‘Foreign airlines’ access to parallel market will end stranded fund crisis’
Chairman of Airlines and Passengers’ Joint Committee (APJC) of the International Air Transport Association (IATA), Bankole Bernard, in this this interview with WOLE OYEBADE, assesses the aviation industry’s performance in 2022, the problem with foreign airlines’ stranded funds and need for the Central Bank of Nigeria (CBN) to review the foreign exchange guiding rules.
Year 2022 has been adjudged as one of the most difficult years for aviation in Nigeria. How will you assess the sector’s performance?
I will say that based on the issues with the foreign airlines and further devaluation of the local currency, the industry did not really perform well in 2022; rather, it was a year more money chased fewer goods. For instance, if I sell a N100,000 ticket in 2021 and that same ticket costs N150,000 in 2022, you would say we have made higher revenue, meanwhile it is the inflation and exchange rate that made the cost of the same service to spike. It is not that we have increased the number of users. That is exactly what happened in 2022.
What did the figures look like?
We had about $1.1 billion of sales in 2022. It does not mean that we have done well, but we have an exchange rate that has gone through the roof. Again, these are funds from this market that are done from other markets. A ticket that was N1 million and now N3 million does not mean positive growth. Because, when you go into the real data, you will find that fewer people actually travelled in 2022 even though more sales were made because they had to pay more to enjoy the same kind of service.
The foreign airlines’ stuck fund crisis underlines the negative growth. How do you feel that your country tops the list of airline debtor countries (minus Venezuela) in the world?
It saddens one. It just shows that we got our priorities wrong because we could have averted the situation but we ignored it. When we signed the Bilateral Air Service Agreement (BASA) with other countries, it presupposed that foreign airlines will be able to move funds, of what they sold in Nigeria, easily and remit the same to their country.
Unfortunately, we operate a multiple-rate exchange market and we expect the airlines to keep to a particular one that we have failed to make available to them. Yet, the fear of devaluation, like it happened to airlines in the past, is also there. The airlines will rather not want to expose themselves to uncertainties. Therefore, they are looking for means to safeguard their investments.
That means that they will make your citizens pay through their noses.
Is that not exploitation?
Well, if that is the only choice left to them, what else can they do? Is it not better off than nothing? Don’t forget that they are still providing services and the risk must be measurable. If I invest a naira with minimal risk, it is better than a naira with huge risk, because the return on investment must be commensurate with the risk.
The public can see that the foreign airlines are already charging a premium at the rate that rivals the parallel market exchange rate. Why are they still bent on the CBN’s official window for repatriation?
Your law does not allow the foreign airlines to buy (forex) from the streets. Going to buy from the streets means that they are violating the laws of your country. The law has already keyed the operators to a certain window in a multiple-rate market and they cannot go beyond that. So, why not deregulate the market; allow them to source for forex wherever they can and then see whether things will not return to normal. But you cannot tie someone’s legs and hands and still expect the fellow to fight like a professional in the ring. No!
The CBN has said that the foreign airlines are not its priorities given that the liquidity crisis affects other sectors too?
It comes to the same thing we have been talking about the role of government. The truth is that the people in government circles don’t really understand the industry and other parastatals. This is why there should be a synergy among the various government officials for proper understanding. We don’t have that. The CBN should not come out to make such a pronouncement. They don’t even understand that there is a bilateral agreement in place, because if they do, then that sort of pronouncement will not be made in public.
In fairness, the CBN has made about two interventions for foreign airlines to repatriate stranded funds. Did it work?
Actually the government has tried different forms of interventions, but there will always be a problem where there is a misplaced priority. Let me ask: Where are the foreign exchange earnings from the oil industry? Are you telling us that we spend foreign exchange to import PMS? For some time now, only the NNPCL has been importing fuel, does it need to get foreign exchange from the CBN to buy fuel? No! So, where are our forex earnings going? We simply have a lot of people that are against the interest of this country and their actions do not portray them as patriots.
So, if you are saying that aviation is not your priority, then you are telling investors to look elsewhere. See how the cost of local airfares has hit the rooftop. Right now, there are scarcities of all sorts and everyone is exploiting everyone. The CBN intervened by word of mouth, but it never happened.
The IATA Regional Manager was recently in Abuja and commended Nigeria for the release of $265 million.
It was an advanced appreciation to motivate them to do the right thing. And that is why we are insisting that there must be transparency in all these things.
How much does Nigeria owe foreign airlines presently?
The amount has gone astronomical. You will find that airlines that are selling are doing so in dollars now. They don’t have a choice if they want to stay in business. It is now between $700 million to $800 million and everybody is just waiting for elections to come and to see the direction everything is going. The solution is now dependent on the next administration.
What should the next government do differently?
The next administration will have to look at policies that will stabilise the industry. The government’s job is all about policies and creating a conducive atmosphere for businesses. Ours is a tough, yet resilient economy. We Nigerians are also tough. We have resources that we can fall back on – that is oil – and the world is aware of this too.
The government only needs to de-emphasise the focus on oil and explore other sectors. Ethiopia has the best airport in Africa. They don’t have oil money but because they have been focused on aviation development. So, if the incoming administration can be more focused on aviation development, then the entire storyline will change.
We, industry players, also need to play a significant role to ensure that whoever is coming as the next minister will add value to the bottom-line. We have to be partakers in the process and not only show up at the last minute. There is a place for lobbying and positioning for strategic offices. There is a lot for stakeholders to do by coming together. Other sectors are doing so much to ensure that their industry is very relevant in the next administration. We in aviation are always folding our arms.
You are one of the advocates of a new national carrier. Are you disappointed at the turn of events?
It would be wrong to say that I am disappointed without having all the facts of the matter. Things are often not the way they appear. Let me cite an instance, there was a day I was with the Minister at Murtala Muhammed Airport in Lagos, it was at the height of the aviation fuel scarcity and I told him that a time was when we had supplies of aviation fuel from the depots straight to the airports. ‘What happened to the pipelines?’ He said a lot of people had built houses on the pipelines. ‘How many houses are we going to demolish?’ He said the moment you bring that idea up, you would have lawsuits everywhere. ‘So, how do we solve the problem?’ And I reckon with him. It is the same for the national carrier. There are certainly more details to the issue than is known already, which they cannot also come out in the open to talk about.