LONDON – Travel agencies in Nigeria have been closing down over the last 6 months due to the challenge of trapped funds.
Not only are the travel agencies struggling to survive because of the trapped funds in Nigeria, but many airlines who have partnered up with the Global Distribution Systems (GDS) are also shutting down their services against the travel agencies.
Many European and American airlines are shutting down their services, but also Middle Eastern and Ethiopian Airlines from Africa are also closing their partnerships.
Nairametrics, a news site from Nigeria, has visited one of the major travel agencies of Nigeria.
When they spoke to the CEO of the company, he wore a forlorn look.
According to them, the once promising agency now appears like a ghost yard, and the number of staff has been drastically reduced by 30% while the remaining staff is sitting aimlessly behind their desk doing nothing but staring at a blank screen.
Travel agencies earn their buck through commission from each sold ticket from foreign airlines. This has been, however, affected since January, as many travel agencies do need to keep paying their bills, but they are barely receiving any cash flow from the airlines.
The fact that many airlines are shutting their services in Nigeria means that many people that want to travel to other places now cannot anymore.
It also means that because people can’t get their tickets the safe way, they are now resorting to other methods of obtaining their tickets, including the black market.
This does drive up the prices of the tickets, going as high as N730 ($1.68). While it doesn’t sound that high to us, we should, in fact, consider the inflation rate and the purchasing power of the citizens.
The same CEO of Nairametrics interviewed said that all efforts made by the National Association of Nigeria Travel Agencies, also known as NANTA, to intervene in the last 3 months have only proved unsuccessful.
He also mentioned that even though the federal government had directed the Central Bank of Nigeria (CBN) to release $265 million, or 50% of the trapped funds), the situation was yet to abate.
The CEO emphasized that the people who were planning to study abroad in the United States or Europe are now reconsidering the location to western Africa, as the exchange rate of the Nigerian Naira to dollars has become extreme.
“Most of the travel agencies are closing shop because they can’t pay their staff. They don’t even have the funds again. Most of their clients can no longer buy dollars.”
“Some of them are even returning their children to African countries, including Togo and the Benin Republic. That money they would have paid to buy tickets for their children is enough to put them in schools in Ghana, Benin, and other countries within the continent.”
“So, that has affected the travel agencies tremendously, and most of them are crying daily. Their accounts are in red, and they are at the Save-Our-Soul (SOS) level now. NANTA, too is not folding its arms, but it can’t embark on any action without the support of the majority of its members.”
What should be done?
The CEO also commented on the task of NANTA of how they should be addressing the situation:
“NANTA will react officially to all this nonsense the airlines are doing. The leadership is under pressure. The airlines have not been fair to the agencies at all in this case.”
“They are suffocating the people who are also their trade partners, which does not seem to be right. This challenge is not peculiar to Nigeria alone. Why are the airlines not reacting the same way in other countries? This is where they can even feed their aircraft and go.”
Besides this, a top staff in an unnamed leading airline in Africa said that the airline was yet to receive any funds from Nigeria since January.
According to him, the airline had over $160 million of trapped funds in Nigeria, but the airline had failed to recover it despite the help of IATA.
Despite this, the airline refused to leave their GDS as they felt that many people do need to travel, and it would only cause more problems for the citizens.
He also mentioned that the airline would not stop the Nigerian routes but force the government to intervene before the industry collapsed.
“We now pay for fueling and some other charges in naira, but there are some critical ones that have to be paid in dollars, and we have a lot of money stuck in Nigeria.
“The money is in the hands of the CBN, we are not earning interest on it, yet we can’t get it. The airlines are losing big time,” he said.
What has (sort of) been done
It’s not as if nothing has been done to this point. The president of NANTA, Mrs. Susan Akporiaye, said that an economy ticket in Nigeria before cost only N300,000 ($6900) while now it costs over N1.5 million ($34470).
“This now is creating trust issues with the airlines; there is no transparency, and so the airlines are not confident that we really mean to pay them this money, hence the reason why they are still holding forth, and they are still watching to see how it goes,” she said.