Conundrum
The Central Bank of Nigeria said it had cleared the entire backlog of verified claims owed to foreign airlines whose payments had been…
The Central Bank of Nigeria said it had cleared the entire backlog of verified claims owed to foreign airlines whose payments had been blocked in the country. CBN spokesperson Hakama Sidi Ali said on Tuesday that all verified claims by airlines had been cleared after the bank released an additional $64.4 million of foreign exchange owed to them, bringing total payments to $136.7 million. However, the International Air Transport Association (IATA) said another $700 million of owed money remained in Nigerian banks, adding that the trapped revenue issue has been made worse by the devaluation of the Nigerian currency.
As of June 2023, Nigeria alone owed foreign airlines $812.2 million out of the $2.27 billion owed to airlines by various countries―amounting to almost 36% of the debt. The affected airlines resorted to various measures to recover their funds including suspending operations in Nigeria like Emirates and Etihad did. In October 2022, Emirates Airlines announced that it had suspended flight operations to Nigeria over its inability to repatriate funds trapped in the country, which was estimated at $85 million. In fact, various foreign airlines reported that they were unable to repatriate their earnings of more than $500 million due to the shortage of foreign exchange. British Airways also blocked Nigeria from its global distribution system, preventing local travel agencies from booking flights from their portals. In the early days of the Tinubu administration, the president met with Emirati authorities to resolve the issues, however, they insisted on getting their money. This discrepancy is a significant issue for the airlines and Nigeria’s reputation. This situation has been made worse by the devaluation of the Naira. For airlines earning in Naira, the devaluation has increased the cost of sourcing dollars for aircraft spares, aircraft leasing costs, flight crew training, insurance premiums, and other obligations. While the CBN’s efforts to clear the backlog of verified claims are a step in the right direction, there is still a significant amount of money that remains blocked in Nigerian banks according to the IATA. CBN’s clever use of the word “verified” in its communications is doing a lot to manage perceptions. $136 million is nowhere near the amounts that have been reportedly owed over the last year or the extra $700 million IATA claims. For example, Business Day reported a $783 million figure in November 2023, while The Vanguard reported $792 in December 2023. Playing with semantics will not restore confidence, and we urge that the CBN should not lend itself to propaganda speak but rather do the tough work of engaging these stakeholders and finding some agreement on the remittance of these funds. Overall, we recognise that this is a complex issue that requires ongoing attention and resolution.