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$600m trapped funds: Tinubu directs CBN to hold reconciliatory meetings with foreign airlines

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Wednesday, September 13th, 2023
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President Bola Tinubu yesterday, directed the Central Bank of Nigeria, CBN, to create a platform for quarterly reconciliatory meetings with foreign airlines to address the backlog of their fund.

This Minister of Aviation and Aerospace Development, Festus Keyamo made this disclosure at the ongoing African Aviation Summit in Abuja.

He noted that the development was one of the reasons President Tinubu travelled to the United Arab Emirates, UAE, to address.

The Minister also unveiled three roadmap projects which include Aerotropolis, Aircraft Leasing Company, ALC, and Maintenance Repair and Overhaul, MRO, facility.

He also unveiled five focus areas to realise the country’s vision of becoming an Aviation Hub in Nigeria.

The key areas listed include infrastructure upgrade, ALC, MRO facility and forex availability.

Also, the International Air Transport Association, IATA, has criticized Nigeria over multiple charges imposed on airlines operating in the country.

The global trade body representing the airline industry recently queried the federal government for not being responsive to the foreign airlines’ inability to repatriate their funds in excess of $600 million.

For instance, in Nigeria, foreign airlines collect Naira for their tickets to customers and exchange the same for foreign currencies for their operations. But they have been lamenting their inability to get the exchange executed through the official foreign exchange market due to the scarcity of foreign exchange resources.

A development which forced the UAE, flag carrier, Emirates Airlines to suspend its operations in the country.

It was also responsible for the move by the airlines to close down their lower fair inventory to travelling agents across Nigeria, denying them access to issuing tickets emanating from other countries into Nigeria in a bid to reduce the backlog.

Vanguard gathered that, travellers from Nigeria pay about N2.5 million for economy tickets to London, Heathrow airport, also, flying with KLM Royal Dutch, over N2.6 million flying with Virgin Atlantic, while with Lufthansa which is among the highest at N2.7 million.

Travellers from Ghana, South Africa, among other countries in the region which have to cover more distance to Heathrow than Nigeria pay about N400,000 to N500,000, for the same grade of tickets.

Meanwhile, Keyamo while speaking at the event stated that, “The recent global events, further exposed the immense contribution and importance of air transportation as a catalyst for economic development, vital engine of global socio-economic growth, one of the greatest contributors to the advancement of modern society and a key instrument for achieving the United Nations Sustainable Development Goals (SDGs).

“These underscore why the world was greatly impacted when international aviation was disrupted by the pandemic and other global occurrences. It is the Vision of this current administration to make Nigeria the Aviation hub of Africa.

“Government welcomes major players in aircraft leasing and head lessors to invest in Nigeria airlines to provide state of the art aircraft. The government will ensure the enforcement of contract agreements and the rights of investors and indeed all parties are protected and Nigeria being a signatory to the Cape Town Convention will uphold international obligations.

“This administration is committed to ensuring that forex is readily available to entrepreneurs this he has directed that the CBN holds quarterly reconciliation meetings with a view to resolve this issue.

“CBN is open to providing tax holidays to encourage existing and new entrants into the Nigerian Aviation Sector. I wish to reiterate that my administration, will continue to sustain the support being given to the industry.

“MRO facility is another critical aspect that can make the Nigerian aviation industry a hub on the continent. With the shortage of qualified engineers, the current administration is willing to provide all the necessary support for the establishment of world-class MROs and training organisations.

“On upgrading infrastructure, this includes upgrading of the Cat3 landing system, at major airports, construction of the second runway in Abuja, airport improvement programmes through Concession and government willingness to partner with companies to turn major airports into Aerotropolis.

“On tax holidays, the current administration is open to providing tax holidays to encourage existing and new entrants into the Nigerian Aviation Sector.”

IATA identifies 27 charges

Also, IATA’s, Vice president, Africa and Middle East, Kamil Al Alwadi, who spoke at the ongoing, identified about 27 charges imposed on airlines by the Nigerian government.

According to him, research indicates that Nigeria holds the top position in terms of airport charges among African countries.

He noted that Abuja airport is the most costly airport in Africa, closely followed by Lagos airport.

He lamented the stunted growth of aviation in the region, especially Nigeria, calling on the Nigerian government to create a conducive environment for airlines to thrive.

 In his word: “In a recent research conducted web discovered that the most expensive airport in Africa is Abuja airport, followed by Lagos airport, with all these exorbitant charges, Nigerian airlines can’t compete with their foreign counterparts.

“Africa has put itself in a a place where it cannot help its own, expensive fuel, excessive charges, leasing and insurance through the roof, the airlines need to be financially viable too. The airlines contribute to the country’s GDP but Nigeria needs to decide what to do for them to survive.

“Carriers based in Africa are expected to generate a moderate combined loss of around USD 484 million in 2023 because the continent remains a challenging market in which to operate an airline, with economic, infrastructure and connectivity challenges impacting the industry performance.

“However, despite the challenges, the industry continues to move towards profitability following the COVID disruption and could be in the black as soon as next year. Underpinning this is the robust demand for air travel. As we saw in the second quarter of 2023 – and for two consecutive quarters – African carriers had one of the world’s highest annual passenger traffic growth rates, second only to Asia Pacific.

“With total traffic up 38.9 percent compared to the same quarter in 2022, African carriers growth outperformed the industry-wide average for total and international traffic, even though the region has not fully recovered to pre-pandemic levels. Q2 2023 RPKs were 9.2 percent below the same quarter in 2019.

“Despite this continued positive performance, the region still confronts economic challenges that severely limit the affordability of air travel, in addition to a range of infrastructure issues that curb capacity and hinder the development of consistent air service.”

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