Airlines Have $700 Million Trapped at the CBN

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International airlines have resorted to selling their tickets in dollars because of their inability to access up to $700 million (N1.4 billion) of ticket revenues trapped in the Central Bank of Nigeria (CBN). International airlines normally sell their tickets in naira and then approach the CBN for the dollar equivalent to take back to their respective countries.

However, the CBN has in recent times been reluctant to give the airlines the dollar equivalent of their naira ticket sales at the official rate as the CBN seeks to conserve its fast dwindling external reserves for only what it considers essential imports or payments by Nigerians. The result is that many international airlines have built mountains of naira cash which they cannot take back to their countries.

Airlines have now resorted to selling tickets in dollars forcing many travel agents to buy dollars in the black market at the higher N320 to the USD to buy tickets for their customers seeking to travel outside the country. This has resulted in a sharp rise in the prices of flight tickets with return tickets to UK on high demand airlines like British Airways and Virgin Atlantic now selling for a minimum of about N600, 000 and more.

The International Air Transport Association (IATA), a trade association of the world’s airlines, has visited the Nigerian government to express concern over the trapped funds and what the government is doing to get them released.

The fear is that if the situation persists, many international airlines will cut their flights to the country. Already, Iberia, which used to operate three flights a week from Lagos to Mardrid has pulled out of Nigeria. Etihad, a popular airline choice by many Nigerians has also had to cut their capacity by 15% and is now using a smaller aircraft into the country in line with the lower passenger traffic resulting from the higher ticket fares.

Many Nigerian travelers have turned to the local airlines, Arik and Medview, which have lower fares and accept payments in naira. But there is also fear that local airlines may place less emphasis on maintenance of their aircrafts if they are unable to get dollars to cover the costs of undertaking the mandatory regular maintenance checks.

Data from the National Bureau of statistics already show that passenger traffic has started dropping as at the last quarter of 2015 due to worsening economic situation in the country. Passenger traffic in the last quarter of 2015 was down 8.5% compared to the same period of 2014 according to data from the NBS.