The Nigeria Civil Aviation Authority (NCAA) has warned it will ground aircraft and enforce other penalties against airlines and aviation service providers who fail to comply with insurance cover requirements as set out in new civil aviation regulations effective since July 10, 2023.

In a directive, NCAA Director-General Musa Nuhu emphasised that under Nigerian Civil Aviation Regulations (Nig. CARs) 2022, Part, all airlines and service providers must maintain proper insurance coverage; submit copies of valid insurance certificates and payment evidence to the regulator; and ensure timely renewal of insurance policies. Failure to comply would result in penalties, including the grounding of aircraft and other enforcement actions against non-compliant parties, he cautioned.

Nigeria is struggling with a scarcity of foreign exchange and a plunging local currency, the Nigerian naira. According to industry insiders, this poses a challenge for airlines required to pay insurance premiums in hard currency. "If the naira continues to crater in the way it's been cratering, we all would soon run into trouble," an airline source confided in ch-aviation.

A weak balance of payments coupled with dwindling exports over the past decade have resulted in Nigeria's foreign currency shortages, making it difficult for investors to take money out of Africa's biggest economy and contributing to economic volatility.

The forex shortfall has led to the depreciation of the naira, impacting businesses relying on imports and making it difficult for Nigerian companies to access the necessary currency for trade.

In addition, the Nigerian government has been withholding funds owed to foreign airlines. In June 2023, IATA reported that USD812.2 million of foreign airlines' funds remained trapped in Nigeria, the country topping the five worst offenders (also including Bangladesh, Algeria, Pakistan, and Lebanon), which together account for 68% of blocked airline funds worldwide.