• Thursday, June 20, 2024
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Foreign airlines lost over 50% trapped funds to Africa’s currency devaluation – IATA

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The International Air Transport Association (IATA) has disclosed that over 50 percent of foreign airlines’ entire value of its fund was lost to the devaluation of currencies of most African nations since 2022 when the funds started piling up.

Kamil Al-Awadhi, IATA’s Regional Vice-President of Africa and Middle East, while briefing journalists from Africa on the sidelines of the association’s 80th Annual General Meeting (AGM) and World Air Transport Summit in Dubai, United Arab Emirates (UAE), lamented that the ones that have suffered the most are the African carriers because when they close their year, they get $1 million instead of $10 million from the blocked funds in different countries.

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He further lamented that blocked funds and issues around the devaluation of currencies are hurting African carriers more than their European, American and Middle-East airlines, describing it as strange and how they have continued to bleed as a result of that.

Since January 2022, naira has declined by more than 55 per cent against the US dollar. And Nigeria is not alone. Other African countries have had a rough go over the past two years. The Ghanaian cedi, Kenyan shilling and South African rand are all down over the same period.

The IATA chief however said there is no penalty for countries defaulting in its obligation as regards blocked funds despite the effects, especially African airlines.

“There is no penalty. If I bought something from you and you are in Nigeria and you did not pay me for two years, in my book, most airlines deal in dollar values in their PNR, so, when I close my 2023 year, I say my revenues are a certain amount. $20 million came out of Nigeria but I did not get my money in 2022 and in 2023. When I finally get it in dollars, it is not $20 million, it is $10 million because of the currency depreciation.

“This has happened in several countries in Africa. The ones that have suffered the most are the African carriers because when they close their year, they get $1 million and not $10 million from the blocked funds in different countries.

“It is strange for the African countries and it is harming the African carriers the most. You need to calculate every month, the depreciation it has on your blocked funds. For one airline, there was a 60 per cent depreciation in the value of its funds blocked over that period. It is a huge amount,” Al-Awadhi said.

Just on Monday, the clearing house for over 300 global airlines confirmed that Nigeria had cleared 98 per cent of foreign airlines’ blocked funds, disclosing that the remaining two per cent of funds amounting to $19 million yet to be cleared is due to the Central Bank’s ongoing verification of outstanding forward claims filed by the commercial banks. It noted that as of April 2024, 98% of these funds have been cleared.

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Willie Walsh, Director-General of IATA, said, “We commend the new Nigerian government and the Central Bank of Nigeria for their efforts to resolve this issue. Individual Nigerians and the economy will all benefit from reliable air connectivity for which access to revenues is critical. We are on the right path and urge the government to clear the residual $19 million and continue prioritizing aviation.”

Eight countries account for 87 percent of the total blocked funds, amounting to $1.6 billion. The situation he said had become severe in Pakistan and Bangladesh with airlines unable to repatriate $731 million ($411 million in Pakistan and $320 million in Bangladesh) of revenues earned in these markets.