The Chairman of the Airlines and Passengers Joint Committee of the International Air Transport Association, Bankole Bernard, stated that the demand for travel within Nigeria is high, indicating that the revenue from foreign airlines is expected to continue thriving, Punch reported.

He expressed confidence that the figures would remain steady in the near future.

However, there have been issues with trapped funds for foreign airlines in Nigeria. The Senate passed a resolution calling on the Central Bank of Nigeria (CBN) to release $717,478,606 of airline funds that were stuck in the country. 

The Senate also urged the CBN to allocate $25 million to airlines operating in Nigeria at its fortnightly dollar auction. 

Bankole Bernard commented that the Senate may not be able to intervene effectively, as the CBN has shown disregard for the law by only complying with a court order to release old notes.

Regarding the possibility of airlines withdrawing their services due to trapped funds, Bernard stated that it is unlikely because they did not acquire the aircraft to keep them parked. 

However, he acknowledged that foreign airlines still face challenges and may consider redirecting their aircraft to more lucrative markets if available.

The spokesperson for foreign airlines in Nigeria, Kingsley Nwokoma, emphasized that the repatriation of funds has been a longstanding issue for foreign airlines. 

The inability to access the funds has impacted their operations, profitability, and willingness to continue operating in Nigeria. 

Nwokoma warned that if the Nigerian government does not take immediate action to repatriate the funds, more airlines may leave the country. 

He mentioned that several airlines have either ceased operations or reduced flight frequencies due to this issue.

Nwokoma expressed skepticism about the CBN’s immediate disbursement of the funds following the Senate’s order. 

He believed that there needs to be a willingness from the government to ensure that the funds are repatriated according to the BASA (Bilateral Air Services Agreement) regulations. 

He also suggested that if any disbursement had been initiated, the airlines would have made a public statement regarding it

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The association made the announcement in a letter addressed to Hadi Sirika, Minister of Aviation, and signed by Samson Fatokun, the association’s West and Central Africa Area Manager.

The air transport group and the global airline community wrote to the federal government, requesting a special invention to resolve the country’s blocked funds for airlines.

“For over a year, Nigeria has been the country with the highest amount of airline-blocked funds in the world. Please find attached the comparative table of airlines’ blocked funds by country,” the letter reads.

“Moreover, as of January 2023, airlines’ blocked funds in Nigeria have increased to $743,721,092 from $662m in January 2023 and $549m in December 2022.”

TechEconomy recalls that the trapped funds accrued from ticket sales by foreign airlines. As of March 2022, the total funds were $289 million, but three months later, they increased to $464m amid pressure from the airlines.

As a result of this, many airlines in the past had suspended flight operations in the country, notably Emirates Airlines and British Airways. 

Since then, there have been a series of meetings to address the issue. However, sources close to the matter say that the repatriation of the trapped funds was not in the purview of the Ministry of Aviation but rather the Federal Ministry of Finance.

Speaking in the letter on Tuesday, IATA said the increasing backlog of international airlines’ blocked funds in Nigeria sends a strong message against foreign direct investment (FDI) in Nigeria.

“Potential investors are reading from the plight of the airlines that they would not be able to repatriate their funds from Nigeria, even at this moment when Nigeria is expecting investments in the concession of some of its prominent airports,” the group said.

“Foreign airlines fly into Nigeria within the legal framework of the bilateral air service agreement (BASA) signed between their countries and the Federal Republic of Nigeria.”

It is agreed in those BASAs that Nigeria will facilitate the repatriation of the funds of the other party’s airline. Nigeria flaunts this contractual obligation by not facilitating enough the repatriation of airlines’ funds.”

IATA explains, reduces passenger and cargo access to Nigeria. “E-commerce that relies on aviation for speedy delivery will be impacted in Nigeria.

“Moreover, going by the law of demand and supply, the reduction of airline inventories in the Nigerian market will lead to a ticket fare increase, which will further burden average Nigerians and take air travel out of the reach of many Nigerians,” it said.

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Godwin Emefiele, the CBN Governor, made the statement after the monetary policy committee’s meeting held at the CBN headquarters in Abuja on Tuesday.

Recall that the issue had generated several reactions from aviation stakeholders and the non-repatriation of airlines revenue had grown from $450 million in May to $464 million in July.

The CBN had also intervened by releasing $265 million to clear part of the forex backlog.

Emefiele said the trapped funds were released to reduce the pressure in the sector, which would have disrupted the travel plans of many Nigerians if left unattended.

“In spite of this, we have seen that the number of travels or naira value of tickets issued by the airlines has increased.

We decided to release $265 million when the pressure was building aggressively.”

According to Emefiele, it was not the role of CBN to give airlines all their dollar revenues, citing the Bilateral Air Services Agreements (BASA), insisting the agreement did not explicitly say “you must repatriate all your dollars.”

Emefiele said: “No law that makes it compulsory that you must buy your Dollars from the Central Bank. When you put money in your account, what it means is that you tell your bank to buy your dollar.

“We will do everything possible and are determined to clear the backlog and consistently, at all the retail interventions. As long as the bank accounts are funded, we will continue to ensure that the cumulative backlog is cleared.”

“But I think it is important for me to say this — the foreign airlines are saying this because they said we should respect bilateral air services agreements (BASA) that say proceeds of all their ticket sales must be repatriated out of the country. It did not say you must repatriate all your dollars.”

Emefiele added that “no law that makes it compulsory that you must buy your Dollars from the Central Bank. When you put money in your account, what it means is that you tell your bank to buy your dollar” and added that “your bank will go to the legitimate or approved sources which in this case is the I&E to buy dollars and pay for your ticket sales proceeds.”

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TechEconomy recalls that the trapped funds accrued from ticket sales of foreign airlines. As of March 2022, the total funds were $289m, but three months later, they increased to $464m amid pressure from the airlines.

There have been a series of meetings to address the issue. However, sources close to the matter say that the repatriation of the trapped funds was not in the purview of the Ministry of Aviation but rather the Federal Ministry of Finance.

The $464 million reportedly held by the CBN is the largest amount being withheld by any African country, and in May, the amount grew to over 12 percent higher than the figure from the previous month.

According to Alhaji Lai Mohammed, the Minister of Information and Culture, relevant authorities are working towards addressing issues concerning the revenue of foreign airlines that have been trapped in Nigeria.

He stated these on Monday at the Murtala Muhammed Airport (MMA), Lagos, during the tour of the newly commis­sioned terminal at the international wing of the airport.

In his response to a question asked by newsmen on the trapped $464 million of foreign airlines, Mohammed said, “On the trapped funds, I can tell you that the relevant authorities are working hard on that issue.”

Also, Mohammed expressed optimism that the loans obtained by the Federal Government for infrastructure purposes were being judiciously used by the government but regretted that most Nigerian citizens don’t pay taxes to the government.

The Minister appealed to Nigerians to ensure prompt and adequate payment of taxes for the growth of the country.

The post FG Begins Talks With Airlines to Release $464M in Trapped Funds appeared first on Tech | Business | Economy.

The funds accrued from ticket sales of foreign airlines. As of March 2022, the total funds were $289m, but three months after, they increased to $450m amid pressure from the airlines.

There have been a series of meetings to address the issue, however, sources close to the matter say that the repatriation of the trapped funds was not in the purview of the Ministry of Aviation but, the Federal Ministry of Finance.

The $450 million reportedly held by the CBN is the largest amount being withheld by any African country, and in May, the amount grew at over 12 percent higher than the figure of the previous month.

This isn’t the first time the Nigerian government is withholding funds, it had previously blocked revenue from foreign airlines but eventually repatriated the funds. But with the current economic crisis which the country is, there are doubts that the funds would be paid in a single shot.

In fact, this situation had compelled foreign airlines flying into Nigeria to begin the sale of their tickets in dollars instead of Naira on April 19. Although, a temporal measure until the issue get resolved.

The International Air Transport Association (IATA), is also expected to have another round of discussions with Nigerian officials to secure the release of the trapped funds.

In a statement, the National Association of Nigeria Travel Agencies (NANTA) said the trapped funds are estimated at over $450 million and that this issue reduces investor confidence in Nigeria.

According to Susan Akporiaye, President, NANTA, the current situation presents a real threat to the industry and the continuity of their business as travel professionals, bearing in mind the potential jobs losses and the attendant national economic losses as the world is gradually coming out of the pandemic era.

She said they are worried that, foreign airlines may resort to taking out lower inventory in the system resulting in the high cost of tickets from the Nigerian market.

Explaining the implication, she stated that, for instance, a six-hour trip to London may attract a fare rate of about $2000 or more and also encourage tickets sold outside the country to flood Nigeria, thus affecting the survival of Nigerian travel agents and consequent loss of taxes and levies from such transactions.

She said if the matter is not handled quickly, a bleak future worse than the pandemic awaits Nigerian travel operators if nothing concrete and effectual is done by the Central Bank of Nigeria.

“As Nigerians, we are patriotic and have presented our country well in the global travel industry and rightly felt disturbed that Nigeria is on the brink of a wrong narrative at the just concluded 78th Annual General Meeting of International Air Transport Association (IATA) in Doha, Qatar on the account of airlines trapped funds.

“We are by this outing once again, appealing to the Central Bank of Nigeria, the Ministry of Aviation, and the office of the Vice President to speedily intervene to bring down the number of trapped funds to help resolve the operations of these airlines,” she said.

Aviation Minister

Commenting on the situation last week, James Oduadu, Spokesman to the Minister of Aviation, said he is aware that Sen. Hadi Sirika, is at the forefront of encouraging both local and foreign airlines to operate to be their full capacity and person that will do whatever is possible for airlines operating in Nigeria to have access to their funds.

“If it’s true that Nigeria is blocking funds which I doubt very much, probably, there may be issues that are not resolved, and of course, repatriation of funds is not within the purview of the Ministry of Aviation, but that of Finance Ministry.

If there are problems the foreign airlines are facing and they need the assistance of the Ministry of Aviation, the onus is on them to come for intervention even though it’s not within the purview of the Ministry and I can assure all stakeholders, local and foreign that the minister of aviation is committed to doing whatever is humanly possible to ensure that their operation is effective, efficient and profitable,” he said.

The post [EXPLAINER] CBN, Aviation Ministry and Foreign Airlines’ $450m Trapped Funds appeared first on Tech | Business | Economy.