Foreign airlines operating in Nigeria have contested claims by the Central Bank of Nigeria (CBN) that the outstanding foreign exchange (FX) obligations have been successfully settled.
This is coming against the backdrop of lingering efforts by the CBN to clear trapped airlines earnings, which has stood in the way of the operation of some of the International Air Transport Association (IATA) members in Nigeria.
Kingsley Nwokeoma, President of the Association of Foreign Airlines and Representatives in Nigeria (AFARN), adamantly stated that there has been no discernible change regarding the clearance of foreign airlines’ trapped funds.
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“If they say they have cleared the trapped funds, they should show us figures. They should tell us how much have been cleared. The last I checked, the status quo still remains the same,” Nwokeoma told BusinessDay.
Nwokeoma’s assertion comes a day after Hakama Sidi Ali, acting director of corporate communications at CBN, announced that the financial regulator had recently finalized payments totaling $1.5 billion, effectively addressing the residual balance of the FX backlog. But she also disclosed that independent auditors from Deloitte Consulting meticulously assessed these transactions, ensuring that only legitimate claims were honored.
“Any invalid transactions were promptly referred to the relevant authorities for further scrutiny,” Mrs Ali said.
However, Bankole Bernard, chairman of the Airlines and Passengers’ Joint Committee (APJC) of the International Air Transport Association (IATA), provided a nuanced perspective, acknowledging the clearance of trapped funds while highlighting lingering challenges.
Bernard revealed that while foreign airlines were offered the option to retrieve their funds from banks using the rate of the Investors and Exporters (I&E) window, they expressed reluctance due to disparities between the current official (NAFEM) rate and the rate at which tickets were initially sold. This discrepancy poses potential financial losses for airlines, prompting them to adjust pricing strategies to mitigate the impact of exchange rate fluctuations.
The standoff between foreign airlines and the CBN over trapped funds resulted in Emirates Airlines’ suspension of flight operations in Nigeria in late 2022, marking the second instance of such action.
Asked while Emirates has not resumed operations in Nigeria if truly the FX backlog has been cleared, Bernard attributed Emirates’s decision to hold back to a diplomatic dispute between the United Arab Emirates (UAE) and the Nigerian government, exacerbated by concerns over crime and safety in Dubai.
“The crimes Nigerians are committing in Dubai has made them refuse Nigerians from coming to Dubai. These crimes affect tourism. They do not want their country to be perceived as unsafe. Emirates still has their office in Nigeria and they have staff they are paying salaries,” he told BusinessDay.
Emirates’ withdrawal from the Nigerian market reflects broader challenges within the aviation industry, with trapped earnings reaching critical levels. In October 2022, Emirates suspended its services citing the inability to repatriate earnings amounting to $85 million amidst a total trapped fund exceeding $500 million. Nigeria’s situation is emblematic of global FX challenges, with IATA reporting outstanding obligations totaling $2.27 billion, with Nigeria accounting for a significant portion.
The crux of the issue revolves around the exchange rate mechanism utilized in settling the backlog between foreign airlines and the CBN. Both parties are engaged in negotiations, seeking to minimize potential losses emanating from Nigeria’s volatile FX market.