National carrier of the United Arab Emirates, Emirates Airlines, has withdrawn passenger flight services on Nigerian routes over foreign airlines’ trapped funds, estimated to have reached over $500 million.
This is coming as more foreign airlines have also hinted at reviewing their future operations in the country, based on the final outcome of the recent intervention by the House of Representatives.
Emirates, in an official memo to the Ministry of Aviation in early October, had notified that barring repatriation of about 80 per cent of its accumulated funds in Nigeria by month-end, it would suspend operations by October 29.
The Guardian learnt that the ‘commercial decision’ to stop Lagos and Abuja operations was hastened by the recent visa ban on Nigerians travelling to Dubai, coupled with the alleged nonchalance of the Central Bank Nigeria (CBN) to defray trapped funds.
Travel agencies yesterday regretted the “avoidable development”, saying Nigerian travellers would have more difficulties reaching other parts of the world without Emirates.
About two months after CBN intervened in the trapped fund’s crisis, with the release of $264 million out of $465 million, there has been no reprieve as the foreign airlines’ monies in Nigeria continue to accumulate and are now in excess of $500 million.
The funds are proceeds of international flight tickets that had been sold in naira but starved of foreign exchange (dollars) equivalent to repatriation to the airlines’ home countries.
Following the protest by travel agencies, the House of Representatives, a fortnight ago, summoned the Ministry of Aviation and CBN to a round-table with operators, as part of measures to release trapped funds in the country and make flight tickets affordable.
Though CBN had said the foreign airlines were not its priority, the meeting ended with an agreement to release another batch of $150 million to the airlines. Some of the airlines, however, said such interventions have not helped their cause.
A top official said: “Some of us have not received any of the released funds as we speak. Yes, they promised $265 million then, I’m aware only a fraction has been released. It seems CBN is just trying to buy time, while our monies continue to increase.
“Not many of the airlines can put up with such issues beyond November. The government has shown that they are not ready to keep commercial agreements. Then, you cannot blame foreign airlines for preparing to leave. I’m aware that two more will follow Emirates,” he said.
Emirates has since July notified the Aviation Ministry of its plan to slash daily frequencies to Lagos over accumulated stock funds.
In an official memo to the Federal Government last month, obtained by The Guardian, Emirates said it had continued to actively seek a solution for the repatriation of the remainder of its blocked funds in Nigeria.
“We were encouraged by CBN’s efforts of reviewing our request and considered that this critical issue would be swiftly resolved with the subsequent clearance of our remaining funds.
“However, Emirates has yet to receive an allocation of our blocked funds to be repatriated. Without the timely repatriation of the funds and a mechanism in place to ensure that future repatriation of Emirates’ funds does not accumulate in any way, the backlog will continue to grow, and we simply cannot meet our operational costs nor maintain the commercial viability of our operations in Nigeria.
“We have officially communicated our position and attended multiple hearings with the Nigerian government, and we have made our proposed approach clear to alleviate this untenable situation, including a plan for the progressive release of our funds.
“This included the repatriation and receipt of at least 80 per cent of our remaining blocked funds by the end of October 2022, in addition to providing a guaranteed mechanism to avoid future repatriation accumulation challenges and delays. Under these extraordinary circumstances, Emirates had no option but to suspend flights to/from Nigeria from 29 October 2022 to mitigate against further losses moving forward.
“We hope to reach a mutual resolution with the Nigerian government around the repatriation of blocked funds to enable the resumption of operations and connectivity for travellers and businesses,” the memo read in part.
Travel expert, who also doubles as Chairman of the Airlines and Passengers Joint Committee (APJC) of the International Air Transport Association (IATA), Bankole Bernard, said there would be a telling effect of Emirates’ exit, given its place as the “most significant” airline, by passenger traffic, on the Nigerian route.
Bernard noted that the airline is the most subscribed by Nigerians, given its multiple destinations worldwide through the Dubai Airport.
“I think every airline has the right to suspend operations for various reasons, insofar as they notify the general public. The Nigerian market has been a feeder to Emirates. They had earlier planned to leave on September 1, but CBN’s intervention shifted the plan and had operated their last flight on October 28.
“But you cannot blame them because they are not a charity organisation. Instead of making profits, their money is getting trapped here. They also need the fund to cover the cost of operations. Theirs is peculiar because, unlike others that are selling their tickets outside Nigeria, Emirates has been selling in Nigeria and in naira.
“Their exit will now mean that the likes of British Airways and Qatar would have a field day in the Nigerian market. Also, Nigerian travellers will have limited choices. I hope the likes of Air Peace can see opportunities to fill some of the voids,” Bernard said.
Another travel expert, Sunday Olumegbon, noted that Emirates’ exit was calculated and would not benefit any Nigerian airline.
“About a week ago, they banned Nigerians, among other countries, from acquiring travel visas in the UAE. Technically, there are no Nigerian travellers to ferry on that route for now. I think they (Emirates) know what they are doing.
“Above all, it is really not good for our image as an aviation country. We had an agreement with this airline, to sell in naira and get dollars equivalent to repatriate. I think we should not be offended because they are complaining. I have expected a more responsive government to engage with the foreign airlines even more and map out sustainable plans to ensure that the backlog does not keep mounting,” Olumegbon said.
However, the Minister of Aviation, Hadi Sirika, has said Nigeria would not succumb to threats by foreign airlines to shut down operations in Nigeria.
Sirika said he expected the foreign airlines to empathise with Nigeria in this difficult situation, given the amount of money they make in the country and should not threaten to shut down operations.
“If you disagree, we expect that you come to us and we negotiate and we give you what we have in the hope that we finish paying; what I have a problem with is threats. Every country; every airline will threaten Nigeria. ‘We will not fly to Nigeria again’, ‘we are not giving Nigerians visas’, ‘we won’t do our operations’, ‘we will shut down Abuja and Lagos’.
“Please, countries have been shut down completely and they did well, there are examples in Asia, the Middle East and even Europe; we are not afraid of being shut down. It will help us to do better; our school and hospitals will do better; we will begin to go to our own hospitals and to our own schools. If you shut down Nigeria, it does not make any sense and we are not threatened.”
IATA’s Regional Manager, Dr Samson Fatokun, earlier said the stranded fund scenario was quite embarrassing for the country, by having in its possession 36 per cent of all stranded funds globally.
Fatokun noted that the current problem did start in March 2020 with $700 million stranded in Nigeria, until $265 million was released.
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