Some foreign airlines operating in Nigeria have commenced the repatriation of the revenues from their recent ticket sales, following the reform of the foreign exchange market by the Central Bank of Nigeria (CBN).
While backlogs of funds from their previous ticket sales remain trapped, BusinessDay’s findings show that some airlines have been able to repatriate funds from recently sold tickets, an indication that the unification of exchange rates is yielding some positive results.
The CBN had last month directed banks to remove the cap on the Investors’ and Exporters’ (I&E) window of the forex market to allow for the free float of the naira.
The country’s currency was floated after years of sticking with a hard peg that spooked investors and drained dollars from the economy. The naira closed at 788.42 per dollar on Tuesday at the I&E window, compared to around 460/$ before the exchange rate unification.
Airlines in Nigeria have had as much as $812.2 million of funds stuck within the country as of April.
Susan Akporiaye, president of the National Association of Nigeria Travel Agencies (NANTA), told BusinessDay that from ongoing meetings with foreign airlines, some of them revealed that since the unification of exchange rates, they have been repatriating their money from the recent ticket sales.
“So far, it looks good. There is nothing definite yet but at least one thing I take out is that it is a mixture of both sides. For some, the status quo is still the same, while some have better experiences. They say since the unification of the rates, they are beginning to get their funds but it is just the backlog that has remained trapped,” Akporiaye said.
She said the airlines have agreed to release lower inventories (cheaper fares) as a response to the positive development.
She said: “Most of the airlines appealed to the travel community to be a bit patient with them. They said it is looking good and very soon, there may be good news. They all agreed that there is no justification for not releasing the lower inventories.
“I think they just want to see how it goes. Some say they are willing to release inventories but they want to monitor the process and see how the process goes. If the process continues for a month or two, then they will release lower fares.”
Since last year, airlines blocked low ticket inventories, leaving high inventories to be sold in naira only while the low ticket inventories on most airlines’ websites can only be bought with dollar cards only. This was in a bid to cushion the effect of their trapped funds in Nigeria.
Bankole Bernard, chairman of Airlines and Passengers’ Joint Committee of the International Air Transport Association (IATA), had earlier predicted that the introduction of the single rate would reduce the amount of trapped funds in the country.
He said: “What this means is that the market will be even. At this point, a lot of people are going to lose money; some things will become more expensive. The black market man on the street will now go and look for a job because he would no longer have a job to do. Everything will be the same.
“So, this is good news for airlines as more funds will be repatriated. All the issues of not being able to repatriate their money will end. This is because there would be no difference in the rate. The airlines will lose money initially because they already have money that has piled up.”
Last month, IATA disclosed that Nigeria owed $812.2 million out of $2.27 billion trapped funds globally, making it the country with the highest trapped funds.
The top five countries account for 68.0 percent of blocked funds, including Bangladesh ($214.1 million), Algeria ($196.3 million), Pakistan ($188.2 million) and Lebanon ($141.2 million).
IATA warned that rapidly rising levels of blocked funds were a threat to airline connectivity in the affected markets.
Kingsley Nwokeoma, president of Association of Foreign Airlines and Representatives in Nigeria (AFARN), told BusinessDay that the only reason why most airlines are still operating is because there is a new government and they are watching to see if there would be anything that would be different.
He said: “Ticket prices are still high and summer this year is low. Those that managed to travel for summer this year were downgraded. Those that would have travelled using business class downgraded to economy and some of the people that use regular economy had to cancel their travel plans because they cannot pay over one million naira because they are travelling for a six hour flight.
“The exchange rates increased. It is a new administration and we hope that once we have a substantive minister, perhaps things will change. The trapped funds are close to $1 billion and that is a lot of money. Most people travel to Cotonou, Lome and Accra and take two days’ holidays and leave from there to London. If there is a committed paying system, most funds will have been repatriated.”
BusinessDay had earlier reported that the price of an economy class ticket for Lagos-London and Lagos-France has increased to N1.9 million to N2.2 million from around N1.5 million a month ago.
Cost of air fares from Nigeria to various destinations have seen a sharp rise since the exchange rate.
