The International Air Transport Association (IATA), a Geneva-based trade association representing global airlines, has expressed concerns over potential losses of approximately $200 million due to exchange rate depreciation for foreign airlines operating in Nigeria.
Kamil Al Awadhi, the IATA Regional Vice-President for Africa and the Middle East, emphasized that the issue of trapped funds is being exacerbated by the significant depreciation of the naira against the dollar. Al Awadhi discussed these concerns in an interview with CNBC, as reported by our correspondent.
The IATA VP addressed the backdrop of the reported over $700 million in foreign airlines’ ticket revenue still trapped in Nigeria. Despite the Central Bank of Nigeria’s announcement last week that it had settled all verified debts owed to foreign airlines, IATA swiftly responded, stating that foreign carriers operating in the country still had over $700 million trapped in Nigeria.
In response to these challenges, local travel agents under the National Association of Nigerian Travel Agencies have urged foreign airlines to release lower fares in their inventory, warning of severe consequences if ignored. This plea followed the CBN’s report of completing payments for foreign airlines’ debts.
However, the IATA VP insisted that the Central Bank of Nigeria needed to address all outstanding ticket revenue still trapped in the country.
In a statement, he warned against unfairly penalizing airlines due to the lower exchange rate.
Al Awadhi stressed the need to consider both blocked funds and their fair value, illustrating the potential impact of devaluing the naira on airlines’ funds.
He highlighted that if $720 million is blocked and the naira is devalued by 30 percent, over $200 million of airlines’ money would be wiped out, necessitating compensation.
Furthermore, Al Awadhi noted that airlines have suffered significant financial losses operating in and out of Nigeria under the current economic conditions.
The naira’s recent free fall against the dollar, plunging from about 900/dollar to over 1,400/dollar at the official market, has raised concerns.
Mr. Kingsley Nwokoma, the President of the Association of Foreign Airlines and Representatives in Nigeria, asserted that the naira is depreciating.
Nwokoma concurred with IATA’s observation on the diminishing value of trapped funds, emphasizing the need for the government to fulfill its payment obligations.
He proposed establishing arrangements with the airlines, suggesting periodic payments, either monthly or quarterly, as a viable solution.
Expressing the substantial magnitude of trapped funds in the system, Nwokoma highlighted that passengers were opting for flights from Togo and Ghana due to cost considerations.
The Central Bank of Nigeria recently announced the completion of payments for all verified claims by foreign airlines, disbursing an additional $64.44 million.
The apex bank clarified that this recent payment brought the total verified amount disbursed to the air transport sector to $136.73 million, settling all verified claims from airlines.
Susan Akporiaye, the President of NANTA, informed The PUNCH that the $61.64 million paid to foreign airlines constituted a portion of the accumulated debts.
She mentioned that the old debts are being settled at the prevailing rate when tickets are sold, with the exchange rate around N400/450 to one dollar, resulting in a reduction from the original $800 million debt.
