Foreign Airlines Worries Over $200m Loss To Naira Depreciation

By Clement Alphonsus

The International Air Transport Association, the Geneva-based trade association representing world airlines, expressed concern that foreign airlines operating in Nigeria, may lose about $200m to exchange rate depreciation.

According to the IATA Regional Vice-President for Africa and the Middle East, Kamil Al Awadhi, the issue of trapped funds was being exacerbated by the depreciation of the naira, which had dropped significantly against the dollar. This was disclosed by him in an interview with CNBC monitored by a correspondent.

Last week, the Central Bank of Nigeria disclosed that it had paid all verified debts owed foreign airlines but IATA in a swift response said foreign carriers operating in the country still had over $700m trapped in Nigeria.

Meanwhile, local travel agents under the aegis of the National Association of Nigerian Travel Agencies have requested that foreign airlines in the country should release lower fares in their inventory or face severe consequences.

This follows the CBN report of completing payments of foreign airlines debts.

The IATA VP, however, insisted that the CBN should complete all outstanding ticket revenue trapped in the country.

The IATA VP warned in a statement last week, “Airlines should not be unfairly penalised by the lower exchange rate."

While speaking to CNBC, AlAwadhi noted that, “You also have to take into consideration the blocked funds and the fair value of the blocked funds. If you have $720m blocked and then you devalue the naira by 30 per cent, you have wiped out over $200m of airlines’ money, and they have to compensate that.”

"Airlines have lost a lot of money operating in and out of Nigeria and it continues to be so under the current environment," he added.

Recently, the naira plunged from about 900/dollar to over 1,400/dollar at the official market.

The President of the Association of Foreign Airlines and Representatives in Nigeria, Mr. Kingsley Nwokoma, expressed concern that the naira was depreciating.

Nwokoma told a correspondent, “I concur with IATA’s observation regarding the diminishing value of trapped funds. The worth of the naira today is different from its value five years ago or even last year. The crucial aspect is for the government to fulfill its payment obligations.”

In his proposal, he said the Nigerian government should consider the possibility of establishing an arrangement with the airlines, considering periodic payments, either monthly or quarterly, as a viable solution.

According to him, “We have reiterated numerous times. The reality remains that the magnitude of trapped funds in our system is substantial."