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The Federal Government’s release of the sum of $265million out of the $646 million owed foreign airlines operating in the country to settle part of their outstanding ticket sales is a welcome development. Unarguably, this is the first step towards resolving the lingering challenges in the aviation sector over the inability of foreign airlines to repatriate their ticket sales.
The government should equally make haste to pay the outstanding balance to avoid being threatened again by the airlines. Moving forward, it is not good to be threatened by the airlines before paying them the money accruing from their ticket sales. A breakdown of the $265million shows that the sum of $230million is for Special Foreign Exchange (FX) intervention, while $35million was released through Retail SMIS Auction.
The SMIS is the Secondary Market Interventions earlier put on hold due to the COVID-19 pandemic and dwindling foreign exchange reserves, which, at the time, stood at less than $34 billion. The SMIS window was created by the Central Bank of Nigeria (CBN) for importers to ease pressures faced by businesses in the FX market through sale of foreign currencies to authorised dealers.
Nevertheless, the release of the $265million is a huge relief to the airlines and travellers. To avoid any disruption of service by foreign airlines, the CBN should evolve a seamless plan for the repatriation of funds by the foreign airlines as enjoined by aviation experts.
While releasing the trapped funds, the CBN Director of Corporate Affairs, Mr. Osita Nwanosiobi, said the apex bank was concerned about the unsettled ticket sales and the consequences for the aviation sector, travellers and the image of the country. He also explained that the bank was not against any airline’s plan to repatriate its fund from Nigeria.
Before now, there were concerns over millions of dollars reportedly earned by foreign airline operators in the country, which they could not repatriate due to scarcity of forex. Consequently, some foreign airlines raised their airfares and reduced flights to Nigeria.
While the fund was trapped, foreign airlines threatened to blacklist Nigeria. Some of the airlines, such as Emirates and British Airways, recently moved to suspend flight operations in Nigeria, effective September 1, 2022. British Airways and other airlines also directed their agents in Nigeria to stop selling their tickets amid difficulties in repatriating over $464million ticket sale proceeds to their respective home countries.
The International Air Transportation Association (IATA) had also expressed disappointment over the Federal Government’s inability to enable foreign airlines to repatriate their trapped funds. The high cost of aviation fuel is another threatening challenge for the sector.
The aviation sector is in distress, literally striving to survive. That is why some of the domestic airlines have announced plans to suspend operations if the situation does not improve soon. Some of the domestic airlines have reduced their work force to remain afloat.
Recently, domestic airline operators petitioned the Nigeria Civil Aviation Authority (NCAA) to review the five per cent it currently receives as surcharge, and in its place, adopt a new surcharge of between 25 and 40 per cent on aviation fuel consumption. This is probably the only way they can cope with the rising cost of aviation fuel, put at over N800/litre. Hitherto, it was sold about N250/litre.
Let the Federal Government address the challenges of the aviation sector so that foreign airlines will not contemplate the suspension of their operations in Nigeria. The domestic airlines should be helped to remain in business. The inability of the airlines to access forex may lead to their collapse.
According to IATA, due to forex scarcity in the country, the aviation sector has lost about $700million. About 90,000 jobs in the sectors are said to be at risk. This will worsen the rate of unemployment in the country.
If the government is unable to address the challenges in the sector, it will be hard to attract foreign direct investment, which will further stimulate economic growth. Also, the plan to unveil a new national carrier will not work if the domestic airlines are struggling to survive.
In all, we urge the government to put necessary structures in place that will make Nigeria’s airspace safe and attractive to foreign tourists. Besides, there is need for good corporate governance, which entails putting the right policy and regulatory framework in place in all our local and international airports, in line with the regulations of the International Civil Aviation Organisation (ICAO). Henceforth, foreign airlines should not be allowed to suspend operations on account of unsettled debts.
