The International Air Transport Association (IATA), representing global airlines, has sounded alarm bells over potential losses totaling approximately $200 million faced by foreign airlines operating in Nigeria due to currency depreciation.
In an interview with CNBC, Kamil Al Awadhi, the IATA Regional Vice-President for Africa and the Middle East, highlighted concerns regarding trapped funds exacerbated by the significant depreciation of the naira against the dollar.
The issue of trapped funds gained prominence following reports indicating that over $700 million in foreign airlines’ ticket revenue remains locked in Nigeria. Although the Central Bank of Nigeria recently announced the settlement of verified debts owed to foreign airlines, IATA refuted this claim, asserting that significant funds were still held hostage.
Meanwhile, local travel agents, represented by the National Association of Nigerian Travel Agencies, have called on foreign airlines to adjust fares downward in response to the CBN’s report of debt settlements.
Despite the CBN’s efforts, Al Awadhi emphasized the need for the complete resolution of outstanding ticket revenue trapped in the country. He cautioned against unfairly penalizing airlines due to exchange rate fluctuations, stressing the adverse impact on airlines’ financial stability.
Al Awadhi pointed out the substantial losses incurred by airlines operating in Nigeria, a trend that persists amid the prevailing economic conditions.
The recent depreciation of the naira against the dollar has intensified concerns, with the official market witnessing a sharp decline from approximately 900 naira per dollar to over 1,400 naira per dollar.
Echoing IATA’s concerns, Kingsley Nwokoma, the President of the Association of Foreign Airlines and Representatives in Nigeria, emphasized the urgency of addressing the depreciating value of trapped funds. He urged the government to explore options for establishing payment arrangements with airlines to mitigate losses and ensure financial stability.
Nwokoma highlighted the adverse effects of trapped funds on passenger preferences, noting a shift towards booking flights from neighboring countries like Togo and Ghana due to cost considerations.
In response to the ongoing challenges, the Central Bank of Nigeria recently announced the completion of payments for verified claims by foreign airlines, disbursing an additional $64.44 million. The apex bank clarified that this payment brought the total verified amount disbursed to the air transport sector to $136.73 million, signaling progress in addressing outstanding debts.
Susan Akporiaye, the President of NANTA, acknowledged the efforts to settle debts, emphasizing the reduction of the original debt from about $800 million to mitigate financial burdens on airlines.
