Who can get away with legal theft? You have to be the government.
Last month, the International Air Transport Association (IATA) said Nigeria was withholding revenue worth about $450 million earned by foreign airlines operating in the country. This is especially dangerous when trying to relaunch African Tourism and global aviation past COVID-19.
The problem is not just isolated to Africa. Bangladesh, Lebanon, and others are part of this global scam creating uncertainty for international airlines and global aviation.
However, Africa seems to be the most insecure region in the world when it comes to airlines able to collect on local sales.
Twelve countries in Africa are involved in this scam.
Nigeria, as a massive African economy, is the worst violated and owes about $450 million to foreign airline carriers.
Zimbabwe follows this with $100 million, Algeria with 96 million, Eritrea with 79 million, and Ethiopia with 75 million.
The International Air Transport Association (IATA) confirmed Nigeria is withholding about $450 million in revenue from foreign airlines operating in the country.
Kamil Al Awadhi, vice-president for Africa and the Middle East, IATA, recently said this at its 78th annual general meeting and world air transport summit in Doha, Qatar.
The Dubai-based Emirates Airlines is now taking a step to reduce services to its operation in Nigeria. A reduced schedule would kick in as of August 15, 2022.
This is bad news for Nigeria and African connectivity, pricing, and tourism.
The airline said this in a letter addressed to Hadi Sirika, minister of aviation, dated July 22, 2020, and signed by Sheik Majid Al Mualla, Emirates airline’s divisional senior vice-president (DSVP), international affairs.
The exact wording of the letter by Emirates to the Nigerian Government:
Honorable Minister of Aviation
Federal Ministry of Aviation
Annex 3, Federal Secretarial Complex
Shehu Shagari Way
Greetings from Dubai. We trust this letter finds you well.
It is with a heavy heart that I write to inform you of planned reductions in Emirates’ operations to Nigeria.
With effect from 15 August 2022, Emirates will be forced to reduce flights from Dubai to Lagos from 11 per week to 7 per week. We have had no choice but to take this action to mitigate the continued losses Emirates is experiencing as a result of funds being blocked in Nigeria.
As of July 2022, Emirates has US$ 85 million of funds awaiting repatriation from Nigeria. This figure has been rising by more than $US 10 million every month, as the ongoing operational costs of our 11 weekly flights to Lagos and 5 to Abuja continue to accumulate.
These funds are urgently needed to meet our ope.rational costs and maintain the commercial viability of our services to Nigeria. We simply cannot continue to operate at the current level in the face of mounting losses, especially in the challenging post-COVID-19 climate.
Emirates did try to stem the losses by proposing to pay for fuel in Nigeria in Nairas, which would have at least reduced one element of our ongoing costs, however, this request was denied by the supplier.
This means that not only are Emirates’ revenues accumulating, but we also have to send hard currency into Nigeria to sustain our own operation. Meanwhile, our revenues are out of reach, not even earning credit interest.
Your Excellency, this is not a decision we have taken lightly. Indeed, we have made every effort to work with the Central Bank of Nigeria (CBN) to find a solution to this issue.
Our Senior Vice-President met with the Deputy Governor of the CBN in May and followed up on the meeting by letter to the Governor himself the following month; however, no positive response was received. Meetings were also held with Emirates’ own bank in Nigeria and in collaboration with IATA to discuss improving FX allocation, but with limited success.
Despite our considerable efforts, the situation continues to deteriorate. We are now in the unfortunate position of having to cut flights to mitigate against further losses going forward.
While we appreciate that this issue is primarily a financial one, any support you could kindly provide would be warmly welcomed by Emirates. We are confident that your valuable involvement would make a real difference in improving this very difficult situation.
Should there be any positive development in the coming days, we will of course re-evaluate this decision. Meanwhile, thank you for your understanding, and please feel free to contact me if you wish to discuss the matter further.
Sheikh Majid Al Mualla
DSVP International Affairs
Interesting is that Nigeria is not only holding on to revenue belonging to Emirates and other foreign airlines but also makes the airline invest additional hard currency to buy fuel.
Recently Delta and United Airlines started service to Lagos, Nigeria, most likely watching the situation with Emirates carefully.
As of April, a total of $1.6 billion in funds are blocked by 20 countries worldwide, out of which 1 billion in 12 African nations.
When airlines cannot repatriate their funds, it severely impedes their cash flow and indirect operations and limits the number of markets they can serve.
Strong connectivity is an economic enabler and generates considerable economic and social benefits. Now is not the time to score an ‘own goal’ by putting vital air connectivity at risk,” an IATA executive explained.