The Federal Government of Nigeria has successfully settled the $850 million outstanding debt owed to European airlines, the European Union (EU) has revealed.
This significant financial resolution was announced by the EU Ambassador to Nigeria and the ECOWAS, Samuela Isopi, at the 9th edition of the Nigeria-EU business forum in Abuja.
The forum, themed ‘Investing in Jobs and a Sustainable Future,’ was attended by prominent figures including the Director-General at the EU, Myriam Ferran, the Minister of Budget and National Planning, Atiku Bagudu, and the Permanent Secretary at the Ministry of Industry, Trade, and Investment, Ambassador Nura Rimi.
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During the event, the EU and Eurocham Nigeria (The European Business Chamber) signed a €300,000 grant agreement to support the further development of the Chamber. The agreement, signed by Myriam Ferran and Eurocham’s Vice-President Frederik Klinke, aims to enhance Eurocham’s capacity to serve its members better, promote European business interests in Nigeria, and contribute to mutual economic growth and development.
In addition to the grant agreement, the Dutch entrepreneurial development bank FMO and Nigeria’s First City Monument Bank (FCMB) signed a $25 million NASIRA guarantee agreement. This agreement is designed to enable FCMB to expand its funding to agricultural, youth, and women-owned SMEs without requiring collateral, targeting client groups typically deemed too risky by banks.
Ambassador Samuela Isopi commended the Nigerian government for its intervention in clearing the backlog of debts owed to European airlines and for the removal of foreign exchange restrictions on the import of 43 items. She highlighted that Nigeria remains the EU’s largest trading partner, with about €35 billion in trade relations recorded in the previous year.
Additionally, Nigeria is the EU’s biggest foreign investor, with a stock estimated at €26 billion, representing one-third of Nigeria’s foreign direct investment. Over 230 EU companies operate in Nigeria, providing significant employment opportunities for youths and women.
Isopi noted that a key condition for any foreign investor is the ability to repatriate profits.
“A year ago, these funds amounted to $850 million, with a big chunk being owed to European airlines. Today more than 98 percent of arrears have been cleared. This is a major achievement,” she said.
She further noted, “Investor confidence takes time to build up, but resolving these issues was a top priority.”
Backstory of International Airlines’ Fund Repatriation Struggle
International airlines operating in Nigeria faced significant challenges in repatriating their earnings due to stringent foreign exchange controls. The scarcity of foreign currency in the Nigerian market led to a backlog of funds that airlines were unable to transfer out of the country. This situation created financial strain for many carriers, as their revenue was effectively trapped within Nigeria, unable to be converted into their home currencies.
The International Air Transport Association (IATA) intervened in this issue, warning the Nigerian government about the potential repercussions of not addressing the backlog. In 2022, IATA highlighted that Nigeria was the country with the highest amount of global airline funds blocked, exceeding $700 million at that time. The association noted that the inability to repatriate funds could lead airlines to reconsider their operations in Nigeria, including reducing frequencies or suspending flights entirely.
In June, IATA announced that Nigeria has successfully cleared 98% of the blocked funds belonging to foreign airlines. It said the remaining 2%, which amounts to $19 million, is still pending due to the Central Bank of Nigeria’s ongoing verification of outstanding forward claims filed by commercial banks.
“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,” said Director-General of IATA, Willie Walsh.
The clearing of the $850 million debt is expected to bolster Nigeria’s reputation as a reliable partner in international business, fostering greater confidence among foreign investors. This move is part of a broader strategy by the present administration to create a more favorable business environment in Nigeria, which includes the removal of foreign exchange restrictions that had previously hindered imports and affected various sectors of the economy.
The settlement of the debt also comes at a crucial time, as Nigeria seeks to attract more foreign direct investment and stimulate economic growth. The ability to repatriate profits is a fundamental requirement for foreign investors, and the resolution of this issue addresses one of the key concerns that have been raised by the international business community about doing business in Nigeria.