Nigeria's currency issues seem to be neverending and only getting worse. Foreign airlines striking would have a devastating effect on an economy and capital market already on its knees. The lack of dollars is in part caused by plummeting FDI, but the FDI decreases are partially due to dollar shortages raising repatriation concerns. A Catch-22.
Airlines in Nigeria threaten strike over dollar access leading to the inability to repatriate profits. The issue is not new and has plagued foreign real estate investors for years who are forced to rely on complicated structures to trap as little money within Nigeria as possible. But the crippling nature of dollar shortages in Nigeria is at a level not seen in recent years. Airlines and other investors experience delays of 6-12 months for dollar settlements, hindering their ability to recoup investments and run their businesses. The Nira depreciated 20% in 2023 and is predicted to fall further in 2024 giving greater impetus to the airlines to get their money out of the country.
The Association of Foreign Airlines in Nigeria claims only $61 million of the $800 million in total funds in the country have been settled. Foreign airlines are considering a strike to lobby the government to find solutions. An airline strike could ground flights, impacting 17 million annual passengers and costing the economy $1.2 billion weekly. Repatrian difficulties caused foreign investment to plummet which is what is occurring in Nigeria which experienced an 80% drop in FDI inflows in 2023 compared to 2022, according to UNCTAD.
Lack of investor interest in bringing fresh capital into Nigeria is a primary cause of the dollar shortages and why Nigeria's central bank has an estimated $800 million backlog for foreign currency settlements. Investors and businesses complain of opaque processes, cumbersome documentation requirements, and inconsistent policy implementation involved in repatriating profits.
Ghana has also faced severe dollar shortages of late, with other countries having occasional shortages such as Zambia, Zimbabwe, Angola, Egypt, Mozambique, and Kenya.
