Emirates Airlines has announced that it will reduce the number of flights to Nigeria starting August 15th, 2022 due to failure to repatriate its revenue from Nigeria. The airline disclosed this in a letter dated July 22nd, 2022 and was addressed to Nigeria’s Minister of Aviation, Hadi Sirika, and signed by the airline’s DSVP International Affairs, Majid Al Mualla. The letter read in part, “With effect from August 15th, 2022, Emirates will be forced to reduce flights from Dubai to Lagos from 11 per week to 7 per week. We have had no choice but to take this action to mitigate the continued losses Emirates is experiencing as a result of funds being blocked in Nigeria.”
The letter noted that as of July, Emirates had over $85 million awaiting repatriation from the country. The airline said that the figure has been rising by more than $10 million every month. Meanwhile, operational costs of 11 weekly flights to Lagos and 5 to Abuja continue to accumulate. The airline said that these funds are urgently needed to meet operational costs and maintain the commercial viability of their services to Nigeria. “We simply cannot continue to operate at the current level in the face of mounting losses, especially in the challenging post-COVID-19 climate,” it said.
Businesses in Nigeria are increasingly having problem with forex.
In the wake of dollar scarcity in Nigeria, businesses are increasingly having difficulty sourcing forex to buy goods and pay for services overseas, especially businesses that survive on importing raw materials and essential commodities. Because of this, these businesses that depend on the Central Bank of Nigeria (CBN) to get dollars for their imports have either folded up or encountered great difficulty in conducting their business. For instance, Nigerian students studying abroad are encountering bottlenecks in paying their tuition fees in dollars, pounds, and other foreign currencies, while associations such as the Association of Master Bakers and Caterers of Nigeria have also said that dollar scarcity has affected their members too.
The Central Bank of Nigeria has tried several measures in hopes that they will mitigate this problem. The CBN stopped the receipt of funds in foreign currencies to a normal savings account because the funds will be converted to naira. Another measure that the CBN took was to make the exchange of naira into dollar not easy except through a domiciliary account. As the days go by and the country’s foreign reserve continues to deplete, foreign businesses such as Emirates Airlines now find it difficult to repatriate their revenue from the country.
Emirates’ proposal to pay for fuel in naira rejected by supplier.
According to the Bilateral Air Service Agreements (BASAs) with countries, airline tickets are mostly sold in naira while the airlines would repatriate the funds in dollars through the CBN. Emirates said it tried to stem the losses by proposing to pay for fuel in Nigeria in naira. This would have at least reduced one element of its costs, but the request was denied by the supplier. The airline said, “This means that not only are Emirates’ revenues accumulating, we also have to send hard currency into Nigeria to sustain our own operation. Meanwhile, our revenues are out of reach and not even earning credit interest.”
They continued, “This is not a decision we have taken lightly. Indeed, we have made every effort to work with the Central Bank of Nigeria to find a solution to this issue. Our Senior Vice President met with the Deputy Governor of the CBN in May and followed up on the meeting by letter to the governor himself the following month. However, no positive response was received.” The letter also explained that meetings were also held with Emirates Bank in Nigeria and in collaboration with the International Air Transport Association (IATA) to discuss improving Forex allocation but with limited success.
The airline has requested that the government help.
The airline has requested that the government help resolve the problem. Presently, Nigeria faces a foreign currency crunch amidst low oil revenue and increasing demand for dollars – which has resulted into the dollar being sold for 710 naira on July 29th, 2022 at the parallel market. This is the worst performance of Nigeria’s naira in the exchange market. “Should there be any positive development in the coming days, we will of course re-evaluate this decision,” the airline said.
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