Buhari legacy

Cargo planes stop Nigeria flight over trapped funds

Big cargo planes specifically designed to carry cargo have stopped flying into Nigeria as a result of the foreign exchange scarcity and trapped funds experienced by carriers.

Before the airlines’ trapped funds issue started in Nigeria, cargo aircraft flew into Nigeria three to four times weekly. However, findings by BusinessDay show that currently, most cargo planes have stopped operations in Nigeria.

Cargolux, Saudi Cargo and Emirates Cargo airlines which operated cargo flights into Nigeria have all stopped flights into the country. Only Turkish Airlines cargo planes still carry out skeletal operations in Nigeria and sometimes, the airline is unable to operate even one flight to the country in one week.

Airlines now use the belly compartment in passenger aircraft to accommodate cargo. However, importers or exporters with large cargo have had to charter cargo planes to bring in their cargo products into Nigeria at very exorbitant rates.

A few days ago, the International Air Transport Association (IATA) disclosed that the trapped funds belonging to foreign airlines operating in Nigeria reached $743,721,097 from $ 662 million in January 2023.

IATA disclosed this in a letter addressed to Hadi Sirika, the minister of aviation, signed by Samson Fatokun, the area manager of west and central Africa, IATA.

According to the letter, IATA and the global airline community are seeking intervention from the minister for the resolution of airlines’ blocked funds in Nigeria.

The situation has since forced Emirates and Etihad Airlines to suspend passenger flight operations in Nigeria. As trapped funds continue to increase, cargo airlines have also joined the fray and have stopped flying into the country in a bid to mitigate the effects of the trapped funds on their operations.

“Currently, no freighter cargo airline is coming into Nigeria. We used to have freighter cargo carriers like Cargolux and others that fly into Nigeria between three to four times weekly, but all of them have stopped. We don’t have any single freighter cargo airline coming into Nigeria,” Kingsley Nwokeoma, president, Association of Foreign Airlines and Representatives in Nigeria, (AFARN) told BusinessDay.

“So what happens to cargo now is that the bellies of passenger aircraft such as the 777, and the big Airbus aircraft are used to take some reasonable amount of cargo.”

Nwokeoma explained that for operators to export or import very big cargoes that cannot enter the belly of passenger flights, it means they have to pay for a charter plane to bring in those cargoes.

“For instance, telecommunications operators have to charter planes to bring in their masts. The marine sector is taking advantage of this gap and more people who are willing to wait for one to three months for the arrival of their goods now export and import via sea,” the AFARN president said.

He said trapped funds have affected air transportation business in Nigeria, forcing IATA to also increase its exchange rate.

He called on the government to sort out trapped fund issues, adding that every day, the trapped fund increases.

“The government needs to sit with the carriers to see how some of the money can be paid. There is no trust when we don’t keep to agreements,” he said.

BusinessDay’s findings show that cargo planes often carry products such as aircraft spare parts, raw materials for companies and agro cargo products, amongst others.

Seyi Adewale, chief executive officer, Mainstream Cargo Limited who confirmed the development told BusinessDay that the belly of passenger aircraft are now used to take in cargo and this is more expensive for importers and exporters.

“There is competition for space on passenger aircraft. Cargolux, Saudi Cargo and Emirates cargo used to come into Nigeria but they no longer come. Turkish Airlines seems to be the only airline bringing in their cargo plane into Nigeria,” Adewale said.

Foreign airlines a few days ago raised the exchange rate for ticket sales from N462 per dollar to N551 per dollar.

The latest increase in the naira-dollar exchange rate for ticket sale by the International Air Transport Association, the Switzerland-based trade association of the world’s airlines, is expected to worsen the plight of Nigerian travellers who are already paying higher airfares.

Bankole Bernard, a former President of the National Association of Nigerian Travel Agents – the trade body for local travel agents – said the foreign airlines’ trapped funds is an unfortunate situation which can be considered a ‘misplacement of priority.’

“We have a choice in business; if the Bilateral Air Service Agreement (BASA) says their funds as it were, once they make sales in local currency, change it to foreign currency, we should be able to fulfil that obligation,” Bernard said.

“Reputation damage causes a lot and it is one of the things that made an airline like Emirates and Etihad Airways leave when we could have had more airlines coming into the market but they don’t want their funds to be trapped. So, they will go to another market that is lucrative and this would not have been possible if we were doing proper dialogue.”

He said if the government does not have funds for airlines at an official rate they can make the airlines pay for a premium, after which the tickets can be sold at a premium, so they will be able to repatriate their funds.

“Today, the rate at which we are issuing tickets is N551 to a dollar. Is that the official rate? No, but that is the rate we are issuing tickets, and this is moving closer to the black market. This means the issue of trapped funds would not have been if it had been properly managed,” Bernard said.