The sensational warning by the International Air Transport Association (IATA), that flights to Nigeria may be hampered because of government’s failure to remit $208 million blocked funds owed foreign airlines operating in the country, is certainly no complimentary news. The funds are ticket sales revenues which Nigeria has failed to remit to the airlines due to the scarcity of foreign exchange (forex). Issuing the dire warning that foreign airlines might withdraw their operations in Nigeria if the funds were not paid, IATA regional vice president for Africa and the Middle East (AME), Kamil Al-Awadhi, painted a gloomy picture of the aviation sector, which took its biggest hit ever, from the Covid-19 pandemic; losing over 75% of its international route connectivity last year; from which it is yet to even recover. The warning followed an earlier alarm by the National Association of Nigeria Travel Agencies (NANTA) that its members were considering relocating to Ghana, in the wake of inconsistent policy somersaults that have cost foreign airlines billions in losses; forcing no fewer than 15 to withdraw their operations from Nigeria. Reduced international air connectivity erodes competitiveness, diminishes investor confidence and inflicts reputational harm from the perception that Nigeria is a high business-risk environment. That being the case, it is proper to ask if there would ever be respite for the travelling public!
Although the Nigerian Civil Aviation Authority (NCAA), has decide to play the ostrich by refusing to admit that gravity of the situation, which now seem to have past crisis point, IATA was unequivocal in blaming the current nightmarish experience the airlines are facing on the policy inconsistencies of the Buhari administration, notably the pig-headed forex policy. “Airlines’ inability to access adequate foreign exchange in Nigeria is a rapidly increasing obstacle,” Al-Awadhi said, adding: “Cash flow is key for airlines’ business sustainability – when airlines are unable to repatriate their funds, it severely impedes their operations and limits the number of markets they can serve.” He disclosed that globally, $1 billion in airline funds was blocked by 20 countries worldwide and of this, about $700 million was tied up in 11 African countries, including $208 million being held in Nigeria. He said the Nigerian debt was the highest by any single African country, saying that the blocked funds keep on rising every week.
Earlier this year, NANTA President, Susan Akporiaye disclosed that the effects of Covid-19 on air travel and its attendant effects on the country and economy were made manifest as total tickets sold for the first quarter of 2020 decreased by $151 million. This was a sharp reduction to $282.35 million sold in 2019 by foreign carriers that operated in and out of the country. In April 2020, there was a sharp decline in travels with BSP (Billing Settlement Platform) recording a $-1.36 deficit, indicating that the platform recorded more refunds than sales. Travel agencies have been recording losses as many more airlines quit Nigerian routes. The government last year introduced a fiscal policy through the CBN, restricting access to forex and funds transfer out of Nigeria. In the process, IATA estimated that no less than $800 million belonging to foreign airlines was stranded in Nigeria. With devaluation of the Naira, the $800 million from ticket sales when the exchange rate was N197/$1, was taken out of the country at the new rate of N320/$1. Consequently, for every $1m repatriated under the new CBN forex policy, the airlines lost at least $200,000.
Aviation sources at the time estimated that Delta and United Airlines had up to $180 million hanging in the Nigerian economy, while Air France-KLM was estimated to have over $150 million. British Airways had about $100 million, while Iberia, which had already withdrawn its services, had $5 million of its funds trapped. Foreign airlines remained a major stakeholder in the aviation industry, accounting for about 90% of air passenger traffic and for some airlines to lose up to 50% of their funds due to the forex policy, is completely unacceptable. Already, Nigerian pilots and aeronautical engineers are redundant as a result of the unavailability of aircraft needed to practicalize their skills. “Prior to the pandemic, aviation in Nigeria supported 241,000 jobs and contributed $1.7 billion to the GDP. Imagine the social and economic trickle-down benefits for Nigeria if it could sustain thousands of livelihoods by making it possible for airlines to fly people and goods between countries and continents,” Al-Awadhi said.
“Strong connectivity is an economic enabler and generates considerable economic and social benefits — something that struggling economies need more than ever. It is in everybody’s interest to ensure that airlines are paid on time, at fair exchange rates and in full. We call on the government to prioritize aviation in the access to foreign exchange on the basis that air connectivity is a vital key economic catalyst for the country. At stake is Nigeria’s important economic and social standing in Africa and on the global stage. This is far too great to jeopardize by failing to safeguard its air connectivity. The airline industry is a competitive business operating on thin margins. So, the efficient repatriation of revenues is critical for airlines to be able to play their role as a catalyst for economic activity. It is unreasonable to expect airlines to invest and operate in nations where they cannot efficiently harness revenue from their services,” Al-Awadhi said.
This is no time for rigmarole. Over the years, the aviation sector has appeared too ridden with corruption with all the internationally accepted best practices in suspension. Too many questions hang over too many things: the award of concessions, the disbursement of intervention funds meant to improve the sector, the employment or summary dismissal of personnel, conscientious enforcement of rules by the regulatory agencies, the renovation of facilities, and the wasteful spending such as buying armored luxury cars for high officials even as some airports lack up-to-date equipment. It is no wonder that, in a manner of speaking, the sector is never firmly airborne but remains grounded.
Some points must be made in regard to the current connectivity crisis. First, Nigerians deserve an explanation for the inconsistent government policy somersaults that has engendered the crisis for two reasons: in a democracy, it is a right due to the electorate from the elected. Second, it can be that the aviation authorities are AWOL; so when will they come back to Nigeria? If and when they eventually return home, all they need to do is to dust up reports of past legislative hearings to understand the rot in the aviation sector. It bears repeating: Nigerians have a right to know how their country is run.
Besides CBN forex policy that has poisoned the enabling environment, the local aviation industry had been embroiled in a controversy on the propriety of the imposition of $4000 and $3000 tariffs per trip for foreign registered and Nigerian aircraft imposed by the NCAA on non-scheduled commercial airline operators. While businesses are bound to pay legally sanctioned taxes or tariffs, it is inconceivable that government would deliberately inconvenience citizens through imposition of high tariffs, or make it difficult for service providers or companies to operate. Nigeria cannot afford the luxury of its citizens travelling first to a neighboring country to catch flights on account of cheaper rates. In this case, there ought to be equilibrium on the airfare tax ratio comparable to neighboring countries. A plethora of taxes on service by government, whose impact, is eventually transferred to consumers is unacceptable.
The Buhari administration must stop giving the impression that foreign airlines are being witch-hunted in Nigeria. Their service to those who have the means is essential. The present quagmire was avoidable if the government had set out to find common ground to resolve the problem of forex crunch, which prevented foreign airlines operating in Nigeria from repatriating the stipulated 5% profits. Huhuonline understands that the airlines had insisted on making payments in naira equivalent, but constitutional provisions prevented them from doing so; raising questions as to why the National Assembly failed to intervene by amending the relevant laws in this regard. This is more so at a time when government revenue is said to be dwindling and juxtaposed with the series of air mishaps and the failure to secure safety of air transportation, the extent of government’s contempt and disdain for its citizens becomes even more obvious.
Amongst the numerous problems bedeviling the sector includes aviation fuel scarcity which remains a major problem in Nigeria. In spite of the country being an oil-producing one, it is embarrassing that airlines get their fuel from neighboring countries. The implications for aviation seem to be having a domino effect on the transportation industry, as is being witnessed in the maritime sub-sector (forcing diversion of ships away to Cotonou in Benin Republic). The present challenges faced by the aviation sector make it imperative for relevant agencies to re-evaluate their policies going forward. The greatest fear, however, is compromising the safety of air travelers. What the time calls for is a comprehensive overhaul of the aviation sector to inspire confidence in the flying public. Nigerians in their own right should demand nothing less from their government.
