The Nigerian government has increased the amount of foreign airlines’ earnings that cannot be repatriated to $743 million from $662 million in January 2023.
This is according to a letter seen on Tuesday from the International Air Transport Association (IATA).
The letter was addressed to the minister of aviation, Hadi Sirika, and signed by Samson Fatokun, the association’s West and Central Africa area manager.
The air transport association and the worldwide airline community appealed to the federal government requesting a novel approach for the unblocking of airlines’ cash in the country.
“Nigeria has been the country with the biggest quantity of airline-blocked funds for more than a year. “You find attached a table comparing prohibited airline funds per country,” the letter states.
Meanwhile, airlines’ blocked funds in Nigeria climbed to $743,721,092 as of January 2023, up from $662m in January 2023 and $549m in December 2022.
When the amount climbed from $450 million in May 2022 to $464 million in July of the same year, the trapped monies have been linked to some of the significant difficulties in Nigeria’s aviation sector.
In an effort to recoup lost revenue from the previous year, Emirates Airlines paused its flying operations to Nigeria, but resumed regular passenger flights in December 2022.
In a similar manner, British Airlines (BA) closed inventory on Nigeria in the global distribution system (GDS), preventing local travel agencies from making reservations through their respective booking portals.
The Central Bank of Nigeria (CBN) issued $265 million to foreign airlines operating in Nigeria to settle outstanding ticket sales after a series of meetings with government officials aimed at resolving the standoff.
IATA stated in a letter dated Tuesday that the growing backlog of multinational airlines’ frozen funds in Nigeria sends a powerful message against foreign direct investment (FDI) in Nigeria.
“Potential investors are deducing from the condition of the airlines that they would not be able to repatriate their assets from Nigeria, even at a time when Nigeria is anticipating investments in the concession of several of its major airports,” the organization stated.
“International airlines operate into Nigeria pursuant to the bilateral air service agreement (BASA) negotiated between their respective nations and the Federal Republic of Nigeria. These BASAs stipulate that Nigeria will facilitate the repatriation of the funds of the opposing airline. This contractual commitment is disregarded by Nigeria, which does not facilitate the repatriation of airline funds adequately.”
According to the union, in order to alleviate the mounting backlog of their funds in Nigeria and its influence on their cash flow, some airlines have been forced to restrict their frequencies or the number of seats made available for sale on the Nigerian market.
IATA explains that this mitigation measure restricts freight and passenger access to Nigeria.
“In Nigeria, e-commerce that relies on aviation for rapid delivery may be disrupted. Moreover, according to the law of supply and demand, the reduction of airline stocks on the Nigerian market would lead to an increase in ticket prices, which will place air travel out of reach for many Nigerians.
“The aviation industry’s downstream sector (travel agents, freight forwarders, ground handling businesses) relies greatly on airlines’ capacity to expand or remain in operation. If airlines were required to lower their capacity further, these firms would be badly affected, resulting in job losses. The indirect negative impact will also influence the output of ground transportation (taxi, auto rental), hotels, and restaurants.
IATA consequently urged Sirika to ensure that the airlines’ stalled money be cleared in full before her administration leaves office.