Amid mounting concerns, foreign airlines operating in Nigeria are apprehensive about the possibility of suspending flights if the government fails to provide a lasting solution to the issue of trapped funds.
The backlog of funds has led to challenges for international carriers attempting to repatriate their earnings from the country. Aviation experts warn that such a scenario could have severe repercussions on the aviation sector and the overall economy.
Festus Keyamo, the Minister of Aviation and Aerospace Development, faces the critical task of preventing further airline exits from the Nigerian market. Industry analysts emphasize the potential catastrophic impact on both the aviation sector and the broader economy if more airlines follow in the footsteps of those that have already suspended their operations.
In November, following his attendance at the Dubai Airshow, Keyamo disclosed that Emirates Airline was poised to resume flight operations in Nigeria after suspending operations twice in 2022. The airline had temporarily halted flights due to challenges in negotiations with Nigerian authorities over fund repatriation.
Etihad Airways also suspended flights during the same period, contributing to the rising concerns in the aviation sector. The Minister assured that efforts were underway to ensure the resumption of flights by Emirates, with discussions ongoing to address outstanding issues.
Nigeria, with over 27 foreign carriers operating within its borders, holds the highest amount of airline-trapped funds globally. The International Air Transport Association (IATA) reveals that the funds have surged to approximately $792 million as of the end of the previous year.
The foreign exchange crisis in Nigeria, coupled with declining oil production and shortages of the US dollar, has created challenges for foreign airlines. The inability to repatriate funds earned in local currency has led to mounting financial pressures on international carriers.
Captain John Ojikutu, CEO of Centurion Aviation Security and Safety Consult, highlighted the challenges faced by airlines that collect revenue in local currency but are required to pay for services in US dollars. He raised questions about the handling and authorization of the funds, emphasizing the need for transparency and adherence to established protocols.
The potential exit of more airlines from Nigeria poses a significant threat to the aviation industry, which has contributed significantly to the country’s GDP. In the third quarter of 2023, the aviation sector contributed N22.6 billion to Nigeria’s Gross Domestic Product, representing a 109.26% increase from the corresponding period in the previous year.
As the aviation industry grapples with these challenges, stakeholders are urging the government to urgently address the forex crisis to prevent further disruptions and potential exits by foreign airlines. The minister’s spokesperson, Tunde Moshood, assured that necessary measures have been taken, emphasizing the bilateral nature of the agreements between Nigeria and the affected countries.
Industry experts and stakeholders stress the importance of a prompt resolution to prevent further deterioration of the aviation sector, which plays a vital role in Nigeria’s economic landscape.
