The International Air Transport Association (IATA) has commended the efforts of the Federal Government and the Central Bank of Nigeria (CBN) in resolving the issue of blocked airline funds.
This praise comes as IATA reveals that $1.8 billion of airline revenues remain blocked worldwide, a significant concern for the aviation industry.
Willie Walsh, IATA’s Director General, said at a recent event in Dubai, “IATA appreciates the new Nigerian government and the Central Bank of Nigeria for their efforts to address this issue. Reliable air connectivity is crucial for individual Nigerians and the economy, and access to revenues is a key part of this.
“We are on the right path and urge the government to clear the residual $19 million and continue prioritizing aviation.”
At its peak in June 2023, Nigeria’s blocked funds amounted to $850 million, severely impacting airline operations and finances in the country.
Carriers faced significant difficulties in repatriating revenues in US dollars, which led to some airlines reducing their operations and one carrier temporarily ceasing operations in Nigeria.
This issue, however, is not isolated to Nigeria. According to IATA, eight countries account for 87% of the total blocked funds, amounting to $1.6 billion.
Pakistan and Bangladesh are the most affected, with airlines unable to repatriate $731 million ($411 million in Pakistan and $320 million in Bangladesh) of revenues earned in these markets.
Walsh said, “Pakistan and Bangladesh must release the $731 million in blocked funds immediately to ensure airlines can continue providing essential air connectivity.
“In Bangladesh, the solution lies with the Central Bank, which must prioritize aviation’s access to foreign exchange in line with international treaty obligations.
“In Pakistan, the solution involves finding efficient alternatives to the system of audit and tax exemption certificates, which cause long processing delays.”
IATA, representing 330 airlines that account for more than 80% of global air traffic, has highlighted the issue of blocked funds for some time, reiterating its call for governments to remove all barriers to the repatriation of airline revenues.
These revenues are generated from ticket sales and other activities in accordance with international agreements and treaty obligations.
In a recent announcement in Dubai, IATA revealed that the total amount of blocked funds had been reduced by $708 million (28%) since December last year.
This significant reduction was mainly driven by the release of blocked funds from Egypt and Nigeria. However, in these cases, the airlines were severely affected by the devaluation of the Egyptian Pound and Nigerian Naira.
“The reduction in blocked funds is a positive development,” Walsh noted. “The efficient repatriation of airline revenues is guaranteed in bilateral agreements.”
The remaining countries contributing to the blocked funds crisis include Algeria ($286 million), the XAF Zone ($151 million), Ethiopia ($149 million), Lebanon ($129 million), Eritrea ($75 million), and Zimbabwe ($69 million).
These funds have been blocked by governments or central banks, causing significant operational challenges for airlines.
By April 2024, 98% of the previously blocked funds in Nigeria had been cleared, with the remaining $19 million pending due to the Central Bank’s verification processes.
As the global aviation industry continues to recover from the impacts of the COVID-19 pandemic, ensuring the financial stability of airlines through the repatriation of blocked funds is essential. “We urge governments worldwide to prioritize the aviation sector and remove barriers that prevent airlines from accessing their revenues,” Walsh concluded.
