In a recent development regarding the foreign exchange backlog in Nigeria, the Minister of Aviation and Aerospace, Festus Keyamo, has clarified the current situation of trapped funds belonging to foreign airlines. According to Keyamo, approximately $600 million is still held up in commercial banks, differentiating this from the Central Bank of Nigeria’s (CBN) direct obligations.
Keyamo explained that the original debt to foreign airlines was about $700 million, of which the CBN has successfully cleared $136.73 million. The remaining balance, he noted, pertains to transactions foreign airlines conducted with commercial banks.
- He said: “It is the naira component deposited at the commercial banks that the banks have not been able to pay them the dollar equivalent, not the CBN.”
During his address at the 10th Annual Aviation Workers Week and Award Night in Abuja, Keyamo highlighted the government’s commitment to fulfilling its financial obligations to foreign investors. He underscored that the CBN had met its commitments from forex auctions conducted in the past few years.
- He said: “The ones for the CBN are the ones they promised to pay during the normal weekly auction they did two to three years ago up to this year.
- “The CBN has been able to fulfil that obligation to foreign investors. Government has shown its capacity to fulfil its dollar obligation to foreign investors.”
Government to drive competitiveness for cheaper flights
Addressing concerns about high airfares due to exchange rate fluctuations, Keyamo emphasised the government’s efforts to mitigate this issue. He reiterated the administration’s focus on enhancing the competitiveness of local airlines on international routes.
- He said: “There is no way our local airlines can compete for loans at 26%. What we are doing is going all over the world to get aircraft for them so that they can compete in those routes that our Bilateral Air Service Agreement (BASA) has allowed us to compete in.
- “If for instance, British Airways has 14 slots to come into Nigeria every week, we should also have our local airlines reciprocate and have 14 slots going to the UK every week. That competitiveness is what will force down the price.”
More Insights
- The situation with the foreign airlines’ trapped funds in Nigeria has been a significant challenge, intertwining the dynamics of forex liquidity and international business operations. The CBN has been at the centre of efforts to address this issue.
- As of the latest developments, the CBN confirmed that it has cleared a part of the forex backlog owed to airlines, totalling $136.73 million. This payment is part of the CBN’s broader commitment to settle verified forex claims in various sectors, including aviation. Despite these efforts, a considerable amount of the airlines’ revenues, approximately $600 million, remain trapped in Nigeria, impacting the operations of these international carriers.
- President Bola Tinubu directed the CBN to engage in quarterly reconciliatory meetings with foreign airlines to address the backlog issue. This directive comes amid criticisms from the International Air Transport Association (IATA) over multiple charges imposed on airlines operating in Nigeria and the country’s responsiveness to the foreign airlines’ inability to repatriate their funds.
- The issue of foreign airlines’ trapped funds reflects broader challenges in the country’s foreign exchange market. The resolution of this matter is pivotal for maintaining the confidence of international businesses in Nigeria’s economy and ensuring the smooth operation of foreign airlines in the country.
