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The lingering shortage of foreign exchange in Nigeria has forced the naira to crash against the United States dollar on the air ticket pricing template of the International Air Transport Association, the Switzerland-based trade body representing over 290 global airlines.
As a result, airfares on Nigeria routes that are priced in naira have increased considerably, forcing Nigerian travel companies to express fear the development may further dampen the recovery of international travel from the effects of the COVID-19 pandemic.
The development came amid struggles by foreign airlines to access forex from the Central Bank of Nigeria to repatriate ticket sale proceeds running to over $208m.
Investigations by The PUNCH revealed that the naira fell against the US dollar last week on the IATA ticket pricing template from 415/dollar to 444/dollar, forcing travel companies to sell tickets at higher prices.
The development is coming at a time travel agents are bracing to make higher sales from intending international travellers for the Yuletide vacation later in the year.
Travel companies told The PUNCH that air ticket pricing had gone up from 415/$ to 444/$ as agents were bound to issue tickets based on the exchange rate stipulated on the IATA platform.
Multiple travel companies confirmed that the IATA exchange rate had been fluctuating between 415/$ and 442/$ in recent times before peaking at 444/$ last Thursday.
As of Monday evening when this report was being filed, the IATA rate was still at N444/$.
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Random checks through some popular travel companies showed that airfares had surged following the naira’s crash against the greenback on the IATA platform.
Speaking on the development, the President of the National Association of Nigeria Travel Agents, the umbrella body for travel agencies/companies in Nigeria, Susan Akporiaye, expressed dismay and warned the situation could dampen the post-COVID-19 recovery of the air travel industry.
She said, “The exchange rate is fluctuating now. Before now, IATA had moved the exchange rate from N425/$ to N442/$. What is now happening is unfortunate and it is not good for our industry.
“I think it was necessary because there is a big disparity between the bank rate, airline rate and the black market rate. Before now, the airline rate was N415/$ while the black market rate was N580/$. Look at that disparity!”
While linking the development to foreign airlines’ inability to access forex, the NANTA president advised the CBN to address the situation urgently.
“If foreign airlines were getting forex as and when due, there probably wouldn’t have been the need for the increase in IATA rate. These are foreign airlines; they are not Nigerian airlines. Their funds have to go back to their countries,” she said.
Akporiaye recalled how a similar forex crisis in 2016 led to a situation where foreign carriers removed cheaper classes of tickets from their inventory.
She said, “A particular foreign airline says it is not repatriating up to 50 per cent of its funds; it says it is doing between 20 and 30 per cent. Some foreign airlines say if they are repatriating about 50 or 60 per cent of their ticket sale proceeds, they will be fine.
“The increase in the exchange rate will affect travel demand because people will not want to go above their budget. Since the COVID-19 pandemic, people have learnt to cut their budgets. Demand for travel will reduce. The forex scarcity is another pandemic that we cannot afford to have. Government should seriously look into the issue of repatriation of funds for foreign airlines.”
Source: Punch
This post was written by Obiajulu Joel Nwolu.
The views expressed here belong to the author and do not necessarily reflect our views and opinions.