The authorities should intervene immediately to ensure that the airlines continue with their scheduled operations
In a statement yesterday, Emirates Airlines said it would suspend its flight operations to Nigeria effective 1st September 2022 which is less than two weeks away. This decision, according to the flag carrier of the United Arab Emirates (UAE), stems from its inability to repatriate earnings totalling about $85 million from Nigeria due to foreign exchange scarcity. “We have had no choice but to take this action, to mitigate the continued losses Emirates is experiencing as a result of funds being blocked in Nigeria,” the airlines stated in a letter addressed to the Aviation Minister, Hadi Sirika. In as much as we understand current challenges, no level of desperation should make the federal government to abuse long-standing international trade regulations or renege on sovereign obligations.
In Nigeria, failure to encourage domestic airlines to grow into strong operators has willy-nilly made foreign airlines operating into our country very imperative. These foreign carriers have also over the years maintained high load factor due to high patronage, which is quite understandable. As the fastest way of moving persons and goods, air transportation is a catalyst to economic development for any nation. It is also the preferred means of transport for people both in the private and public sectors. So, every country is negatively affected when scheduled flight operations are impaired.
The International Air Transport Association (IATA) recognises that the withholding of airlines’ funds by Nigeria and other countries was not on purpose. But IATA has also observed that Nigeria might not be giving aviation the priority it deserves. This is a problem foreseen. Foreign airlines operating from Nigeria have for months been unable to repatriate their revenues because the Central Bank of Nigeria (CBN) does not have enough dollars to pay them. Consequently, foreign airlines have been forced to introduce outrageous airfares on the Nigerian route and justified it by insisting that airlines must be profitable in order to ensure their continued operation. If the situation persists, these foreign airlines could stop scheduled flights to Nigeria, as Emirates has just done. Apart from the negative effects this default could have on the image of the country, the government should also be mindful of the fact that there are Nigerian airlines that ply international routes and maintain sizable operations abroad.
Meanwhile, the total amount of money owed foreign airlines is put at over $600 million, up from $450 million in April this year with projections that if not settled before December, it could rise to over a billion dollars. We recall that it was non-remittance of foreign airlines’ earnings that forced the United Airlines and Iberia to leave Nigeria in 2016. In 2014 many foreign airlines withdrew services to Venezuela over the country’s inability to remit airlines revenue and the economy is still battling with the consequences. Such withdrawal also has significant effect on domestic airlines because they will find it difficult to source spares, seek technical support and will eventually deplete their operating aircraft.
Overall, the consequences of reduced air connectivity include the erosion of our national competitiveness, diminished investor confidence and the reputational harm that could come with a perception that Nigeria is a high-risk place to do business. While the CBN may therefore be battling with scarcity of forex, the solution is not to sit on the legitimate earnings of foreign airlines. The bank can negotiate a graduated payment plan with each airline to release the trapped funds in tranches over a number of months. That way, their services are not interrupted.
Overall, we recommend interim emergency measures to ensure that these airlines do not suspend operations, after which the authorities should find immediate, medium and long-term solutions to this lingering problem.
