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Aviators demand new strategies to tackle trapped funds, FX crisis

By Wole Oyebade
26 August 2022   |   4:34 am
Aviation stakeholders have urged the Federal Government and the Ministry of Aviation to think outside the box for sustainable solutions to defray foreign airlines’ trapped funds and the foreign exchange liquidity crisis.

Aviation. Photo; tashlineinstituteofaviation

•NUATE proffers crude oil swap, bemoans withdrawal implications

Aviation stakeholders have urged the Federal Government and the Ministry of Aviation to think outside the box for sustainable solutions to defray foreign airlines’ trapped funds and the foreign exchange liquidity crisis.

The concerned parties said given a strategic policy-driven system, the foreign segment of the air transport sector directly generates enough hard currencies to settle airlines’ trapped funds in-house.

Specifically, they have called for a reevaluation of the Bilateral Air Transport Agreements (BASAs) with other countries, interlining arrangements with local airlines, audit of incomes generated in foreign exchange, and other extraordinary measures like crude oil swap for currencies, at least to save the sector in the short-run.

The aviation sector has lately been apprehensive over foreign airlines’ stranded funds in Nigeria, estimated to have reached $464 million as of July. Emirates airline, among others, has notified the government and customers of its plans to halt Nigerian operations, effective September 1, 2022.

Exits of foreign carriers that account for 80 per cent of commercial aviation earnings to the Gross Domestic Product (GDP) will hobble projected growth of the air transport sector and cost Nigeria $1.36 billion or N567.12 billion (at $/N417) yearly.

Secretary General of the Aviation Safety Round Table Initiative (ASRTI), Group Capt. John Ojikutu (rtd), said Nigeria is in a foreign exchange fix because it failed to tailor or plan its policies to save earnings for the rainy days.

Ojikutu queried the aviation policies that allowed foreign airlines’ multiple destinations into the country without reciprocity nor interlining with local carriers, coupled with estimated $1 billion yearly raked in from aviation services and charges.

He raised questions: “First, how did we plan to repatriate the foreign airlines earnings when we signed the BASA agreements with them? How did we come to be giving the foreign airlines multiple destinations outside the BASA, without the considerations for the domestic markets and the domestic airlines?

“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.

Ojikutu added that the implication of foreign airlines exiting Nigeria is dire. “The country will lose earnings on Passenger Service Charge (PSC), landing and parking, navigational charges, ground handling services, cargo service charges, five per cent tickets sales charges and cargo sales charges, fuel charges, and so on.

“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 recommended that the responsible authorities should stop the multiple destinations given to the foreign airlines, but replace the same with multiple frequencies to two airports; Lagos or Abuja and one other airport in the alternative geographical area.

“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.

Secretary-General of National Union of Air Transport Employees (NUATE), Ocheme Aba, reckoned that the foreign airlines’ exit warnings are threats to Nigerian workers and the livelihood of thousands of employees of these airlines.

Aba, however, said that there are no magic wands to the liquidity crisis, other than extraordinary measures to save the sector and the economy from the looming calamity.

“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,” he said.

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