Foreign Airlines Face Potential $200 Million Loss Amid Naira Depreciation

The International Air Transport Association (IATA) has raised concerns about the potential financial impact on foreign airlines operating in Nigeria due to the significant depreciation of the naira against the dollar. IATA’s Regional Vice-President for Africa and the Middle East, Kamil Al Awadhi, expressed these fears in an interview with CNBC.

Al Awadhi highlighted the exacerbation of the issue of trapped funds, estimating that foreign airlines could face a staggering $200 million loss as a result of the naira’s depreciation. This comes in the wake of reports indicating that over $700 million of foreign airlines’ ticket revenue remains trapped in Nigeria.

Despite the Central Bank of Nigeria’s recent announcement of settling all verified debts owed to foreign airlines, IATA contested this claim, insisting that the airlines still had substantial funds trapped in the country.

Meanwhile, local travel agents, under the National Association of Nigerian Travel Agencies, have issued a warning to foreign airlines, urging them to release lower fares in their inventory or face severe consequences.

In response, IATA’s Vice-President emphasized the need for fairness, stating, “Airlines should not be unfairly penalized by the lower exchange rate.”

In a conversation with CNBC, Al Awadhi emphasized the impact of devaluing the naira on blocked funds, stating, “If you have $720 million blocked and then you devalue the naira by 30 per cent, you have wiped out over $200 million of airlines’ money, and they have to compensate that.”

The ongoing depreciation of the naira, which recently plunged from about 900/dollar to over 1,400/dollar at the official market, has raised concerns among industry stakeholders. President of the Association of Foreign Airlines and Representatives in Nigeria, Mr. Kingsley Nwokoma, supported IATA’s observations and urged the government to fulfill its payment obligations.

Nwokoma proposed the possibility of establishing an arrangement with the airlines, suggesting periodic payments, either monthly or quarterly, as a viable solution to the financial challenges faced by foreign carriers.

In response to the situation, passengers are reportedly opting to book flights from neighboring countries like Togo and Ghana due to cost considerations.

The Central Bank of Nigeria recently announced the completion of payments for all verified claims by foreign airlines, disbursing an additional $64.44 million to the concerned parties. However, challenges persist as stakeholders navigate the impact of currency fluctuations on the aviation industry, with debts being settled at the prevailing exchange rates.