Nigeria risks loss of revenue from foreign airlines over $717.4m trapped funds

THE Nigerian government risks losing revenue from foreign airline operators if it fails to resolve the crisis of $717.4 million funds belonging to the airlines but trapped with the Central Bank of Nigeria (CBN).

According to available data, the aviation industry generally contributes 4 per cent to the gross domestic product (GDP) with about 200,000 jobs.

Last year, Emirates Airlines announced the suspension of all its flights in and out of Nigeria over its funds trapped in Nigeria.

According to the airline, its inability to repatriate its earnings led to the suspension of its operation in the country indefinitely, starting September 1, 2022.

Commenting on the implications of the trapped funds, an aviation consultant, John Ojikutu, told The ICIR of the fear that foreign airlines operating in the country might leave if their trapped funds were not addressed.

Ojikutu said, “The wider implication is services withdrawal by the foreign airlines, resulting in the reduction of their flights and subsequent reductions in our forex earnings, which form over 70 per cent of our earnings in commercial aviation.

“If there is such reduction, there would be subsidies or intervention for sustaining the local operations. Should there be a scarcity of dollars for the exchange of the foreign airlines’ trapped monies? Capital no!”

He further said that foreign airlines pay in dollars for services rendered by government agencies like the Federal Airport Authority of Nigeria (FAAN) and Nigeria Air Management Authority (NAMA), and private services providers like caterers and fuel marketers.

The revenues accruing from these services are estimated at about $2.5 billion annually.

Worried, the Senate had urged the CBN to release the trapped funds to the owner airlines.

National Assembly Complex
National Assembly complex

The Senate had also asked the CBN to allocate $25 million to airlines operating in Nigeria at its bi-weekly dollar auction.

The resolutions were sequel to the consideration and adoption of a motion titled, ‘Current Issues on Airlines Blocked Funds in Nigeria’, sponsored by Biodun Olujimi, chairman of the Senate Committee on Aviation.

Moving the motion, the vice chairman of the committee, Bala Na’Allah, who represented Olujimi, informed that since January 2021, Nigeria has been the most challenging country in the world for airlines in repatriating funds to support their operation.

He said, “In February, Nigeria alone accounted for 44 per cent of total airlines blocked funds in the entire world.”

“The total airlines blocked funds in Nigeria as of March 2023 amounted to $717,478,606, comprising matured bids that the CBN is yet to deliver, bids yet to mature and cash balances in airlines’ accounts for repatriation.”

“The matured bids not delivered by the CBN amounted to $186.5 million, amounting to 26 per cent of total blocked funds, while three stakeholders (IATA, Qatar Airways, and Ethiopian Airlines) accounted for 57 per cent of total blocked funds.”

He stressed that a review of airlines’ blocked funds in Nigeria in the last six months showed an average month-on-month increase of $49.3 million.

“The consequence of these blocked funds is that cheap tickets are not available in Nigeria because taxes and inflation would have eroded the profit when the funds are kept for a very long time,” Na’Allah said.






     

     

    He added that trapped funds would make tickets very expensive and limited while neighbouring countries would get the tickets cheaply as they pay airlines promptly to enable them to repatriate their funds on time.

    In their contributions, the senators supported the motion and voted to approve the prayers when they were put to voice vote by the Senate president, Ahmad Lawan.

    They called on the Federal government to address the protracted problem of trapped airline funds in Nigeria.

    They also urged President Muhammadu Buhari to direct the CBN governor, Godwin Emefiele, to release the funds to the affected airlines, and appealed to the airlines operating in the country not to withdraw their services while efforts are ongoing to resolve the issue.

    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.

    Join the ICIR WhatsApp channel for in-depth reports on the economy, politics and governance, and investigative reports.

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