The recent clearance of the trapped foreign airlines’ funds by the Tinubu administration represents a positive index for Nigeria.

It has erased some negative impressions about Nigeria and enhanced the international recording of the country. Coming at a time Nigeria’s public image seems to be at its lowest ebb, the settlement of the trapped airlines’ funds is a master stroke for President Tinubu on behalf of Nigeria.

The International Airport Transport Association (AITA), recently reportedly confirmed that the Central Bank of Nigeria (CBN), has cleared the foreign airlines’ trapped funds worth $831m from June 2023 till date. IATA said the development had brought international airlines’ trapped funds globally to about $1.8bn. According to IATA, from a peak of about $850m foreign airlines’ funds trapped in Nigeria in June 2023, only $19m is still left outstanding. It added that the remaining $19m was waiting the CBN verification through the commercial banks.

The Director General of AITA, Willie Walsh, who made the disclosure, praised the Nigeria government for their effort in ensuring a successful repatriation of the funds by the international airlines. Walsh recalled that at the peak of the crisis in June 2023, Nigeria’s blocked funds significantly affected airline operations and finances in the country. Carriers faced difficulties in repatriating revenues in US dollars. The high revenue of blocked funds led some airlines to reduce their operations in Nigeria with the loss of jobs. The situation severely impacted the country’s aviation industry in an unprecedented manner. It is gratifying that as of April 2024, 98 percent of the funds have been cleared while the balance would be settled soonest.

Meanwhile, IATA also announced a significant decrease in the amount of foreign airlines funds blocked from repatriation by governments. According to Walsh, the major reason for the reduction is the significant clearance of the funds blocked in Nigeria, noting that Egypt also approved the clearance of a significant amount of its blocked funds. Unfortunately, the devaluation of the currencies of both Egypt and Nigeria has adversely affected the funds. It said the situation is more severe in Pakistan and Bangladesh with the continuous blocking of $731m. “Pakistan and Bangladesh must release the $731m in blocked funds immediately to ensure that the airlines can continue providing essential air connectivity. In Bangladesh the solution is in the hands of the Central Bank, which must prioritize aviation access to foreign exchange in line with international treaty obligations. The solution in Pakistan is in finding efficient alternatives to the system of audit and tax exemption certificates, which causes long processing delays,’ he stated.

As would be expected, foreign airlines have applauded the CBN over the clearance of the trapped funds in the country. Speaking under the aegis of the Association of Foreign Airlines Representatives in Nigeria (AFARN), the airlines said the clearance is a sigh of relief for their operations. According to the president, Kingsly Nwokoma, the CBN is urged to adopt a quarterly payment plan for the over $700m trapped funds remaining with the apex bank. Said AFARN, “We thank the government for listening and doing it little by little, but we hope they can do more or have an arrangement with the airlines for a quarterly payment and that would be perfect. A systematic type of payment every quarter will help defray the backlog, and we can also get it behind us once and for all.”

Also speaking, the Head of Financial Institutions Ratings at Agusto & Co, Ayokunle Olubunmi, said the clearance of the trapped funds and forex forwards would improve the value of the naira. According to him, “To be fair to the current CBN management, they have been trying their best, trying to clear the backlog of forex demand and matured forex forwards and have been trying to get them paid.” He added that the payment would boost investors’ confidence as they can easily repatriate their funds.

It would be recalled that the CBN recently cleared the backlog of forex owed foreign airlines in the country, as it concluded the payment of all verified claims by the airlines with an additional $64.44m to the concerned airlines. Acting director of corporate communications at the CBN, Mrs. Hakama Ali, said the latest amount paid to the airlines brought the total verified amount paid to the sector to $136.73m. According to her , the CBN Governor Olayemi Cardoso and his team are doubly committed to and would stop at nothing to ensure that a verified backlog payment across all other sectors were effected and confidence restored in the Nigeria market.

Furthermore, she assured that the CBN was working with stakeholders to ensure that liquidity improves within the forex market, thereby reducing the pressure on the naira. While expressing optimism that the market would respond positively to the latest injection of over $64m, she admonished actors in the foreign exchange market to guard against speculation as such actions would hurt the naira.

At the height of the trapped airlines funds, IATA warned that the rapidly rising levels of blocked funds were a threat to airlines connectivity in the affected markets and were gradually becoming a threat to global operations. Nigeria has been facing a severe forex crisis which made it impossible for international carries to repatriate accumulated funds from tickets sold in naira. As a result, many airlines resorted to various methods to get the attention of government such as stopping ticket sales. The UAE’s Emirates airline recently suspended all flights to Nigeria.

At the time, the total blocked funds of the global airline industry increased by 3.96 percent to $2.36 billion in September 2023 from $2.27 billion in April 2023. Of this amount, $1.65 billion was trapped in Africa, of which 45 percent ($792m) was trapped in Nigeria. The CBN prohibited foreign from issuing tickets to locals in foreign currency according to section 20(1) of the CBN Act. Nigeria has been experiencing a huge shortage of forex amid a growing demand and it appears the CBN has not been prioritizing airlines in accessing foreign exchange. The result is that Nigeria has earned a top position on the debt list with 33 percent of the total global airlines’ blocked funds.

In September 2023, President Bola Tinubu directed the CBN to create a platform for quarterly re-conciliatory meetings with foreign airlines to address the backlog of trapped funds and shortly thereafter, plans to clear the forex backlogs were rolled out. In recent times, as airline operators in Nigeria have been hit by this forex challenge, concerns were raised among other challenges. First was the scarcity and rising cost of aviation fuel (which accounts for about 40 percent of operations and conditions of services).

Over and above that is the acute stage of forex, which has become a big problem for airlines in Nigeria. Given the crucial importance of air travel for efficient conduct of trade and other economic activities and the impact on foreign direct investment (FDI), immediate steps should be taken to ensure forex availability for the airlines. It is on that ground that President Tinubu’s latest intervention in this regard should be commended. Government should do everything within its power to sustain this tempo and not relent to let the anomie to recur.

Dr. Nduka, a public affairs commentator wrote from Port Harcourt.