Nigeria’s forex crisis keeps accelerating, creating huge economic challenges along the way. The resulting weakling of the naira, the country’s currency, has forced the Central Bank of Nigeria to tighten monetary policies – which eventually now means that Nigeria can no longer meet some of its international financial obligations.
Reuters reports, citing a statement from an executive at the world’s largest airlines association, IATA, that Nigeria is withholding $450 million in revenue international carriers operating in the country have earned.
Per the report, the International Air Transport Association’s Vice President for Africa and the Middle East, Kamal Al Awadhi, on Sunday, described talks with Nigerian officials to release the funds as a “hectic ride”.
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“We keep chipping away and hoping that it clicks that this is going to damage the country down the road,” he told reporters in Doha on the eve of IATA’s annual meeting of airline chiefs there this week.
Al Awadhi, a former chief executive of Kuwait Airways, said Nigerian officials had blamed the foreign currency shortage for not repatriating the airline revenue, Reuters reported.
This comes on the heels of the CBN’s struggle to curtail the wildling gap between the naira and dollar, which currently trades above N600/$1 in the parallel market and more than the official N419/$1 in the Investor & Export window.
As part of its efforts, Nigeria had repeatedly devalued the naira in the past few years, and also restricted forex access to a host of imported goods and services. In addition, Africa’s largest economy has restricted access to foreign currency for imports and for investors seeking to repatriate their profits as the nation tackles a severe dollar shortage.
The CBN has also introduced schemes such as Naira4Dollar designed to attract diaspora remittances. And as noted by Reuters, Nigeria has previously blocked revenue from foreign airlines before later repatriating the funds.
Reuters reports that IATA has so far held two rounds of talks with Nigerian officials, including from the Central Bank, who Al Awadhi said were “not responsive” to releasing cash.
Another round of talks between IATA and Nigerian officials is expected to start soon, the airline lobby group said, without specifying when.
“Hopefully, we can get some sort of solution where it starts going down (but) it won’t, I doubt, be paid in a single shot,” Al Awadhi said.
IATA says $1 billion of revenue belonging to foreign airlines is being withheld across Africa, although Nigeria is the only country where the value of blocked funds has risen.
The $450 million, the largest amount withheld by any African nation, in May was 12.5% higher than the previous month.
Algeria, Ethiopia and Zimbabwe, who combined are withholding $271 million from foreign airlines, in May marginally paid down what they owed. Eritrea was unchanged at $75 million, IATA said.
The aviation body didn’t say if there will be consequences for failure to repatriate the fund. However, this development supports the assertion that whatever Nigeria’s central bank is doing to boost dollar liquidity and save the naira from its current ordeal, is not working.
Nigeria spends more than 40% of its foreign exchange on fuel import, making it hard for the country to maintain enough dollar liquidity that will take pressure off the naira, especially now that oil prices are on the rise.