Shutdown Looms, As Nigerian Gov’t Blocks $743 million Belonging To Foreign Airlines

Shutdown Looms, As Nigerian Gov’t Blocks $743 million Belonging To Foreign Airlines

4 mins read

The revenue of foreign airlines blocked from repatriation by the Nigerian government has increased to $743 million as of the end of January 2023.

According to the International Air Transport Association (IATA), the amount rose from $662 million recorded two months ago. 

This was revealed by the International Air Transport Association’s area manager of West and Central Africa, Samson Fatokun, in a letter addressed to the Minister of Aviation, Hadi Sirika. 

At the start of the third quarter last year, the amount of foreign airlines’ revenue trapped within Nigeria was $464 million in July, but in December 2022, it rose to $549 million. 

Recall that last year, some foreign airlines suspended their operations to protest the trapped fund, demanding the release of their revenue in order before resuming services. 

The trap funds are due to the dollar shortage in Nigeria, as the foreign airlines can’t easily access foreign exchange in the official forex market to repatriate their ticket revenue from Nigeria. 

Emirates Airlines and British Airways suspended operations. This forced the Central Bank of Nigeria (CBN) to release $265 million to foreign airlines to encourage the foreign airlines to continue operations. 

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With the trapped funds now up to $743 million – nearing double the $464 million that triggered the protest last year – the Nigerian aviation sector might once again experience another protest from foreign airline operators. 

In the letter, IATA said: “For over a year, Nigeria has been the country with the highest amount of airline-blocked funds in the world. Please find attached the comparative table of airlines’ blocked funds by country. 

“Moreover, as of January 2023, airlines’ blocked funds in Nigeria have increased to $743,721,092 from $662m in January 2023 and $549m in December 2022.” 

IATA said this could affect Foreign Direct Investment (FDI) in Nigeria, as the challenges experienced by foreign airlines are being monitored by investors. 

“Potential investors are reading from the plight of the airlines that they would not be able to repatriate their funds from Nigeria, even at this moment when Nigeria is expecting investments in the concession of some of its prominent airports,” IATA said. 

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The association added: “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 flaunts this contractual obligation by not facilitating enough the repatriation of airlines’ funds.” 

The group explained that should difficulty in repatriating revenue continues, other sectors that depend on the continued operation of foreign airlines could lose revenue and jobs if the foreign airlines decide to reduce their business operation in Nigeria. 

“E-commerce that relies on aviation for speedy delivery will be impacted in Nigeria. 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 will further burden average Nigerians and take air travel away from the reach many Nigerians. 

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“The downstream sector [of] the aviation industry (travel agencies, freight forwarders, ground handling companies) relies heavily on airlines’ capacity to grow or remain in business. Should the airlines be compelled to further reduce their capacity, those businesses would be negatively impacted, leading to job losses. The negative indirect impact will also affect ground transportation (taxi, car hire), hotels and restaurants output,” IATA said.

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