Nigeria is getting back to talking terms with international airlines after Abuja announced a decision to release $265 million of $465 million in airfares, which foreign carriers had been prevented from repatriating out of the country.
The move, welcomed by IATA, averted a mounting crisis with international airlines. Announced over the weekend by the Central Bank of Nigeria (CBN), the decision prompted Emirates, which on August 18, had threatened to withdraw all services to Nigeria by September 1, to announce its own decision to reinstate four out of its 14 flights to Lagos starting September 11.
But the respite might be short-lived as the carrier, which at the end of July had $85 million trapped in the West African country, informed the travel trade that services beyond September 30, would be subject to further clarification. Emirates’ blocked funds in Nigeria were accumulating at a rate of $ 10 million per month. It was not immediately clear how much of the $265 million had been allocated to the carrier.
IATA welcomed Nigeria’s decision but urged authorities to work towards releasing the remaining $200m. The outstanding balance in blocked airline funds in Nigeria was $465 million at the end of July 2022.
“IATA welcomes the Nigerian Government’s release of $265m of airlines’ blocked funds. We will continue to engage with it on expediting the release of the remaining amount so that airlines can continue providing the connectivity Nigeria requires without disrupting and harming its economy and jobs,” said Kamil Alawadhi, IATA’s Regional Vice President of Africa & Middle East.
“We encourage other countries, in Africa and elsewhere, that are blocking the repatriation of foreign airlines’ funds, to follow Nigeria’s example and release the money they are withholding. Without it, airlines cannot afford to serve those countries,” Alawadhi said in reference to Zimbabwe which owes airlines $100 million, Algeria $96 million, Eritrea $79 million, and Ethiopia $75m.
Alawadhi added that while IATA “speaks and leads the industry on matters of common interest,” and “cannot speak for individual airlines, we hope the release of blocked funds with assurances and safeguards to prevent a recurrence, will persuade affected carriers to continue serving Nigeria.”
IATA has been particularly concerned about blocked funds because the issue affects foreign carriers operating in a particular market and has the potential to distort competition. (Venezuela is another blocked funds culprit)
It had been feared that Emirates’ decision to halt services to Nigeria, would trigger similar action by other airlines. The carrier said back then that it had not made any progress in “efforts to engage with the relevant authorities in Nigeria over the issue.”
“Therefore, Emirates has taken the difficult decision to suspend all flights to and from Nigeria, effective 1 September 2022, to limit further losses and impact on our operational costs that continue to accumulate in the market,” it said in the statement of August 18.
IATA said then that was “disappointed that the amount of airline money blocked from repatriation by the Nigerian government grew to $465 million in July. This is airline money and its repatriation is protected by international agreements in which Nigeria participates,” Alawadhi said in reaction.
Alawadhi said earlier cautionary statements by the lobby about the likely consequences of blocking funds, were now coming to pass for Nigeria. “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. 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, and impacts jobs and people’s livelihoods. It’s time for the government of Nigeria to prioritize the release of airline funds before more damage is done,” he added.
Nigeria introduced tight exchange controls intended to stem the hemorrhage of foreign currency, after a plunge in oil production which accounted for 90% of export earnings.