$500m Trapped Funds: Unending Crisis Stifling Operations, Burdening Air Travellers
Nigerian air travellers are going through a hard time travelling out of the country with hyper-inflated airfares from foreign airlines, which have skyrocketed to N2 million and N5 million on economy seats. OLUSEGUN KOIKI writes.
Events in the Nigerian aviation industry have been engulfed in crisis since the first quarter of 2022 at a time the sector was recovering from the impact of the Covid-19 pandemic, which slowed down the 4.2 per cent forecast growth for 2020 when compared to 2019 by the International Air Transport Association (IATA).
Also, Boeing Company at the last week’s Africa Aviation Summit held in Kigali, Rwanda said that African aviation traffic has recovered at strong pace in 2022 with pent-up demand and economic growth driven by higher global commodity prices allowing the continent’s airlines to recover their flight operations to 80 per cent of pre-pandemic levels.
But, the crisis of trapped ticket sales funds of foreign airlines operating into Nigeria is slowing down the pace of growth in the country. The total trapped funds were estimated to be over $500 million as at August 31, 2022 from $464 million in May.
The foreign airlines have taken steps to ensure the recovery of the funds from Nigeria through their banks, but failed, while the approval of $265 million, which indicated 50 per cent of their total trapped funds in the country for release by the Central Bank of Nigeria (CBN), has further fueled the self-imposed predicament.
Till date, most of the operators were yet to recover their trapped funds in the country despite the approval, while for those that did, only 25 per cent of their total funds were released to them for collection.
However, in order to recover their funds from the country, the airlines have resorted to exploiting the desperate and willing travelling passengers with the sales of higher inventories and allegedly blocked the travelling agencies from sales of air tickets.
Sen. Hadi Sirika, Minister of Aviation, about two weeks ago also accused the operators of selling tickets in dollars in flagrant disobedient to the Nigerian law, but the airlines and the National Association of Nigeria Travel Agencies (NANTA) debunked this claim, saying the minister was ill-informed.
For six to 12 hours flights to Europe, America and Asia, tickets on the economic class seats go as high as N2 million to N5 million, depending on the routes, airlines and time of booking, while it takes another N1 million for air passengers to change travel dates even on tickets bought before the emergence of the crisis. Definitely, the passengers are feeling the brunt.
However, apart from Nigeria, other African countries like Ghana, Zimbabwe, Algeria, Eritrea, Ethiopia and even Venezuela from South America are also enmeshed in the crisis, but Nigeria seems the highest with over $500 million.
Stakeholders said the lack of engagement, communication and assurances from the government was further heating up the polity. They also warned that the laxity of the government may lead to more job losses for stakeholders in the travel industry.
Exploitation By Foreign Airlines
Mrs. Susan Akporiaye, NANTA President, claimed that the airlines were exploiting the Nigerian travellers with high airfares in a recent engagement with the media.
Akporiaye said that the delay in the repatriation of the funds by foreign carriers emboldened them to exploit the Nigerian air travellers.
She emphasised that the delay by the Federal Government in granting to the airlines their funds was a violation of the Bilateral Air Service Agreement (BASA) arrangements, but insisted imposing high airfares on the Nigerian traveller smacked of irresponsibility by the airlines and definitely unwarranted.
She added that despite the announcement of the release of $265 million by the CBN as part of the trapped funds, the airlines were yet to open their lower inventories, thereby leading to high fare rates by air travellers.
Akporiaye alleged that these high fares were targeted at only Nigerian travellers, stressing that this could not be seen anywhere else on the continent.
She added: ‘’It is sad that Nigerians have to buy tickets to the tune of N4 million and be charged as high as N1 million to change travel dates even on tickets bought before this crisis began.
“‘This is unacceptable, exploitative and hostile to the survival of the Nigerian aviation downstream sector and to which we call for sanity and return to the best inventory practices and deployment.”
She further lauded the government for the release order of some of the funds, but decried that most of them were yet to be paid their funds by the CBN.
Akporiaye also appealed to the government as a matter of urgency to open further windows of engagement by calling for a meeting with all parties involved, which should include the Nigerian Civil Aviation Authority (NCAA) and NANTA.
She raised the alarm that the businesses of her members were on the verge of collapse as a result of the sordid situation, adding that some of them may be forced out of business in coming months.
Unavailable Forex
Also, Dr. Alex Nwuba, President of Aircraft Owners Association of Nigeria (AOAN), wondered why the CBN was yet to release the funds to the airlines after the approval by the Federal Government.
Nwuba, however, observed that this may not be unconnected with the scarcity of foreign exchange by the CBN, but warned that this would continue to portray Nigeria in a negative perspective before the comity of nations.
“The fact is that we don’t have the real funds available to us at this time. But, we are hoping this would move from approval to actual payment very soon. It is clear that we don’t have a lot of money available to us at this present time,” he said.
On the sales of tickets in dollars by some of the foreign airlines as alleged by Sirika, Nwuba said this was in flagrant violation of the Nigerian law.
But, he attributed the inability of the airlines to repatriation of their funds as one of the possible reasons for such a step by the carriers.
“So, they are looking for means to get the money out,” he said.
He explained that the current challenge could only be addressed with pragmatic steps by the Federal Government to diversify the economy, maintaining that without this, Nigeria would continue to be in distress.
“We are still a mono-economy. We are still dependent on oil and we don’t even have the oil to sell. We have refused to leverage on the other areas of the economy.
“Trying to tell you how we are going to get more dollars without changing the way we conduct our economies is wishful thinking. We really need to make changes to the structures of our economy in order to generate more and become less consumers,” he said.
Besides, Mr. Chris Chukwuma, the Chief Executive Officer (CEO), Aviatech Nigeria said that the issue of the trapped funds was having a serious negative effect on the image of the country in the comity of nations.
Chukwuma challenged the Federal Government, the CBN, NCAA, Ministries of Finance and Aviation to hold a joint meeting with IATA and the officials of foreign airlines in the country to address the lingering challenge.
Chukwuma said that the foreign airlines are gradually reducing their frequencies into Nigeria in a bid to moderate the risk exposure, warning that if the issue was not resolved before the end of the month, most of the airlines would have reduced their frequencies by 50 per cent, while job loss would also escalate in the industry.
Irresponsible DATR
Besides, the analyst reproached the Directorate of Air Transport Regulation (DATR), a department under the NCAA, which is statutorily responsible for the safety and economic regulation of the civil aviation industry in Nigeria for displaying insensitivity so far to the plight of the foreign carriers.
He maintained that the department ought to have taken the lead in ensuring the airlines recover their trapped funds through consistent engagement with the Director-General of NCAA.
“What airlines are doing now is to reduce their exposure because the money keeps coming in, but you cannot take it out. We have two ways of making income – direct sales and sales through the Global Distribution System (GDS), which is through IATA, but you are not receiving that one too.
“So, at the end of the day your money is hanging everywhere. You still pay the NCAA, the Federal Airports Authority of Nigeria (FAAN) and the Nigerian Airspace Management Agency (NAMA) despite the fact that you are not collecting your money. So, it is a big problem. If there are no foreign airlines, the Nigerian aviation industry will collapse. None of the Nigerian airlines can do 1 per cent of what foreign airlines are doing.
“The government engagement is poor. The National Association of Nigeria Travel Agencies (NANTA) shouldn’t even come into this if our civil aviation through its DATR that manages the Bilateral Air Service Agreement (BASA) arrangements that all the foreign airlines signed with the Federal Government is coming out with information, but they just sit in their offices without engaging anybody.”
