IATA Reports That Nigeria Owes $812.2 Million in Airline-Trapped Funds to Rank No.1 Globally

The International Air Transport Association disclosed yesterday that funds trapped by foreign carriers operating in Nigeria and other African countries have reached $1.68 billion. 

This was announced by the Regional Vice President of Africa and Middle East, Kamil, who stated at the opening of the African Airlines Association annual general assembly in Kampala, Uganda, that since 2018, a massive amount of funds have been repatriated from Angola, Ethiopia, Ghana, Nigeria, and Zimbabwe through closer relations with respective governments.

The IATA reported that over the past few years, the commission has been partnering with governments of some African nations to sort out ways to liberate foreign carriers' trapped funds, which started in 2018, while a more significant amount has been held back in Angola, Ethiopia, Ghana, Nigeria, and Zimbabwe. 

In January 2023, airlines trapped funds in Nigeria rose to $743,731,027 from $662 million in January 2023 and $549 million in December 2022. As of June 4, 2023, the records showed that the trapped funds of foreign airlines operating in Nigeria have risen to $812.2 million.

Alawadhi said in his speech that restoring trapped funds by governments from repatriation has been extremely difficult for the IATA, as it has continued pressuring the government to keep up on clearing the backlog of trapped funds.

He said,

• Currently, $1.68 billion in airline funds still need to be blocked across the continent. The second major issue plaguing Africa is blocked funds. As of September, $1.68 billion of airline funds are blocked across Africa out of $2.36 billion globally. The numbers are alarming, and this impact on connectivity is devastating.

• Aviation is capital-intensive. Cash flow is key for airlines’ business sustainability – when airlines are not able to repatriate their funds, it severely impacts their operations and their decisions on where to fly.

• But the risk of blocked funds is not just limited to airlines; the negative impact extends to the countries blocking the funds. It impacts the country’s economy and its connectivity, and it hurts investor confidence and reputation. Aviation is not only an economic enabler, it is a pillar of modern economies. Governments must prioritize aviation and find sustainable solutions in the clearing of blocked funds, and we continue to offer our support in any way we can. Africa’s aviation industry is still recovering from significant losses due to the pandemic.

• To make up for this shortfall, governments should avoid imposing higher fees, levies, carbon taxes, or new taxes on air transport, trade, or tourism. These measures would only make air travel more expensive and less accessible in Africa, where the average airfare is already 30 percent higher than the industry average and the jet fuel cost is 10-20 percent higher than the global average.

• Higher costs would discourage customers who are sensitive to prices, resulting in lower demand and revenue for airlines and other stakeholders in the aviation sector, such as airports, ground handlers, suppliers, and air navigation services.

• They would also hamper economic development and limit the opportunities for job creation and income generation. High cost leads to high price, which reduces demand and growth in a price-elastic market, and ultimately affects connectivity negatively.

• The message is clear: governments should follow ICAO’s policies on charges and infrastructure and consult with airlines and industry to ensure a fair and cost-effective operational environment that benefits a more connected continent.

Alawadhi said that IATA is distressed about air transport in Africa, where airports and other navigational charges pose problems for users of such facilities. He stated that for over 55 years, IATA and AFRAA have been good partners in supporting the development of air connectivity in Africa.

 He added,

• Infrastructure in Africa comes with a high price tag; user charges across the continent are eight percent higher than the industry average. Infrastructure charges must be set at levels that are fair, justified, and reflective of a value service proposition for airlines and passengers. Efforts through a pan-Africa fuel campaign have resulted in charge reductions in Chad, the Ivory Coast, and Zambia over the last five years.

• We have worked together with our member airlines through many good times. We have found great strength in partnership through far too many crises. And whether we are in good times or crisis, nearly every day, IATA and AFRAA are collaborating to help its members.

Nigeria Takes the Lead

Among the $2.27 billion in trapped airline funds, Nigeria owes $812.2 million, making it the country with the highest trapped funds globally.

The IATA said that the increase in rapidly rising levels of trapped funds poses a threat to airline connectivity in the affected markets.

According to the IATA, airline trapped funds have risen by 47% to $2.27 billion in April 2023 from $1.55 billion in April 2022.

The IATA added that five countries accounted for 68.0% of blocked funds, with Nigeria taking the lead as the country with the most trapped funds globally.