‘80% of Nigeria’s aviation earnings threatened by foreign airlines exit threats’

NIGERIA may lose 80 per cent of its earnings from the aviation sector as foreign airlines continue their threats to exit the country.

Currently, the air transport industry, including airlines and its supply chain, adds $600 million or 0.04 percent to the GDP in Nigeria. Spending by foreign tourists supports a further $1.1 billion of GDP, totaling $1.7 billion. The ripple effect is enormous with 241,000 jobs supported by the air transport sector.

“There are serious implications of foreign airlines leaving Nigeria. 80 per cent of Nigeria’s earnings in commercial aviation will be gone. To understand the implication of the threats to the economy, look at the annual average earnings of $100 per passenger on 1.5 million passengers, $4,000/flight on 20,000 flights for landing and parking, and other services. All these amounts to about   $230million  or  N170 billion and are paid to the Federal Airport Authority of Nigeria-FAAN alone and don’t include earnings from domestic flights and domestic passenger services,” former Airport commandant at Murtala Mohammed International Airport and aviation security expert, John Ojikutu, told The ICIR. 

Already, key players in the foreign aviation sectors have threatened to pull out their services from Nigeria due to the lingering unpaid trapped funds in Nigeria.

As of December, the regional vice president of the International Air Transport Association (IATA) for the Middle East and Africa, Khalil Al-Awhadi, had at the 2023 Global Media Day Press conference in Switzerland put the accumulated trapped funds in Nigeria at $792 million which made Nigeria the highest indebted nation to the foreign carriers globally.

Aviation analysts said the government must ensure international commercial aviation threats don’t materialize.

Ojikutu, who spoke further on this, suggested the sector’s audit as a key foreign exchange earner for the government to maximize its impact on Nigeria’s currency market.

He questioned trapped funds in the sector, noting that the sector is a top-dollar earning agency, but lacks transparency.

“For the records, the sector makes an average of $4,000 landing/parking charges on about 40,000 institutional flights alongside $1/kg on about 500,000kg cargo annually. There is also a payment of $100 for each two million average international passengers. Nigeria Airspace Management Agency (NAMA) average of about $500/flight navigational charges on about 40,000 international flights (should be questioned), “he stressed.

Despite the Nigerian government’s efforts to clear the backlog of foreign exchange, the naira continues to depreciate against the dollar, raising concerns about foreign exchange scarcity and supply challenges on the part of the government.

For instance, the naira depreciated against the United States dollar, routing to N902.45/$1 on Friday, January 19, as foreign exchange (FX) demand outweighed supply, despite the Central Bank of Nigeria’s (CBN) clearance of $2bn FX backlog.

The ICIR analysis of transactions in the FX market in the just concluded week shows that the naira depreciated against the dollar by 1.34 per cent at the official market and 6.62 per cent at the black market.

At the official market, the naira, which opened on Monday, January 15, at N890.54/$, closed at N902.45/$1 on Friday, January 19.

Similarly, at the black market, the naira opened at N1,269/$1 and closed at N1,353/$1, respectively.

During the week, CBN announced that it had cleared about $2 billion of FX backlog across the manufacturing, aviation, and petroleum sectors.

Economy watchers said this development would not solve the foreign exchange scarcity concerns, except there’s an increase in supply to the economy.

    Former Central Bank of Nigeria’s Governor Sanusi Lamido Sanusi questioned Nigeria’s dollar scarcity despite oil subsidy removal since the current Bola Tinubu-led administration.

    “We are no longer paying the subsidy on Petroleum products, so where are the dollars? Sanusi asked at an event organised by the Bank Directors Association of Nigeria.

    The former Chairman of the Major Oil Marketers Association of Nigeria (MOMAN) Adetunji Oyebanji, who spoke to The ICIR said the clearance of foreign exchange backlog by the government is not impacting the FX market.

    “There are still lots of outstanding debts to the sector. The gradual clearance has not made the needed impact. The country needs enough foreign exchange from various sectors of the economy to strengthen the naira,” he said.

    Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

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