June 5, 2023/CSL Research

The International Air Transport Association (IATA) has said that blocked funds belonging to foreign airlines trapped in Nigeria has hit US$812.2 million. The world airline body made this known at its annual general meeting and world air transport summit taking place from 4 June to 6 June in Istanbul, Turkey, warning that rapidly rising levels of blocked funds are a threat to airline connectivity in the affected markets. The total global industry’s blocked funds have increased by 47% to US$2.27 billion in April 2023 from US$1.55 billion in April 2022. 

The top five countries that account for 68.0% of blocked funds are Nigeria with the highest trapped funds (US$812.2 million), Bangladesh (US$214.1 million), Algeria (US$196.3 million), Pakistan (US$188.2 million), Lebanon (US$141.2 million). According to news reports, airlines’ rate of exchange in Nigeria moved to N610/US$ last week from N462/US$ before March 22 and this is expected to impact the prices of both domestic and international air travels. In a bid to protect its citizens, CBN prohibits airlines from issuing tickets in USD according to section 20(I) of the CBN Act. This, amidst the current FX scarcity has earned Nigeria the top position on the debt list with 35.8% of the total airlines’ blocked funds. 

In recent years, airline operators in Nigeria have been hit by pertinent concerns. First, was the scarcity and rising cost of aviation fuel (which accounts for c.40% of their operational costs), with the attendant impact on the cost of operations and conditions of service. Beyond the high cost of aviation fuel, the current acute shortage of FX is also a big problem for airline operators. For domestic airlines, carrying out operational activities such as servicing their aircraft has become almost impossible amidst the acute scarcity of forex. The scarcity of FX has also been constraining international carriers from repatriating accumulated funds from tickets sold in Naira. Many airlines have had to resort to threats to stop operations in Nigeria to get funds from the CBN. In our view, the government needs to address these concerns urgently, considering the importance of the aviation sector to the economy.

Blocked Funds by Country (US$’m)