Nigeria’s $790m debt to foreign airlines could force some of them to stop flying to the country, according to the International Air Transport Association (IATA).
The IATA, which represents 290 airlines worldwide, says Nigeria is holding the highest amount of airlines’ blocked funds in Africa, followed by Egypt, Algeria, Ethiopia and other countries in the region.
Blocked funds are ticket revenues that airlines cannot repatriate from some countries due to currency controls, exchange rate issues or other restrictions.
The IATA Regional Vice President, Africa & Middle East, Kamil Alawadhi, said at a media presentation in Geneva, Switzerland, on Thursday that the Nigerian government had not engaged with the association to find a solution to the problem.
He said he had not been able to meet with the Central Bank of Nigeria Governor, who said he would contact him when he had a solution.
He added that he had met with the Aviation Minister, who was new to the position and seemed to understand the situation.
“The airlines in Africa are owed $34 million. That $34 million is blocked. Depreciation has set in on the money. They have already lost $10 million because of depreciation. That is not fair for the airlines because they have paid all the dues to the operators of the airports. Every due has been paid for. They carry Nigerian officials on these flights and they can’t get their money,” Alawadhi said.
High Costs, Low Profits
Based on a report by Punch, the IATA VP also said that Nigeria had two of the most expensive airports in Africa, Lagos and Abuja, despite the poor state of their infrastructure.
The fuel costs, insurance premiums and interest rates in Nigeria were much higher than elsewhere in the world, making it difficult for Nigerian airlines to compete and make profits.
“Every airline has its challenges and it depends on where it operates. To answer this question, I will use Nigeria as an example. 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.
“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. Any airline in Nigeria operating outside of Nigeria has a cheaper operating cost and better prices than Nigerian airlines. You can see why it is difficult for African airlines to make profit,” he said.
He said the IATA was trying to identify the reasons for the high costs and to tackle them one by one, hoping to lower the operating costs of the African airlines and help them become profitable.
A Hopeful Future
Despite the challenges, Alawadhi said he was optimistic about the future of aviation in Africa, especially with the implementation of the Single African Air Transport Market (SAATM), which aims to create a unified and liberalized airspace for the continent.
He stated that the IATA was working with the African governments and stakeholders to improve the safety, security and sustainability of the aviation sector in the region.
He urged the Nigerian government to release the blocked funds and to invest in the infrastructure and policies that would support the development of the industry.
