By Roland Ohaeri
The International Air Transport Association (IATA) has called on the Nigerian government to prioritize the release of airline funds to forestall stoppage of more airlines’ flights and the negative impact on the Nigerian economy.
IATA made this charge as Emirates announced that it will stop flight services to Lagos and Abuja in Nigeria from September 1, 2022 over $90million unrepatriated funds in Nigeria. Emirates said this is to cut losses. The airline had hinted at reducing weekly frequencies mid-August due to difficulty to access foreign exchange to repatriate its revenue from Nigeria.
Kamil Alawadhi, IATA’s Regional Vice President for Africa and the Middle East, said in a new statement:
“IATA is disappointed that the amount of airline money blocked from repatriation by the Nigerian government grew to $464 million in July. This is airline money and its repatriation is protected by international agreements in which Nigeria participates. IATA’s many warnings that failure to restore timely repatriation will hurt Nigeria with reduced air connectivity are proving true with the withdrawal of Emirates from the market.”
According to him: “Airlines cannot be expected to fly if they cannot realize the revenue from ticket sales. Loss of air connectivity harms the local economy, hurts investor confidence, impacts jobs and peoples livelihoods. It’s time for the Government of Nigeria to prioritize the release of airline funds before more damage is done.”
The vexed issue of trapped airlines’ funds was highlighted at annual general assembly of global airlines in Doha last June, where Nigeria was named as having the bulk of the trapped funds in Africa, and Africa had overall larges share of trapped funds globally.
Mr. Alawadhi lamented that “blocked funds remain an issue in Africa,” as he revealed that Nigeria has the highest amount of blocked funds at $450m, calling on the country to take action to address this challenge. Nigeria has many airlines flying to it from within and outside Africa.
“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,” Mr. Alawadhi lamented.
He added that the top countries in Africa with blocked funds as of May 2022 also include Zimbabwe with $100m blocked funds, Algeria with $96m blocked funds, as well as Eritrea which has blocked $79m, and Ethiopia trapping $75m of airlines’ funds.
Whereas globally, there is a total of $1.6 billion in funds blocked by 20 countries as of April, he noted that 67% of blocked funds are trapped in 12 countries in Africa.
Mr. Alawadhi explained that “cash flow is key for airlines’ business sustainability,” adding that “when airlines are unable to repatriate their funds, it severely impedes their operations and limits the number of markets they can serve.”
The challenge of blocked funds is a strong discouragement for foreign airlines doing business in Africa. The disturbing issue of blocked funds has been adduced to a number of reasons including mismanagement and other economic challenges.
More airlines flying into Nigeria, largely seen as a juicy market, have taken some measures to keep a foot in the Nigerian market, to reduce the effect of inability to repatriate their revenue in US dollars. Although not expected, if the situation worsens, more airlines may pull out completely which could leave travellers to and from Nigeria with limited travel options and non-competitive airline services.