Aviation stuck funds in Nigeria, other African countries hit $601m
Unrepatriated funds of foreign airlines in Nigeria and 16 other African countries have been estimated at $601 million.
The stuck fund is proceeds of ticket sales made in local currency but blocked due to the non-availability of foreign exchange to recoup it.
The International Air Transport Association (IATA) disclosed as it appealed to African governments to release funds and further support local carriers to increase the chances of survival amid the downtime.
In a related development, the Federal Government is contemplating another batch of bailout funds for the aviation sector, after the release of N5 billion.
Stakeholders yesterday confirmed that the proposal, describing it as part of the N27 billion originally budgeted for the industry.
IATA said that the continued financial relief and the release of committed aid and blocked funds were important for the survival of air travel.
The body recalled that in 2020, a handful of African airlines secured $2.04 billion in government aid. Most of the fund was distributed through direct government loans, equity financing, and cash injections.
Despite this, eight airlines in Africa filed for bankruptcy or entered business administration over the past 12 months.
Over $30 billion has been pledged for air transport and tourism in Africa by international finance agencies and other institutions, including the African Development Bank (AfDB), African Export-Import Bank, African Union (AU), and the International Monetary Fund (IMF).
However, most of this relief is yet to reach the airlines and other aviation stakeholders in need.
On top of this $601 million in the airline, funds remain blocked in Africa across 17countries. The countries are Algeria, Angola, Benin, Burundi, Central African Republic, Eritrea, Ethiopia, Equatorial Guinea, Malawi, Mozambique, Nigeria, Sudan, Gabon, Cameroon, Chad, Congo and Zimbabwe, putting further pressure on airlines as they struggle for survival.
IATA Regional Vice President Africa and the Middle East, Kamil Al Awadhi, said African airlines posted a combined $2 billion loss in 2020.
“This year we expect only a slight improvement (US$1.7bn loss) as the struggle with COVID-19 continues. Looking ahead it’s unlikely that traffic will return to post COVID-19 levels until 2023. Financial relief measures are still desperately needed, particularly those that do not increase the industry’s debt burden. Additional relief measures and activating existing pledges are essential,” Al Awadhi said.
He added that government relief comes in many forms. Cost reductions in terms of taxes and charges will help.
“And the release of the $601 million of airline revenues that are currently blocked from repatriation in certain governments would be an immediate boost in some markets. Governments will need a financially viable air transport sector to energise economic recovery from COVID-19.
“Many of Africa’s airlines were weak even before the crisis. Reducing costs and freeing blocked cash has long been a priority for African aviation. If ever there was a time for decisive government action on these issues, it is now,” Al Awadhi said.
Chairman of the Airline Passenger Joint Committee (APJC), Bankole Bernard, yesterday, said the stuck fund was not unconnected with the shortage in forex from the Central Bank of Nigeria (CBN).
Bernard said the stuck fund in Nigeria, in excess of about $100 million, was not yet outrageous compared to the 2016 experience, but the local authorities should ensure that the crisis does not worsen.
In 2016, the blocked fund was in excess of $600 million. Delta and United Airlines had an estimated sum of $180 million hanging in the Nigerian economy. Those of Air France-KLM was estimated to be over $150 million.
British Airways had a total of $100 million as of March 2016, while Iberia, which had already withdrawn its services had $5 million of its funds trapped.
Recall that the proposed N27 billion intervention fund earmarked for the aviation sector caused row lately. While stakeholders expressed displeasure over the release of only N5 billion out of the N27 billion, some operating carriers complained of being left out of the disbursement.
Among them are airlines like Aero Contractors, Ibom Air, West Link, TAL Helicopters, and Aircraft Maintenance Organisations (AMOs).
Following complaints, the House of Representatives Committee on Aviation pledged to look into the matter.
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