Forex crisis: Trapped funds hit $567m as FG meets airlines

The Federal Government is to meet foreign airlines operating in Nigeria over issues bordering on the trapped funds belonging to the international carriers, which has risen to over $567m, it was learnt on Sunday.

Dubai-based Emirates Airlines had on Thursday announced the suspension of its flight operations in Nigeria indefinitely due to the blocked funds. Operators also stated that other international airlines could halt services too.

Data obtained on Sunday from the International Air Transport Association, the umbrella body for airlines globally, showed that as of September 2022, the highest amount of blocked funds ($567m) belonging to foreign carriers was in Nigeria.

IATA said, “The industry’s blocked funds have increased by 27 per cent in the last six months, reaching the amount of $1.851bn.

“The total amount blocked is higher, mainly driven by two factors: increase of sales across most markets and deterioration in Nigeria, Pakistan, Egypt, Russia and Ukraine and two new countries.”

It added, “The top country with blocked funds is Nigeria where airlines are currently holding a balance of $567m.”

But the President,  Association of Foreign Airlines and Representatives in Nigeria, Kingsley Nwokoma, stated on Sunday that the debts had risen above what was recorded in September.

He told our correspondent that it had been rising by the minute due to ticket sales, adding that the Federal Government had not been able to sit down with airlines on how to clear the debts.

“As I’m talking to you now, tickets are being sold every minute and do you know what that means? It means that there will be more blocked and trapped funds. The government has not been able to agree on the scheme of payment.

“Every day the funds are increasing and if we have not sat down to agree on how to clear the debt, whether monthly or quarterly, then we are back to square one.

“If you owe me a debt and the debt is not increasing, and you are paying me off, that’s different from when the debt is rising at every minute. Moreover, there is no earlier pact on how the payment will be made.”

Foreign airlines

When asked to state the specific international carriers that were being owed and the amount, Nwokeoma replied, “All the foreign airlines are being owed.

“It is just that some are more visible than others because of their many frequencies, such as Emirates Airlines, Qatar Airlines, Turkish Airlines, Virgin, British Airways, etc. The more frequencies and operations, the more you are owed.”

He said the indebtedness of Nigeria to foreign airlines was far higher than what other nations were owing the international carriers.

Nwokeoma said, “These debts have been piling up for years, it did not start yesterday. If other countries are like us, then there will be no operations worldwide, because these monies are needed to pay workers, aircraft manufacturers, and maintenance, among others.

“If the money is not being paid, safety might be compromised and that is why the airlines are ready to stop operations in order to avert such compromise. And I can tell you that more airlines may be forced to stop operations.”

When contacted and asked what was being done by the Federal Ministry of Aviation, the Special Assistant to the Minister of Aviation, James Odaudu, said the minister would engage the airlines.

“Definitely the minister will reach out to them and to the CBN (Central Bank of Nigeria), as well as whoever has a role to play in getting the funds released,” he stated.

The media aide added, “You know he has always been concerned about it and has always stood up to the challenge. The ministry is no longer comfortable with this issue.”Related News

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He, however, pointed out that the release of funds was not within the ministry’s purview, adding, “but, of course, when airlines begin to shut down operations it must be a thing of concern to us as a ministry in charge of aviation.”

Odaudu added, “This especially when we know full well that it is going to affect a lot of Nigerians, as some have already booked their trips and are going to have it cancelled, as well as those who have plans to use that airline to travel.

“So I don’t think suspending flights is the solution to the matter, especially as the government is not sleeping on the issue. The CBN has released some money and has also committed to releasing more.

“The bank is taking steps to address the matter and so I don’t think it is fair enough to begin to shut down operations. It is not fair on Nigerians.”

CBN’s intervention

Meanwhile, foreign airlines will soon begin to receive the second batch of forex payments approved by the CBN, according to officials close to the development.

The CBN had about two weeks ago approved $120m for foreign airlines. This came barely three months after the apex bank released $265m to enable the foreign carriers to repatriate their ticket sales proceeds.

Sources close to the situation said some airlines had started receiving the payment.

“Emirates, for example, has received the second batch of payment. It, however, came after they had suspended flights to Nigeria,” a source close to the situation disclosed.

“Meanwhile, Emirates and the Federal Government are already in discussion with a view to getting the Dubai-based airline to reinstate its services,” the official added.

Aviation stakeholders have advised the Federal Government to find an amicable solution to the forex crisis challenge facing foreign airlines.

The country is currently trapped in a forex scarcity problem that has affected virtually all sectors of the economy.

Nigeria has been grappling with stiff foreign exchange crisis for several months, a development that has led to crash of the naira against the United States dollar, particularly at the parallel market.

The dollar crossed over the N800 mark last week and has maintained its upward movement against the naira, especially after the CBN recently announced that it would redesign the local currency.

Although the dollar goes for around N430 at the official rate, accessing it at the rate has never been easy for those who need forex, which has piled demand pressure on the parallel market.

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The limited forex has also impeded the ability of the CBN to make the dollar available to the foreign airlines for them to repatriate to their respective home countries.

The pressure on the demand for forex heightened recently when the apex bank said it would redesign the naira, as wealthy individuals bought dollar in order to change their currencies, hence leading to jump in forex rate.

Economists at Financial Derivatives Company, a renowned economic think-tank, stated that the naira witnessed a “free plunge in the parallel market following the announcement.”

They added, “The exchange rate has been severely impacted. This new development could heighten the upside risks to inflation in the near to medium term.”