Trapped funds will cut aviation GDP contribution – Stakeholders

Stakeholders in the aviation industry have expressed concerns over the inability of airlines to repatriate their revenues, noting that the trapped funds would hamper the sector’s contribution to the Gross Domestic Product of the country.

Last week, the International Air Transport Association released a statement stating that the amount of airline funds for repatriation being blocked by the government was close to $2bn in more than 27 countries and territories.

The statement also revealed that in the last six months it had risen by more than 25 per cent ($394m).

According to IATA Nigeria leads the top five markets with blocked funds with $551m, Pakistan with $225m, Bangladesh with $208m, Lebanon with $144m, and Algeria with $140m.

Reacting, The Secretary-General Aviation Round Table, Olumide Ohunayo said as a result of airlines’ inability to repatriate their funds, travel agents were laying off staff and businesses were folding up.

He noted that aviation’s contribution to the GDP will decline because revenue from the sector would be lower.

He argued, “What risks are we talking about again? Emirates has pulled out because of the trapped funds; others have removed the lower fares. What you have seen is that flying into Nigeria is expensive. often times, you need to buy in dollars if you want to get reasonable fares and by the time you buy in dollars and convert to naira, it is still very high.

“The travel agents are losing staff and closing shops because the lowers fares are closing; windows for commission for them are also short, so they are barely selling tickets, which is one of the value chains of the industry. As the travel agents are losing staff, so is the contribution of aviation to the GDP not able to meet the target because the more you spend, the more the revenue generated grows. So, the contribution to the GDP will be lower this year.”

He stated that for some Nigerians travelling to Ghana and Togo to take flight, taxes that are supposed to come to Nigerian agencies are going to those countries, adding that it may also affect our airlines when they want to insure aircraft or go to lease.

“There would be stringent conditionality and remittance of funds will increase in the statutory payment due to poor credit rating at the moment,” he declared.

Ohunayo further said that the remittance is also driving away foreign direct investment to our aviation industry which is one of the effects of the non-remittance of funds.

The Chief Executive Officer, Centurion 8Security Limited, Group Capt John Ojikutu (retd) said that the foreign currency earnings in commercial aviation by all the operators should be domiciled with the Central Bank of Nigeria and the naira equivalent be given to the operators/depositors.

He also stated, “I have repeatedly said it that the foreign airlines contribute about 80% of the aviation commercial revenue earnings and we must be serious in the manner of managing this crisis. This amount is very significant to our national earnings.

“Whenever there is a need for the deposit, the operators would return the naira and the required amount is taken to them. Forex repatriation by foreign airlines should always be considered from the domiciliary account and the BASA account also in the CBN.” He explained that those who should deposit forex cash in the CBN include the Federal Airport Authority of Nigeria; the Nigerian Airspace Management Agency; fuel marketers; ground handling services, etc.

“Annual forex earnings from these are more than $1bn. With this deposit, foreign airlines have no problems,” he said.

Meanwhile, IATA called on governments to remove all barriers to airlines repatriating their revenues from ticket sales and other activities, in line with international agreements and treaty obligations.

“Venezuela to settle the $3.8 billion of airline funds that have been blocked from repatriation since 2016 when the last authorisation for limited repatriation of funds was allowed by the Venezuelan government.

IATA’s Director General, Willie Walsh was quoted, “Preventing airlines from repatriating funds may appear to be an easy way to shore up depleted treasuries, but ultimately the local economy will pay a high price.

“No business can sustain providing service if they cannot get paid and this is no different for airlines.”

On his part, the Regional Vice President for Africa and the Middle East, Kamil Al-Awadhi said, “Nigeria is an example of how government-industry engagement can resolve blocked funds issues. This encouraging progress demonstrates that, even in difficult circumstances, solutions can be found to clear blocked funds and ensure vital connectivity.”

Article first published on the Punch Website

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