According to the International Air Transport Association (IATA), Nigeria has topped the list of nations withholding revenue earned by international airlines operating in the country.
The West African nation is withholding $743 million in revenue, making it the highest owed by any nation. Nigeria is experiencing a severe shortage of foreign currency, which minimizes imports and makes it difficult for investors to convert local currency to repatriate their funds.
Airline funds blocked by governments
IATA spokesperson Katherine Kaczynska said that governments around the world owed $2.2 billion to airlines. Nigeria has the highest amount of blocked funds, followed by Algeria, owing $165 million, and Lebanon, which owes $146 million. Kaczynska said in a statement;
"Enabling the efficient repatriation of revenues is critical for any economy to remain globally connected to markets and supply chains."
In December, IATA warned that the amount of airline funds for repatriation being blocked by governments had risen by $394 million in the last six months, which was a 25% increase at the time. IATA called on governments to remove all barriers to airlines repatriating their revenues from ticket sales and other activities.
Apart from Nigeria's $743 million debt, the IATA spokesperson said that countries under the West African Economic and Monetary Union owed $132 million. Also on the list is Zimbabwe, which has severe foreign currency shortages and up to $80 million in blocked airline funds.
Airline funds are being blocked from repatriation in more than 27 countries, with Nigeria topping the list. Repatriation issues arose in March 2020 when demand for foreign currency in Nigeria outweighed supply, and the country's banks could not service currency repatriations.
Industrial-scale theft of crude oil, Nigeria's most economically valuable resource, has significantly reduced the country's influx of dollars in the last year. However, Nigerian authorities are engaging with airlines and, together with the industry, are working to find measures to release available funds.
Check out more African aviation news here
Emirates and Ethiopian issues with blocked funds
Last year, the world's largest Airbus A380 operator, Emirates, suspended flights to Nigeria, citing the inability to repatriate funds from the West African nation. The airline had proposed a plan to release at least 80% of its funds, but failure forced it to halt its Nigerian operations as they were no longer commercially viable.
Emirates demanded a payout of $85 million of its revenue after the central bank of Nigeria released $265 million to international airlines to settle outstanding ticket sales. The airline resumed flights to Nigeria a few days later. Last month, President Muhammadu Buhari ordered the central bank to increase the foreign currency allocated to the Dubai-based carrier.
There was also an issue between Ethiopian Airlines (ET) and the Nigerian government over trapped airline funds in the deal to relaunch Nigeria Air. As we know, ET will own a 49% stake, while the Nigerian government owns 5% in the new airline.
Last month, Nigerian president Muhammadu Buhari met with Ethiopian Airlines Chairman Girma Wake in Addis Ababa on the sidelines of the AU summit. According to the president's Senior Special Assistant on Media and Publicity, Girma Wake requested the return of the airline's funds trapped in Nigeria.
Buhari told Wake that it was a weighty decision by the government to relaunch the flag carrier and that everything would be alright. The trapped funds pose a substantial risk to Nigeria's aviation industry as this can push investors away.
What do you think of the blocked airline funds in Nigeria? Let us know in the comments!
Source: Reuters