Trapped Funds: Foreign airlines deny CBN’s claim of clearing all valid FX backlog

Reacting to Central Bank of Nigeria (CBN) announcement on Wednesday, March 20 that it has finally settled all valid foreign exchange backlogs, foreign airlines says the status quo remains unchanged.

Cardoso, the CBN Governor had recently declared that clearing the FX backlog remained a priority in order to restore credibility and confidence in the Nigerian economy.

But on the contrary, Kingsley Nwokeoma, President, Association of Foreign Airlines and Representatives in Nigeria, (AFARN) said that as far as he is concerned, nothing has changed as regards clearing foreign airlines’ trapped funds.

“If they say they have cleared the trapped funds, they should show us figures. They should tell us how much have been cleared. The last I checked, the status quo still remains the same,” Nwokeoma said.

Hakama Sidi Ali, acting director of corporate communications at CBN, on Wednesday disclosed in a statement that the financial regulator recently concluded the payment of $1.5 billion to settle obligations to bank customers, effectively settling the residual balance of the FX backlog.

She also disclosed that independent auditors from Deloitte Consulting meticulously assessed these transactions, ensuring that only legitimate claims were honoured, and invalid transactions were promptly referred to the relevant authorities for further scrutiny.

“It was important that we go through an independent and credible process that would determine the authenticity of those obligations, and, at this point, I can tell you that we have now cleared all genuine, verifiable transactions. This encumbrance to market confidence in the country’s ability to meet its obligations is now totally behind us,” he had noted.

And corroborating CBN’s claim, Bankole Bernard, chairman of Airlines and Passengers’ Joint Committee (APJC) of the International Air Transport Association (IATA) told BusinessDay that CBN’s claim is true, adding that the airlines’ trapped funds have been cleared.

According to him, the foreign airlines have been offered the option to get their funds from the banks using the rate of the I & E window but have refused because the current I &E window rate is not the same they used to sell tickets.

Bernard said the airlines would be making losses if they collect the money using the I & E window, that is why they stopped selling low inventory tickets and are selling only very high fares in order to recover their monies that have been lost as result of the current exchange rate.

Clearance of the foreign exchange transactions backlog is part of the overall strategy detailed in last month’s Monetary Policy Committee meeting to stabilise the exchange rate and thereby curb imported inflation, spurring confidence in the banking system and the economy.

Cardoso also used the MPC meeting and a subsequent conference call with foreign portfolio investors to set expectations for sustained increases in Nigeria’s foreign currency reserves and improved liquidity in the foreign exchange market.

Last year, International Air Transport Association (IATA) disclosed that Nigeria owes $812.2 million out of $2.27 billion trapped funds, making it the country with the highest trapped funds globally.

The top five countries that account for 68.0 percent of blocked funds include Nigeria ($812.2 million), Bangladesh ($214.1 million), Algeria ($196.3 million), Pakistan ($188.2 million) and Lebanon ($141.2 million).