Trapped Funds Of Foreign Airlines Reach $743 Million In Nigeria, IATA Reveals

The International Air Transport Association (IATA) has disclosed that Nigeria has seen an increase of over 12% in trapped funds of foreign airlines operating in the country.

The trapped funds of $662 million from January 2022 has become $743 million this year. This information was disclosed in a letter addressing Minister of Aviation, Hadi Sirika on Tuesday, Punch reported. The letter was signed by the Area Manager West and Central Africa, Dr. Samson Fatokun.

"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," IATA wrote in the letter.

The letter further revealed that the "airlines' blocked funds in Nigeria have increased to $743.721.092 from $662m in January 2022 and $549m in December 2022," despite the intervention of the Central Bank of Nigeria to ensure they get cleared.

This news comes at a time when Nigeria is expecting foreign investments for some major airports.

The letter highlighted that airline-blocked funds in Nigeria will create a social-economic impact on the country, as it will discourage direct foreign investment in the future.

Moreover, the trapped funds are also violating the Bilateral Air Service Agreement and due to the current situation, IATA will take the drastic step of reducing the number of flights and seat sales in the Nigerian market.

With this step, Nigeria will receive fewer cargo and passengers in the country.

"Going by the law of demand and supply, the reduction of airline inventories in the Nigerian market will lead to the ticket fare increase, which will further burden average Nigerians," Fatokun further stated in the letter.

Furthermore, Fatokun also warned this step will create a negative impact on travel agencies, freight forwarders, and ground handling companies as many Nigerians will lose their jobs.

"The downstream sector [of] the aviation industry (travel agencies, freight forwarders, ground handling companies) relies heavily on airlines capacity to grow or remain in business," the letter added. "Should the airlines be compelled to further reduce their capacity, those businesses would be negatively impacted, leading to job losses. The negative indirect impact will also affect ground transportation (taxi, car hire), hotels and restaurants output."

However, the minister of aviation assured Fatokun on the same day that this matter will be taken to the Presidency and the Central Bank of Nigeria.

Last year, Emirates suspended all its flights to Nigeria to recover $85 million in trapped funds from the country.

Emirates announced in September 2022 that in the wake of the forex exchange crisis in Nigeria, the airline would "limit further losses and reduce the impact on its operational costs that continue to accumulate in the Nigerian market," The Cable reported.

"We sincerely regret the inconvenience caused to our customers, however, the circumstances are beyond our control at this stage," the statement added. "We will be working to help impacted customers make alternative travel arrangements wherever possible."

However, Emirates Airlines resumed their flights again in December that year. British Airways also did a similar move in August 2022, when they closed inventory in Nigeria to stop travel agencies from making bookings.

President of the National Association of Nigeria travel agencies Susan Akporiaye explained that the bookings are closed only for Nigeria travel booking portals, but users can still book their tickets online via British Airways' website.