By Sukh Mann
Managing Partner, dre aviation
Earlier this week the Nigerian Central Bank released a tranche of circa. $62m to foreign airlines operating into Nigeria - you may have heard the phrase "trapped funds".
The funds were "trapped" in Nigeria due to poor liquidity in the banking system and a historical disregard that foreign airlines actually invest in operations, incur operating costs, pay suppliers and run currency risks.
The fact that these funds were due foreign carriers were categorised as low priority and therefore not remitted in a timely manner and the backlog built up over time (years, infact).
However, it is easy to criticise and some market commentators are saying that this is just a drop in the ocean and the Nigerian government is not serious about respecting the foreign carrier rights to these funds.
I think that is a little harsh.
Yes, the foreign carriers have been hard done by, with the total amounts due in the region of $800 million, $62m looks paltry. Foreign carriers have also lost on other ROI opportunities due to the time that the funds have been stuck in the system so in real terms the opportunity cost aspect of the true value of the "trapped funds" is a lot higher than the headline figure.
I think we need to give the current administration under President Tinubu some breathing space. They have inherited a lot of legacy issues which they are (admirably) trying to address.
The changes witnessed in the last 4 months, not just in the aviation sector, but across all areas of government have been swift and effective.
Focussing on the aviation sector, the regulatory body and supporting functions (FAAN, NiMET, NAMA) are unrecognisable as sweeping changes have been made in a most radical review of the sector - something not seen in my 25 years covering, and working in the aviation Nigerian industry.
Hence my plea to give this administration a chance.
I firmly believe that the foreign carrier funds have been prioritised and will be cleared in due course.
Nigeria is and remains a key market on the global network for most, if not all carriers, and I believe the operating and currency risks are actively being managed by the new administration, the inherited balances are no mean feat to clear but the recent payment is a solid precedent of clear indication of intent.
Clearer skies ahead.