Foreign airlines operating in Nigeria are facing significant challenges in accessing their funds from ticket sales due to foreign exchange scarcity, leading to a reliance on the black market where rates reach as high as N750 to a dollar. This dire situation has resulted in a staggering increase in trapped funds, which have risen from $150 million since February 2022 to over $812.2 million, making Nigeria the country with the highest amount of trapped funds in the world. As a consequence, airlines are finding it increasingly difficult to operate smoothly, leading to various measures being implemented that directly impact travelers.

Soaring Ticket Prices and Restricted Availability

To mitigate the effects of the foreign exchange scarcity, foreign airlines have taken several steps that directly affect passengers. One of the initial measures was to block lower ticket inventories on their websites, making it challenging for travelers to find affordable tickets. As a result, ticket prices have gradually increased, with some routes experiencing price hikes of over 700 percent.

For example, a return economy class ticket to London on airlines like British Airways or Virgin Atlantic now costs a staggering N2.8 million and above, compared to an average of N350,000 in January 2022. Similarly, one-way tickets to the United States on other airlines currently cost an average of N2 million, up from N400,000 earlier this year.

Restrictions on Ticket Issuance and Alternative Travel Options

In addition to raising fares, airlines have also taken steps to restrict ticket issuance by local travel agents for tickets originating outside Nigeria. This move aims to reduce ticket transactions conducted within the country and mitigate the amount of money being trapped. Consequently, travelers have been forced to seek assistance from agents in other countries such as Ghana, London, and the United States to purchase tickets, as the fares within Nigeria have become unaffordable.

The dire situation has compelled passengers who can no longer afford the exorbitant fares to explore alternative options. Some individuals are opting to travel by road to Accra, where they catch flights to their desired destinations in Europe, the United States, and elsewhere.

Reduction in Flight Frequency and Suspension of Operations

As the predicament worsened and became unbearable for airlines, they began reducing the frequency of flights into Nigeria. Prominent foreign carriers such as British Airways, Emirates, Air France, KLM, and Lufthansa scaled down their daily flights in Abuja to just five or fewer times per week.

Emirates Airlines, for example, in August 15, 2022, reduced its operations from Dubai to Lagos from 11 flights per week to seven flights per week. This decision was attributed to the airline’s inability to repatriate its blocked funds from Nigeria. Subsequently, in November of the same year, Emirates suspended all flights to Nigeria, citing the refusal of fuel marketers to accept payment in naira as a contributing factor.

Frustration and Concerns for the Future

Recently, Emirates expressed frustration over its unsuccessful efforts to resume operations in Nigeria, stating that approximately 50 percent of the approved funds for clearing within its backlog were still overdue for repatriation. The airline emphasized that despite proposing multiple solutions and engaging in dialogue with government stakeholders and industry bodies, progress remained stagnant.

Kingsley Nwokeoma, President of the Association of Foreign Airlines and Representatives in Nigeria, highlighted the reduction and suspension of flights as just one of the many effects resulting from the trapped funds. He predicted that this situation could have an adverse impact on the country’s ease of doing business rating and potentially hinder foreign direct investment. Nwokeoma mentioned that in 2016, when airlines had $700 million in blocked funds, some foreign carriers were compelled to suspend operations in Nigeria, indicating that other airlines may follow suit and reduce flights to Lagos, similar.

Nwokeoma further explained that foreign airlines operating in Nigeria often have long-term payment plans for their aircraft. Withholding their funds puts a strain on their operations as expenses such as aircraft checks, ground personnel payments, fuel, navigational services, and ground handling services must be covered. He emphasized that airline staff in Nigeria are being paid from earnings generated in other countries, illustrating the extent of the impact on the airlines’ overall operations.

Sindy Foster, Principal Managing Partner at Avaero Capital Partners, acknowledged that Emirates’ decision was not unexpected given the dire circumstances. She emphasized that airlines are commercial businesses striving to repatriate their funds, and it is only natural for them to make commercial decisions in the best interest of their businesses. Foster recognized the critical impact the aviation sector is facing, noting that with fewer flights available, the cost of travel will inevitably rise.

A Broader Impact on the Travel Industry and Foreign Direct Investment

The consequences of the trapped funds extend beyond the airlines themselves. The overall travel industry in Nigeria is suffering, with travel agents and tour operators experiencing significant disruptions. The inability to issue tickets for international flights originating from Nigeria has severely impacted their revenue streams, forcing them to seek alternative arrangements with agents in other countries to serve their clients.

The implications of this ongoing crisis extend beyond the travel sector alone. Nigeria’s reputation as a favorable destination for foreign direct investment may also be jeopardized. The inability of foreign airlines to repatriate their funds sends a concerning signal to investors, raising questions about the ease of doing business in the country and potentially deterring future investments.

The Urgent Need for Resolution

The resolution of this crisis is crucial not only for the affected airlines but also for the broader Nigerian economy. By restoring confidence and trust in the Nigerian market, the country can attract and retain foreign investment, promote tourism, and facilitate the smooth movement of people and goods.

According to Foster, the successful resolution of the trapped funds crisis will not only benefit airlines and travel agents but also contribute to Nigeria’s economic growth and development. She stressed that it is a collective responsibility to work towards creating a conducive environment that ensures the smooth functioning of the aviation sector, strengthens investor confidence, and promotes sustainable economic progress.