By Louis Iba
THIS is certainly not the best of time for international air travelers in Nigeria as foreign airlines have increased the cost of air tickets by about 70 per cent to reflect rising cost of doing business in Nigeria.
Daily Sun learnt that at the root of the increase is the scarcity or the high cost of foreign exchange (forex) as well as the inability of most foreign airlines to repatriate their incomes out of Nigeria.
A source at the airport told Daily Sun that with foreign airlines finding it so difficult to repatriate earnings out of Nigeria in foreign currencies, most of them who would not want to lose the Nigerian market had found a quick-fix approach to the problem by selling tickets either in dollars or ensuring that the passengers in Nigeria paid the dollar equivalent in naira.
“What is happening is that some of the airlines if they don’t charge in dollars, they are now calculating airfares based on the rates found at the parallel market,” an official told Daily Sun.
“So if the real dollar value for a particular trip out of Nigeria abroad is $2,000, the passenger can be made to pay N700, 000 because the calculation of the airline is based not on the official exchange rate but on what is found at the parallel market which can be N330-350 to a dollar and that will give you something like N700, 000 rather than about N394, 000 which was previously charged when the exchange rate was officially at N197 per dollar and that’s why air fares have gone up,” explained the official. It was learnt that some of the airlines having collected their fares either in dollars or through conversions at parallel markets are now repatriating “raw foreign currencies” out of Nigeria. The practice has seen average economy class airfares from Nigeria to the United States of America shooting up from between N350, 000 or N450, 000 to between N750, 000 to N800, 000.
The prevalence of this trend was confirmed last week, when the Nigerian Civil Aviation Authority (NCAA) issued a warning letter to the airlines to desist from selling tickets in foreign currencies to local passengers or risk being sanctioned given that their action constituted a breach of Nigerian law.
The immediate impact
The increase in air fares by foreign airlines, it was learnt, has had a corresponding impact on the number of passengers now traveling out of the Nigeria.
It was learnt that passenger patronage had dropped by about 25 to 30 per cent with dire consequences on revenues of the airlines as well as the local travel agents that sell tickets for the airlines.
A statutory five per cent from the amount sold from every ticket in Nigeria is shared between the Nigerian Civil Aviation Authority (NCAA), Nigerian Meteorological Agency (NIMET), Accident and Investigation Bureau (AIB) and Nigerian Airspace Management Agency (NAMA). That amount which is deployed to boost the equipment and manpower capabilities of these regulatory agencies is reported to have dropped drastically in recent weeks raising fresh worry to the government following the low patronage of foreign airlines by Nigerian travelers.
Chief Executive Officer (CEO) of Zigona Travel and Tours Limited, Mrs. Ngozi Ngoka, who spoke to Daily Sun on the issue however said travel agents are perhaps the worst hit from the crisis with some no longer able to meet remuneration obligations to staff. “What is currently affecting our business as travel agencies is the reality of lack of passengers that turn up to buy air tickets,’ said Ngoka. “People are not traveling so much anymore.
This trend started last year and has gotten worse more recently and the simple reason is the high cost of ticket. Airfares have gotten so high due to the rate of exchange of United States Dollars (USD) to naira and you know that the neutral unit of currency (NUC) of airlines is in USD. Itineraries are fared in USD and converted to naira.
“And then coupled with this problem is the fact that airlines have decided to remove the cheaper fares from their sales offering as a way of dealing with the challenges they are experiencing with the current monetary policy of the Nigerian government,” she added.
Nigeria’s loss is perhaps Ghana’s gain as the foreign exchange crisis has pushed some of the foreign airlines to relocate their ticketing and sales offices from Nigeria to Ghana. Leading the pack of airlines that have moved ticketing base out of Nigeria are Delta Airlines as well as British Airways and Virgin Atlantic. Intending travellers to the United States of America (USA) and the United Kingdom (UK) for some months on these airlines now have to get their tickets through sales outlet in Ghana where the airlines now consider a sort of safe haven for their businesses.
Plea by IATA
The International Air Transport Association (IATA) has called on Nigeria relax its tight currency exchange rate controls and release about $591million being withheld by the Central Bank of Nigeria (CBN) to the foreign airlines.
“The efficient repatriation of revenues is critical for airlines to be able to play their role as catalysts for economic activity,” said IATA’s Director General, Mr. Tony Tyler. In Nigeria, repatriation issues between the Central Bank of Nigeria and the airlines started in the second half of 2015 and became worse in the first half of 2016 forcing Iberia and United Airlines to exit the country.
Fear of job losses
Already, the National Union of Air Transport Employees (NUATE) has warned that foreign airlines doing business in Nigeria plan to sack about 2,000 Nigerian workers due to their frustration with repatriating their monies back home to meet their operational cost. The union said it would not be in the interest of the country should the airlines lay off such number of workers and they have urged the government to step into ameliorate the situation by acceding to the demands of the airlines.
Opportunity for tourism investments
Analysts have however pointed out that what is happening in Nigeria’s aviation sector, especially the high cost of fares to travel abroad for leisure, offers a good opportunity for the country to unlock Nigeria’s dormant tourism potentials for economic prosperity. It is in hard times like this that Nigerian investors can recreate bubbling and a top tourist city out of deserts like it has been done with Dubai. “Nigeria should use this opportunity to diversify its economy. We should begin to look inward and investors should start investing in tourism and tourism products in Nigeria,” said Ngoka.