Some top officials of foreign airlines operating to Nigeria have disclosed that the Central Bank of Nigeria (CBN) has defrayed much of the $700 million in airlines’ funds trapped in the country.
The duo officials who spoke to Aviation Metric under the condition of anonymity said the CBN had paid from January 2022 to December last year, stressing that only outstanding from January to April this year was yet to be settled.
Although, they declined to disclose how much was paid and how much was left to be cleared by the apex Bank, adding, “One thing is certain; they are not accumulating more debts in the name of trapped funds.”
They said, “The CBN has worked very well to see that many of the airlines get their money that was trapped in the country. They have been paying. They have paid till December this year. What is left to be paid is the backlog from January to April 2023. There is a window opened by the CBN for us to get our money which is higher than the official rate.”
They said since April this year, the airlines and the CBN devised a new way of stopping the accumulation of carriers’ trapped funds by opening a new exchange rate window for them which is almost at par with the rate at the parallel market. As a result, airlines can sell fares and repatriate their funds immediately
To forestall the situation the carriers found them with blocked funds, they appeared to have won the battle against the tough stance of the country’s apex bank to stop foreign airlines from basing their fares on United States dollars; the carriers seemingly won the war with the apex Bank helpless in restraining them from doing so.
The CBN had last year warned the carriers to desist from charging travelers from Nigeria dollars on tickets, insisting that the nation’s currency is in Naira which is the legal tender for all monetary transactions within the country.
The carriers had maintained that charging fares in dollars would help them to minimize their trapped funds said to have risen to over $700 million.
The accumulation of airlines’ funds is a result of the long wait the carriers had to wait for the CBN to make Forex available to them at the official rate of between N450 and N460 which takes a longer period of more than 90 days to access and in some instances shorter time if the airlines agree with the CBN to exchange for around N500 and could be accessed in few days if it exchanges for between N550 and N600.
The situation has led to a lot of losses for the airlines, leading to the closure of lower ticket inventories by the carriers.
Consequently, the action taken by the carriers to mitigate their losses by accessing Forex at a higher rate has led to an astronomic increase in airfares.
The rise in fares has not deterred Nigerians whose taste for international air travel hasn’t waned. Rather, there has been a huge increase in the number of people particularly, premium travelers taking to air travel.
For instance, Economy class return tickets to Europe that hitherto sold for between N400,000 and N500, 000 has skyrocketed to over N800,000 and N1.2 million.
President, of the National Association of Nigeria Travel Agencies (NANTA), Susan, Akporiaye admitted that airfares have further spiked, with six-hour economy class tickets that erstwhile sold for N300,000 now selling above N1.5 million, adding that the airlines have left only the highest inventories open to bookings in Nigeria.
“As usual with them, their response which we could describe as a ‘High Fare Pandemic’, is solely targeted at Nigeria and Nigerians, and cannot be seen anywhere in Africa even in countries where they also have their funds being trapped.
“It is sad that Nigerians have to buy tickets to the tune of N3 to N4 million and be charged as high as N1 million to change travel dates even on tickets bought before this crisis began.
Chairman of Finchglow Travels Limited, Mr. Bernard Bankole told our correspondent that the idea to jettison Naira-based tickets had significantly reduced the amount of airlines’ trapped funds.
The International Air Transport Association (IATA) which is the representative body for over 250 global airlines devised new means of basing the exchange rate for tickets allegedly on the exchange of Naira to the dollar at the parallel market.
But the group in a statement recently explained that the exchange rate applied to international flight tickets sold in Nigeria is not determined by IATA, stressing that, “ It is incorrect to describe them as the “IATA exchange rate”.
According to IATA, “Air fares for international flights from Nigeria are denominated in US Dollars and converted into Naira, the local currency, for sale in the Nigerian market. These conversions use the official prevailing exchange rate provided by the country’s financial system”.