Foreign airlines’ funds trapped in Nigeria, others reach record high $1.68bn

Business a.m

The International Air Transport Association (IATA), has  confirmed that blocked funds by foreign carriers operating in Nigeria and other parts of Africa have reached over $1.68 billion.

Kamil Alawadhi, regional vice president for Africa and the Middle East made this known at the opening of the African Airlines Association’s (AFRAA) annual general assembly held recently in Kampala, Uganda.

Alawadhi further stated that since 2018, IATA has been engaging the governments of some African countries to consider measures that will facilitate the release of funds trapped by foreign carriers operating in those countries. He noted that while there had been progress in some countries, the situation remained challenging in Nigeria, where the level of funds blocked by foreign airlines has grown to $812.2 million, up from $662 million in January 2023 and $549 million in December 2022. In addition to Nigeria, Angola, Ethiopia, Ghana, and Zimbabwe have significant amounts of blocked funds.

Alawadhi stated that IATA has been working tirelessly to persuade governments in Africa to free the large amounts of money trapped in their countries by airlines, but this has been a challenging task. He noted that IATA has been providing advice to governments on the best practices for clearing the backlog of blocked funds, which will require a concerted effort from all parties involved. He added that the issue of blocked airline funds has been a source of concern for IATA, as it has a significant impact on the viability of airlines operating in Africa and their ability to provide essential air connectivity.

He said: “Currently $1.68 billion in airline funds remain blocked across the continent. The second major issue plaguing Africa is blocked funds. As of September, $1.68 billion of airline funds are blocked across Africa out of $2.36 billion globally. The numbers are alarming and the impact of this on connectivity is devastating.”

The IATA regional vice president explained that because aviation is capital-intensive, airlines rely heavily on cash flow to remain sustainable. Thus, their inability to repatriate revenue earned from operations in African countries significantly affects their operations and their ability to make decisions on where to fly. He further explained that the issue of blocked funds also affects consumers and local businesses, as it increases the cost of air travel and limits the choice of routes available. He stressed that without a solution to the problem, it could stifle Africa’s economic growth and development.

In order to make up for the shortfall caused by blocked airline funds, Alawadhi advised governments against imposing higher fees, levies, carbon taxes, or new taxes on air transport, trade, or tourism. He explained that such measures would only serve to make air travel more expensive and less accessible in Africa, where the average airfare is already 30 per cent higher than the global average and jet fuel costs are 10-20 per cent higher than the global average. He noted that governments should instead focus on creating an enabling environment for aviation and tourism, which would lead to greater economic activity and job creation.

Alawadhi stated that IATA and AFRAA have been partners in promoting the development of air connectivity in Africa for over 55 years. He noted that the partnership has been instrumental in addressing key challenges facing the air transport industry in Africa, such as safety, security, infrastructure, taxation, and regulatory harmonisation. He added that IATA and AFRAA would continue to collaborate closely to promote the development of the air transport industry in Africa.