Key Highlights
- The Federal Government of Nigeria has upwardly reviewed the exchange rate of foreign currency to airline operators in the aviation sector due to the inability of the Central Bank of Nigeria (CBN) to remit trapped funds to international airlines in the country.
- The new exchange rate of N551 to a dollar is higher than the initial N444 issued to airlines by the CBN in the last three years, and this may lead to an increase in airfares on international routes for travelers originating from Nigeria.
- The inability of foreign airlines to repatriate their funds from Nigeria has led to a mild crisis in the aviation sector, with two airlines, Etihad Airways and Emirates Airlines suspending flight services into the country, and many others reducing frequencies into Nigeria. The trapped funds of foreign airlines in Nigeria have also increased to $743,731,027 million, according to the International Air Transport Association (IATA).
The inability of the Central Bank of Nigeria (CBN) to remit to international airlines their trapped funds in the country when due may have led to the upward review of the exchange rate of foreign currency to airline operators in the sector by the Federal Government.
A source close to one of the foreign airline operators told our correspondent on Monday that the exchange rate to the dollar has moved to N551 from its initial N444 issued to the airlines by the CBN in the last three years.
The source told our correspondent that the new regime commenced about two weeks ago.
With this review, airfares may rise on international routes for travelers emanating from Nigeria, while the trapped funds of foreign airlines in the country may reduce, the source said.
In the aviation industry in the last three years, international carriers have been selling air tickets to air travelers at the rate of N444 to a dollar, while the black market rate has oscillated between N600 to N750 to a dollar within the same period.
But, the inability of the airlines to repatriate their funds from the country led to a mild crisis in the sub-sector.
No fewer than two airlines; Etihad Airways and Emirates Airlines have suspended flight services into the country due to the crisis, while many others have reduced frequencies in Nigeria.
The Group Managing Director of Finchglow Travels, Mr. Bankole Bernard confirmed the latest development in an interview with our correspondent.
Bernard told our correspondent that the travel agencies are currently issuing air tickets at the rate of N551 to a dollar, rather than the former N444.
He, however, regretted that the official rate was hitching towards the rate at the black market, but said this may reduce the pressure on the naira.
He said: “Today, the rate at which we are issuing tickets is N551 to a dollar. Is that the official rate? No, but that is the rate we are issuing tickets, which is moving closer to the black market. This means the issue of trapped funds would not have been if it had been properly managed.
“The funds became trapped because we were not ready to give them at the official rate. Why didn’t you come out all these while and tell them the rate you would give the airlines so that they can sell their tickets at particular rates as long as it is official? After all, we have multiple exchange rates.
“So, what will make this one different? Then, there will not be an issue of trapped funds and people will be able to do their business, and the agony that you are putting a lot of travelers to will not be there.”
Just recently, the International Air Transport Association (IATA) declared that the trapped funds of foreign airlines in Nigeria had increased to $743,731,027 million, thereby becoming the highest in the world.
IATA lamented that the sums had increased to $743,721,027 million within two months in 2023, from $662 million in January 2023 and $549 million in December 2022.