The International Air Transport Association (IATA), the Geneva-based trade association representing global airlines, has raised concerns about potential losses of around $200 million for foreign airlines operating in Nigeria due to currency depreciation.
Kamil Al Awadhi, IATA’s Regional Vice-President for Africa and the Middle East highlighted the issue of trapped funds exacerbated by the significant drop of the naira against the dollar in an interview with CNBC.
Al Awadhi’s comments come amid reports of over $700 million in foreign airlines’ ticket revenue still stuck in Nigeria. Despite the Central Bank of Nigeria’s recent announcement that all verified debts owed to foreign airlines have been settled, IATA swiftly responded, stating that foreign carriers operating in the country still have over $700 million in trapped funds.
READ ALSO: Speak Positive Things About Nigeria, Tinubu Urges Citizens
Meanwhile, local travel agents under the aegis of the National Association of Nigerian Travel Agencies have asked foreign airlines in the country to release lower fares in their inventory or face severe consequences.
This came on the back of the CBN report of completing payments of foreign airlines’ debts.
However, IATA VP had insisted the CBN needed to complete all outstanding ticket revenue trapped in the country.
“Airlines should not be unfairly penalised by the lower exchange rate,” the IATA VP warned in a statement last week.
But speaking to CNBC, AlAwadhi said, “You also have to take into consideration the blocked funds and the fair value of the blocked funds. If you have $720m blocked and then you devalue the naira by 30 per cent, you have wiped out over $200m of airlines’ money, and they have to compensate that.”
He added, “Airlines have lost a lot of money operating in and out of Nigeria and it continues to be so under the current environment.”
The naira has been in a free fall against the dollar in recent weeks.
Recently, the naira plunged from about 900/dollar to over 1,400/dollar at the official market.
The President of the Association of Foreign Airlines and Representatives in Nigeria, Mr. Kingsley Nwokoma, maintained that the naira was depreciating.
Nwokoma said “I concur with IATA’s observation regarding the diminishing value of trapped funds. The worth of the naira today is different from its value five years ago or even last year. The crucial aspect is for the government to fulfill its payment obligations.”
He proposed that the Nigerian government should consider the possibility of establishing an arrangement with the airlines, considering periodic payments, either monthly or quarterly, as a viable solution.
“We have reiterated numerous times. The reality remains that the magnitude of trapped funds in our system is substantial,” he said.
Nwokoma added that as a result, passengers were opting to book flights from Togo and Ghana due to cost considerations.
Last week, the Central Bank of Nigeria announced the completion of payments for all verified claims by foreign airlines, disbursing an additional $64.44m to the concerned parties.
The apex bank clarified that this recent payment brought the total verified amount disbursed to the air transport sector to $136.73m, adding that all verified claims from airlines had been settled.