Operating Airlines in Nigeria: IATA Highlights High Costs and Trapped Funds.
The International Air Transport Association (IATA) has brought attention to the considerable challenges faced by airlines Operating in Nigerian airports, citing them as among the most expensive in Africa. Kamil Al Awadhi, the regional Vice-President for Africa and the Middle East at IATA, emphasized this issue during an interview on CNBC Africa.
Contrary to some reports, Al Awadhi revealed that international airlines in Nigeria still grapple with approximately $720 million in trapped funds. He underscored the financial strain experienced by airlines, emphasizing that they continue to incur losses due to the high operational costs associated with operating in and out of Nigeria.
Al Awadhi explained, “Airlines have suffered significant financial losses operating in Nigeria, and this trend persists. As conditions improve, airlines can anticipate better returns, reduced risks, and ultimately, lower operational costs.”
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Highlighting the impact of currency devaluation, he added, “It’s essential to consider the effects of blocked funds and currency fluctuations. For instance, if $720 million is trapped and the naira depreciates by 30%, airlines could lose over $200 million, necessitating compensation.”
Regarding the repatriation efforts, Al Awadhi noted that the Central Bank of Nigeria (CBN) has so far repatriated only about $65 million of the blocked funds owed to airlines. However, he acknowledged improved communication between the CBN and airlines compared to previous administrations.
Key Points to Note:
- The National Bureau of Statistics (NBS) reported an 87% increase in the average cost of air transport between December 2022 and December 2023. Currency devaluation has further exacerbated the situation in recent months.
- The CBN has been gradually addressing the backlog of forex obligations owed to international companies operating in Nigeria. Approximately $2.3 billion has been cleared, leaving $2.2 billion of valid forex claims pending.
- Despite earlier claims by international airlines of having $813 million trapped in Nigeria, recent disbursements by the CBN have provided some relief, with around $62 million released to date.
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