• UAE keeps mum on gains
• FG, UAE may explore Egypt’s bailout option
• Stakeholders demand sustainable solution, win-win relations
Tinubu’s diplomatic parley with the UAE leader, Mohamed bin Zayed Al Nahyan, in Abu Dhabi on Monday, also came with the immediate return of suspended flight operations on the Nigerian route.
While the “landmark” diplomatic resolution has been commended, aviation stakeholders however, expressed cautious optimism on Emirates’ resumption of flight operations without a sustainable solution to defray over $800 million of foreign airlines’ funds in Nigeria.
Recall that since mid-2022, foreign airlines have been embroiled in a repatriation crisis over the inability to access foreign exchange from the official window of the Central Bank of Nigeria (CBN), which led to Emirates’ Airline quitting the Nigerian route in October 2022.
However, at the end of the meeting yesterday, Presidential spokesperson, Ajuri Ngelale, in a statement, said the president and the UAE ruler, had finalised the “historic agreement”, which has resulted in the immediate cessation of the visa ban placed on Nigerian travellers.
Ngelale said by this historic agreement, “both Etihad Airlines and Emirates Airlines are to immediately resume flight schedules into and out of Nigeria, without any further delay.”
The spokesperson added that in recognition of Tinubu’s economic development diplomacy drive and proposals presented by the president to his counterpart, an agreed framework has been established.
“Additionally, President Tinubu is pleased to have successfully negotiated a joint, new foreign exchange liquidity programme between the two governments, which will be announced in detail in the coming weeks.”
An official statement by the UAE Embassy yesterday, acknowledged talks on opportunities for further bilateral collaboration in areas that serve both countries’ sustainable economic growth, including the economic, development, energy, and climate action fields. It however kept mum on the travel and flight operations between the two countries.
Aviation stakeholders also commended efforts by the Federal Government to deepen diplomatic ties between the two countries, though expressed concerns over piecemeal settlement of the undercurrent problem of foreign airlines’ stuck funds.
According to the International Air Transport Association (IATA), since 2018, a significant amount of blocked funds had been repatriated from Angola, Ethiopia, Ghana, Nigeria, and Zimbabwe through working with the respective governments.
Currently, $1.5 billion in airline funds remain blocked across the African continent. Nigeria accounts for about $800 million of the funds.
Though an intervention by CBN led to a pledge to release $265 million in August, leaving a balance of $200 million, the situation has remained the same.
In October last year, Emirates suspended flights operations to Nigeria over its inability to repatriate its $85 million revenue trapped in the country. The suspension was the second time the airline halted flights to the West African country over its unrepatriated funds — the first time was in August, 2022.
Secretary General of the Aviation Safety Round Table Initiative, Group Capt. John Ojikutu (rtd) said Emirate Airlines would not have lifted the ban “if the president has not promised payment of what Nigeria is owing.”
Ojikutu said it is the fault of Nigeria that Emirates left, and the solution should be the payment plan of the stranded funds of all the foreign airlines involved, “not just Emirates”.
He said: “Does he (President Tinubu) understand the problem on ground? I don’t think so. Maybe he has dollars on the side to give them. But is he going to do so with other airlines or treat Emirates differently? He should not treat them in isolation because there are other airlines like British Airways, Lufthansa, Ethiopia Airlines that are also owed.
“We should look at the agreements in our Bilateral Air Transports Agreements (BASAs) for solutions. The FG must get itself out of the direct involvement in commercial aviation and face squarely Aeronautical Safety and Security Services,” Ojikutu said.
Ohunayo said the Lagos-Dubai routes remain very strategic for Nigerian travellers transiting through Dubai to other parts of the world, but should not be made exclusive to the UAE carriers alone.
Perhaps, another option on the FX liquidity programme between the two countries is the Gulf country considering buying off the country’s dead assets located across the country, which some financial experts had long advised the government to turn into cash.
For UAE, there is already a working template, which the Nigerian case could be plugged into. Egypt was in the middle of a currency crisis (as Nigeria has been battling) last year when it secured a pledge of $22 billion in bailouts from the United Arab Emirates, Qatar and Saudi Arabia to cover its current account deficit and stabilise the Egyptian pound.
The fresh discussion after institutions managing UAE sovereign wealth funds (SWF) signed a letter of intent with Nigeria and other eight African countries for support, was not clearly spelt out by the parties involved in the deal.
The Abu Dhabi Developmental Holding, a sovereign wealth fund based in the capital of UAE, had earlier announced its intention to stake $2 billion in several state-owned companies across banking, port and agro-businesses.
Qatar followed the path of the UAE with an announcement to place another $5 billion different investment in its renewed partnership with Egypt, in a statement issued by the Egyptian government. To implement the agreement, the parties opted for a joint committee led by their foreign ministers.
While the global community contemplated the true intention of the deal, Saudi Arabia announced that it had deposited $5 billion in the Central Bank of Egypt, while another $10 billion was pledged by the Saudi government despite the political dispute between the two countries.
While Egypt shares the same political bloc with the Gulf countries, Nigeria and UAE are worlds apart in both social and political ties.
But with the country sitting on largely inefficiently managed or completely dead national assets, economists and investment experts are optimistic that opportunities abound for any investors who are genuinely interested in the local market.
UAE has the second largest sovereign wealth fund (SWF), behind China. Its fund, which is managed by the Abu Dhabi Developmental Holding Company, Abu Dhabi Investment Authority, Dubai World, Emirates Investment Authority, the Investment Corporation of Dubai among others, is estimated at $1.9 trillion.
The new plan comes 15 months after Abu Dhabi’s Investment Authority and its holding company, ADQ, alongside Kuwait’s Investment Authority, signed a deal with some African countries to support them. The deal was signed on the sidelines of the first meeting of the Africa Sovereign Investors Forum (ASIF).
The deal, which left out details on the support, involved Nigeria, Angola, Djibouti, Egypt, Ethiopia, Gabon, Ghana, Morocco and Rwanda.
“ASIF will enable us to explore new opportunities with potential partners in Africa for ADQ and its portfolio companies,” ADQ CEO, Mohamed Hassan Alsuwaidi, said.
Last year, foreign capital importation declined by over $5.32 billion from $6.7 billion recorded in the preceding years, according to data obtained by the National Bureau of Statistics (NBS). At its peak in 2019, the figure hit $23.99 billion.
Economists said the figure buckled following the indirect capital control policy imposed by the Central Bank of Nigeria (CBN) in recent years, a major reason given by the fleeing foreign investors.
Some of the investors have had their funds trapped in not only the aviation sector but also the capital market and another investment window. As an increasing number of current and prospective investors give Nigeria arm’s length, naira has continued to take a beating, with the arbitrage widening to about 100 per cent last year – the highest any FX market recorded.
The gap narrowed recently following the market reform. But the spread started trending up in recent months again. It is currently N150/$ or 20 per cent, which many experts consider too high for the currency market. The International Monetary Fund (IMF) and other institutions advise that the market arbitrage be kept below five per cent to prevent round-trip transactions.
An economist and strong advocate of pro-market reform, Dr Muda Yusuf, told The Guardian that authority would necessarily find creative ways of deflating the huge backlog of FX requests to reduce the current volatility and stabilise the market.
