There are growing indications that foreign airlines might exit Nigeria’s airspace due to a deteriorating operating environment. This follows a series of exits by foreign businesses from the country, including Procter & Gamble and GlaxoSmithKline. The primary challenge faced by airline operators is the inability to access the foreign currency required for their operations, with over $792 million reportedly trapped in Nigeria. This situation poses a severe threat to the global operations of these airlines.
Key Points:
- Trapped Funds and Operating Challenges:
- Foreign airlines in Nigeria collect Naira for tickets but struggle to exchange it for foreign currencies needed for operations. Approximately $792 million of these funds are trapped in Nigeria, impacting the airlines’ ability to operate globally.
- Emirates Airlines Exit and Unresolved Issues:
- UAE’s Emirates Airlines, which exited Nigeria’s airspace last year, has not returned despite intervention from President Bola Tinubu. The President directed the Central Bank of Nigeria (CBN) to create a platform for reconciliatory meetings, but no progress has been made, and funds remain unreleased.
- Interruption of Ticket Inventory:
- Airlines have responded to the currency challenges by closing down their lower fare inventory to travel agents in Nigeria. This move restricts agents from issuing tickets originating from other countries into Nigeria, aiming to reduce the backlog of funds.
- Impact on Ticket Prices:
- Travellers from Nigeria pay significantly higher amounts for economy tickets compared to passengers from other countries. For instance, tickets to London’s Heathrow Airport range from N2.5 million to N2.7 million, while passengers from Ghana and South Africa pay considerably less for the same grade of tickets.
- IATA’s Concerns:
- The International Air Transport Association (IATA) Regional Vice President for Africa & Middle East, Kamil Al-Awadhi, highlighted Nigeria as having the highest amount of blocked funds at $792 million. He urged the Federal Government to address the issue seriously, stating that airlines are contemplating stopping operations.
- Engagement with Nigerian Authorities:
- Al-Awadhi called for engagement between airlines and Nigerian authorities to resolve the blocked funds issue. He expressed difficulty in engaging with the CBN Governor but noted positive interactions with the Aviation Minister, who expressed understanding of the situation.
- Challenges for Nigerian Airlines:
- High-interest rates on loans, elevated airport taxes, and insurance premiums six times higher than global averages pose challenges for Nigerian airlines. Al-Awadhi emphasized that with these conditions, it would be difficult for Nigerian carriers to make a profit.
Conclusion: The potential exit of foreign airlines from Nigeria underscores the urgency for the government to address the challenges in the foreign exchange market. Resolving the trapped funds issue and creating a more conducive operating environment are crucial not only for the aviation industry but also for the broader economic climate in Nigeria.
