Kamil Al Awadhi, the regional Vice-President for Africa and the Middle East at the International Air Transport Association (IATA), has shed light on the arduous conditions faced by Nigerian airlines. Speaking exclusively to CNBC Africa, Al Awadhi disclosed that Nigerian airports impose some of the most exorbitant operating costs for airlines throughout the African continent. Moreover, he expressed concerns over the considerable sum of funds still trapped within the country, amounting to approximately $720 million, despite recent efforts to address the issue.
During the interview, Al Awadhi articulated the profound financial strain experienced by both local and international airlines operating within Nigeria’s airspace. He emphasized that these airlines continue to endure substantial financial losses due to the excessively high operational expenses incurred. Al Awadhi underscored the prevailing challenges, highlighting that despite ongoing endeavors to ameliorate the situation, operational costs in Nigeria persist as among the highest across the region, significantly impacting the affordability of air travel within the nation.
“Airlines have incurred substantial losses operating in and out of Nigeria, and this trend persists in the current environment,” remarked Al Awadhi. He pointed out that the onerous operational costs represent a formidable barrier to profitability and sustainability for airlines, exacerbating their financial woes.
Furthermore, Al Awadhi drew attention to the issue of trapped funds, stressing the adverse implications of currency devaluation on airline finances. He noted that the devaluation of the naira has further compounded financial challenges for airlines, resulting in substantial losses of funds. The inability to repatriate these funds has significantly constrained the liquidity and financial flexibility of airlines operating in Nigeria.
In addressing these pressing concerns, Al Awadhi highlighted the limited progress made in repatriating trapped funds by the Central Bank of Nigeria (CBN). Despite the partial repatriation of approximately $65 million to airlines, he underscored the need for more concerted efforts to expedite the resolution of this issue. Al Awadhi also acknowledged the improved communication between the CBN and airlines compared to previous administrations, albeit emphasizing the importance of sustained engagement to achieve meaningful outcomes.
Recent data from the National Bureau of Statistics (NBS) further underscored the severity of the situation, revealing a stark 87% increase in the average cost of air transport between December 2022 and December 2023. This substantial escalation in costs, coupled with the persistent devaluation of the naira, has exacerbated the financial strain on airlines operating in Nigeria, impeding their ability to achieve profitability and sustainable growth.
Despite concerted efforts by the CBN to address the backlog of forex obligations owed to international companies, significant challenges persist. Trapped funds and high operating costs continue to pose formidable obstacles to the recovery and long-term viability of the Nigerian aviation industry.
Al Awadhi’s insights highlight the urgent need for coordinated action and policy interventions to alleviate the financial burdens faced by airlines and ensure the resilience and sustainability of the aviation sector in Nigeria.