeria had bemoaned their inability to repatriate their trapped funds. Some of them have blocked the sale of cheap tickets, known as low inventories, leaving costly tickets or high inventories to be sold in naira only, while the low ticket inventories on most international carriers’ websites can only be bought with dollar cards. There are fears that some of the airlines may join Emirates and Emirates in withdrawing their services from Nigeria if the matter is not quickly resolved.
Although the federal government is facing acute dollar shortage, it should have a realistic plan to offset the trapped funds. While it is the convention for international carriers’ operators to price and sell air tickets in the local currency of the country they operate, they also need to repatriate such funds in foreign currency, especially the US dollar. The practice is in line with the Bilateral Air Services Agreement (BASA).
BASA provides that each designated airline “shall have the right to convert and remit to its country on demand, local revenues in excess of sums locally disbursed.” Conversion and remittance are permitted without delay in accordance with the existing foreign exchange (FX) regulations. Due to the scarcity of forex and other constraints, these airlines could not repatriate their trapped funds.
Globally, about $1.6 billion funds were either blocked or trapped by 20 countries, and about 67 per cent of the trapped funds totaling $1trillion came from 12 countries, mostly from Africa. The affected countries are Ethiopia ($75m), Eritrea ($79m), Algeria ($96m), and Zimbabwe ($100m). But as at May 2022, Nigeria was top of the countries where international carriers’ funds were trapped in Africa, with no fewer than $450million or about 25 per cent of the unpaid funds.
No doubt, this hampers the economy and makes international travels frustrating to most Nigerians. Many Nigerian travelers now pass through Ghana, Togo and Benin Republic to connect international flights. Unfortunately, Nigerians now pay higher fares than passengers in other countries.
Beyond paying the bulk of the debt, there are other ways to resolve the problem. The foreign airlines can embrace “Agenda Item 39” of the International Civil Aviation Organisation (ICAO), which provides that where airlines have significant local currency amount that they are unable to convert and repatriate, they should seek innovative ways to use those funds, perhaps collaborate with local organisations that are interested in buying some of the airlines’ local funds.
Also, the airlines can use the trapped funds to pay airport fees, ATC charges, aviation fuel charges, ground handling, catering, and others, through the use of local currency. However, the government should quickly enable the airlines repatriate their trapped funds.
About 80 per cent of Nigeria’s aviation earnings could be threatened if the matter is not seamlessly resolved. Currently, the aviation sector is estimated to add about $600 million to Nigeria’s Gross Domestic Product (GDP). Foreign tourists contribute more than $1billion to the GDP. There are about 241,000 jobs opportunities in the sector. The sector makes an average of $4million from landing and parking charges daily from foreign carriers, in addition to other sundry charges from International flights.
Figures from the Nigeria Civil Aviation Authority (NCAA) showed that in 2022, 26 foreign airlines carried out a total of 13,003 operations to and from Nigeria, with over 4.4 million passengers traveling on international flights. Besides, leading airports in the country recorded the highest international traffic in 2023. If more foreign airlines leave the country as being threatened, it will not augur well for the aviation sector. The federal government should halt further exit of foreign airlines from Nigeria by offsetting their trapped funds without much delay.