Foreign Airlines May Exit Nigeria, 25% Interest Rate ‘Ridiculous’: IATA

The International Air Transport Association (IATA) warned that foreign airlines may be forced to leave the Nigerian market due to increasing trapped funds, higher loan interest rates and insurance premiums.

Kamil Alawadhi, IATA's regional vice president for Africa and Middle East, said Thursday that Nigeria needs to fix the $792 million ticket revenue trapped in the country, Naija Times reported. Nigeria reportedly holds the highest amount of airline-trapped funds in the world, followed by Egypt ($348 million), Algeria ($199 million), AFI zone ($183 million) and Ethiopia ($128 million).

Praising Ethiopia for taking steps to resolve the blocked funds crisis, Alawadhi noted that the first step toward the solution is communication between both parties.

"If parties don't engage, it is very difficult to move forward. I have not been able to engage with Nigeria's CBN Governor. He said he would engage with me when he had a solution," he said during an interaction with journalists from the African region at the IATA Global Media Day in Geneva on Thursday.

Though Alawadhi slammed Nigeria's Central Bank governor, Olayemi Cardoso, for not engaging with him, he did praise Aviation Minister Festus Keyamo as very "understanding" despite being new to the position. Keyamo was appointed as aviation minister in August by President Bola Tinubu.

Alawadhi noted that foreign airlines in other countries have cheaper operating costs and better prices than Nigerian airlines, which are struggling to make profits.

Nigerian airlines pay between 10% and 12% of the value of an aircraft to insure it, while airlines operating in Ghana, South Africa and other African countries pay 2% to 3%. In a stark contrast, airlines operating in Europe and the United States pay only between 0.5% and 1% to insure the same aircraft.

"...Nigeria has two most expensive airports; their fuel is higher than elsewhere in the world, and insurance is six times more expensive than anywhere else in the world," Alawadhi said. "The interest on loans is 25%. It is ridiculous. It is the highest interest I have ever seen."

"When you set up these airlines, you are already disadvantaged," he added.

Alawadhi said IATA is working on a solution to tackle the high-cost problem in the country, expecting to bring down the operating costs of African airlines.

Due to funds trapped in Nigeria, the United Arab Emirates stopped issuing visas to Nigerian nationals after Emirates Airlines suspended flights last year. However, the ban was lifted after President Tinubu visited Abu Dhabi and secured a landmark deal across various sectors in September.