Pilots seek innovative approaches to settle the FX dilemma of foreign airlines in Nigeria

African commercial aviation

The Federal Government and the Ministry of Aviation have been encouraged by aviation stakeholders to go outside the box for long-term solutions to address stuck cash for international airlines and the foreign exchange liquidity situation.

The parties in question claimed that under a strategic policy-driven framework, the international air transport sector directly produces enough hard currencies to settle stuck funds held by airlines internally.

In order to save the sector at least temporarily, they have specifically called for a review of bilateral air transport agreements (BASAs) with other nations, interlining agreements with local airlines, an audit of foreign exchange incomes, and other extraordinary measures like trading crude oil for different currencies.

The stranded money in Nigeria from foreign airlines, estimated to be $464 million as of July, has recently caused concern in the aviation industry. Several airlines, including Emirates airline, have informed the authorities and their clients of their intentions to cease operations in Nigeria as of September 1, 2022.

Exits of international carriers, which account for 80% of the GDP’s revenue from commercial aviation, will hinder the sector’s expected growth and cost Nigeria $1.36 billion (or N567.12 billion, at $/N417) annually.

Nigeria is in a foreign exchange bind, according to Group Capt. John Ojikutu (rtd), Secretary General of the Aviation Safety Round Table Initiative (ASRTI), because the country didn’t adapt or plan its programs to store money for bad times.

In addition to the estimated $1 billion in annual revenue from aviation services and fees, Ojikutu questioned the aviation policies that permitted international airlines to fly to several destinations within the nation without reciprocity or interlining with local carriers.

“First, when we signed the BASA agreements with them, how did we expect to return the foreign airlines’ earnings?” he questioned. How did we come to provide many destinations for international airlines outside of the BASA without taking into account the local markets and domestic carriers?

“What was the sense in cancelling the commercial agreements that were made outside the BASA? What have we been doing with over $1 billion earnings on services provided to the foreign airlines by the private and government service providers? These are unilateral decisions that have no government backing and they surely are leading us to government and private sector revenue losses,” he said.

The consequences of international airlines leaving Nigeria, Ojikutu continued, are grave. The Passenger Service Charge (PSC), landing and parking, navigational charges, ground handling services, cargo service charges, 5% ticket and cargo sales charges, fuel charges, and other fees would result in losses for the nation.

“All these are what our neighbouring countries that may turn to be new hubs in the sub-region, will be generating from our lack of foresight,” he said.

Ojikutu advised the competent authorities to stop giving foreign airlines several destinations and replace them with multiple frequencies to Lagos or Abuja and one other airport in a different geographic region.

“They (foreign airlines) must be forced to have interlining connecting flights with the domestic airlines on domestic routes for their transiting passengers to their local destinations and pay in dollars for the connecting flights. Same too for cargo services. This way, we can generate additional forex from these airlines. Such forex must be domiciled with the Central Bank of Nigeria (CBN) where the recurring exchange can be paid or supported for the repatriation of the foreign airlines’ earnings.”

“Government must call on its agencies that have been collecting forex earnings from these foreign airlines and ships in the maritime services too, as well as the private sectors in the two sectors to bring back their forex earnings. Where they fail, they must return whatever government has given to them in forex transactions in the last eight years or their certificates of incorporation cancelled,” he said.

Ocheme Aba, the secretary general of the National Union of Air Transport Personnel (NUATE), believed that the exit warnings issued by foreign airlines posed a threat to Nigerian workers as well as the livelihood of thousands of these carriers’ employees.

However, Aba underlined that the only solution to the liquidity situation is to take extraordinary steps to protect the sector and the economy from the impending disaster.

“It is important to state that we are very mindful of current difficulties being experienced by the State with regard to the acute shortage of foreign exchange earnings. We also recognise that there are no straight fixes available.”

“But, in view of the apparent calamity that will surely befall the nation if the situation is not ameliorated quickly enough, we urge you to prevail on the Federal Government to take extraordinary measures to resolve the quagmire. Such a measure could include the use of crude oil swap to defray the backlog in the first instance,” Ocheme Aba said.

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