The backlog of foreign airlines’ trapped funds in Nigeria could be reduced by the sale of air tickets in dollars, according to Simeon Uchendu, an aviation analyst and flight dispatcher. Uchendu noted that foreign airlines contribute over 70% of aviation earnings in Nigeria, but their inability to access foreign exchange resources has resulted in significant funds being trapped in the country. The backlog of trapped funds reached $549 million as of December 2022, $662 million in January 2023, and now stands at $744 million as of April 2023, a rise of 11% compared to the previous month.
Foreign airlines collect Naira for their tickets, but exchange the same for foreign currencies to fund their operations. Due to the scarcity of foreign exchange resources, however, they have been unable to execute the exchange through the official foreign exchange market. Consequently, they have been forced to reduce their frequencies to Nigeria or suspend operations in the country altogether. For example, Emirates Airline, the United Arab Emirates flag carrier, suspended its operations indefinitely in Nigeria in October 2022, affecting the allied services in the country to the airline, such as hotels, catering services, car hire, security, expatriates, fuelers, and other backup companies.
Mr. Francis Ihenacho, Director of Research at Kenrich Travels Limited, stressed that the suspension of operations by Emirates Airlines in Nigeria has a ripple effect on the allied services in the country. He suggested that the Nigerian government should allow foreign airlines operating in the country to sell tickets in dollars, following Zimbabwe’s example. The Zimbabwean government allowed foreign airlines operating in the country to sell tickets in dollars, resolving the challenge of blocked funds being experienced by foreign airlines in the country.
Furthermore, Ihenacho recommended that the Nigerian government merge the black market rate with the official rate to reduce the challenge of trapped funds. He emphasized the need to find a way out of this crisis and prevent further loss of jobs and businesses. He pointed out that fuel suppliers who refused to collect Naira from Emirates are now collecting zero naira and zero dollars, highlighting the adverse impact of the situation on the Nigerian economy.
