The Central Bank of Nigeria (CBN) made a fiscal policy that restricted foreign exchange on 41 items and blocked the transfer of funds out of the country in 2015. As a result of this restriction, airlines’ funds have been stuck in banks since then.
In 2022, the International Air Transport Association (IATA) first identified Nigeria as the country with the highest foreign airline debt in the world.
Nigeria maintained this status the following year, with debt figures rising from $515 million to $783 million in August 2023. Presently, Nigeria owes foreign airlines about $800 million in trapped funds, all as a result of the policy of 2015.
On January 7, CBN announced a $61.64 million disbursement to the airlines through deposit money banks (DMBs). According to the apex bank, the disbursement was part of its efforts to clear the backlog of trapped forex owed to international airlines in the country.
Reacting to the disbursement on Sunday, the Association of Foreign Airlines and Representatives (AFARN) said it was nothing to be excited about.
Kingsley Nwokoma, the president of the association, explained that major airlines might withdraw their services completely if the crisis was not resolved.
“The government should sit with the foreign airlines just like how you sign your BASA agreements and agree on the quarterly payment of these funds. The government should please keep to that agreement. By then, we will be making progress,” Nwokoma stated.
Nwokoma’s statement isn’t a bluff. Between 2016 and 2024, for instance, two major foreign airlines exited Nigeria because they could not remit revenue. FIJ takes a look at these exits and the circumstances surrounding them.
In May 2016, Spanish Iberia Airlines withdrew its services from Nigeria after suspending operations for about three weeks. The airline said it withdrew due to dwindling passenger traffic and, most importantly, trapped revenue.
Despite only operating for two years, the airline claimed to have over $500 million held by Nigerian banks.
About a month after Iberia’s exit, United States Airlines also exited the Nigerian market. Like Iberia, United Airlines cited two major reasons for its exit, including the inconsistency of the energy sector.
United Airline’s major reason, however, was its inability to remit revenue from banks across Nigeria due to the CBN foreign exchange policy.
In the same year, the Guardian reported how no fewer than 14 airlines suspended operations in Nigeria as a result of trapped revenue. As of the time of the Guardian report in August, airlines were estimated to have lost N64 billion to the policy.
In September 2022, Emirates Airlines suspended its operations in Nigeria due to its inability to repatriate about $85 million of its revenue in foreign exchange from Nigeria.
According to the airline, it made the move to cut losses and reduce the impact of the Nigerian market on its operational costs.
“Without the timely repatriation of the funds and a mechanism in place to ensure that future repatriation of Emirates’ funds does not accumulate in any way, the backlog will continue to grow, and we simply cannot meet our operational costs nor maintain the commercial viability of our operations in Nigeria,” the airline explained.
Part of the conditions they gave for resuming operations was a plan from the Nigerian government that would ensure a progressive release of their funds. They also demanded that the CBN disburse at least 80 percent of their blocked earnings before the end of the following month.
Although Emirates Airlines resumed its operations 10 months after suspension, there have been no reports that they’ve recovered their revenue from the CBN
