Barring a quick intervention from the Federal Government, air travellers, and the industry could be jolted in the days ahead as the unrepatriated funds for foreign airlines accruing from sales of flight tickets in local currencies hit the $600m mark at the end of June.
This worrisome development has already elicited serious concerns from captains of the aviation industry, business analysts, as well as travel agencies, who have called for swift action.
Foreign airlines have equally warned of dire consequences should the stuck funds not be freed sooner than later.
The experts urged the Central Bank of Nigeria (CBN) to wake up to its responsibilities and place the foreign airlines on the cash-call priority list, as a critical service provider to the Nigerian economy.
Findings by The Guardian showed that the stuck fund was in excess of $800 million in November 2021. It was brought down to about $283 million as at March this year, further increased to $450 million in May, and according to estimates, has now reached about $600 million as at June ending.
Though not peculiar nor new to Nigeria, the aviation industry was in similar condition in 2016 when foreign airlines were unable to pull out funds from the official window, hence trapped funds rose to $600 million (about N120 billion). That led a couple of foreign airlines to exit the Nigerian route at that trying time.
The International Air Transport Association (IATA), the clearing house for over 280 airlines globally, had also recently raised the alarm over the steady rise in the amount of unrepatriated funds in Nigeria and other countries.
Other countries in Africa that hold on to the huge amounts of airlines’ revenues include Zimbabwe – $100 million; Algeria – $96 million; Eritrea – $79 million and Ethiopia, $75 million. IATA noted, however, that the trapped fund in Nigeria was about 25 per cent of similar funds stuck in other countries as at April.
About this time in 2016, foreign airlines’ accumulated stuck fund reached a record high of $600 million. At the time, authorities were apt to blame the global slump in the price of crude oil and attendant decline in foreign reserve. More so, it was at the time a fairly new administration was still trying to find its feet in the economic puddle.
Fast-forward to 2022, the rack-up is back to the 2016 threshold. And quite different this time, is the boom in the oil market with the price of crude oil now over $110/barrel, though weaker value of Naira to the Dollar, and a reason for both airlines and travel agencies to be worried over the backlog.
Last November, foreign airlines operating in and out of Nigeria had taken protests to the CBN over difficulties in repatriating accumulated funds and soon got reprieve. Now, they are back on the curve.
According to The Guardian, the foreign airlines are most worried because they are just recovering from the pandemic, racking up debts and cash crunch, and in dire need of all the funds they can rake in to sustain operations.
Experts noted that the consequences of the challenge would be felt, in the immediate, as a heavy toll on air travellers. Besides the foreign airlines withdrawing services in extreme cases, the immediate effects will be on airfares, and the travel agencies are already feeling the pinch.
In the November episode, foreign airlines had adjusted the Rate of Exchange (RoE) from N411 to N450, raising airfares some notches to mitigate losses of having funds tied down in the economy. The add-on cost to be passed to air travellers this time around, is yet undecided.
President of the National Association of Nigerian Travel Agencies (NANTA), Susan Akporiaye, was however certain that the development is a bad omen for the industry and its operators.
Though the problem is not new, Akporiaye noted that NANTA had consistently appealed to the government to prioritise repatriation of airlines’ funds as a going concern. She added that the current situation presents a real threat to the industry and the continuity of their businesses as travel professionals.
“The foreign airlines may resort to taking out lower inventory in the system and resulting in high cost of tickets from the Nigerian market. For instance, a six-hour trip to London may attract a fare rate of about $2000 or more and also encourage tickets sold outside the country to flood Nigeria, thus affecting the survival of Nigerian travel agents and consequent loss of taxes and levies from such transactions,” Akporiaye said.
The NANTA president noted that her thousands of members remain patriotic and have represented the country well in the global travel industry and rightly felt disturbed that Nigeria is on the brink of a wrong narrative at the just-concluded IATA Annual General Meeting in Doha, Qatar.
Chief Executive Officer of Finchglow Holdings, Bankole Bernard, reckoned that the concerns raised by the foreign airlines were genuine and deserving of urgent attention.
