Foreign airlines yesterday disputed the central bank’s recent upward revision of the rate of exchange (RoE) and the ensuing increase in the cost of overseas travel, claiming that these factors were to blame for both.
It is inaccurate to refer to the currency rate that applies to international flight tickets sold in Nigeria as the IATA exchange rate, according to the airlines operating under the auspices of the International Air Transport Association (IATA).
You may recall that the foreign airline rate of exchange, which affects the cost of overseas travel, has risen for the third time in less than two months, reaching N582/$1 currently.
A six-hour Lagos-London Economy class ticket is sold at the new RoE price between N1.1 million and N2.97 million or more, depending on the airline, the location, and the time of purchase. The price range for the Business class version is N3.36 million to N4.8 million.
Stakeholders acknowledged the inherent relief on foreign airlines that are using the Investors and Exporters (I&E) FX window for fund repatriation and reopening of naira inventories to travel agencies in the countries, while regretting that the development has further increased the cost of international air travel for average Nigerians.
In a statement released on Monday, IATA, the clearing house for more than 290 international airlines, reaffirmed that prices for international flights departing from Nigeria are quoted in U.S. dollars before being converted to the local currency, the naira, for sale in the Nigerian market.
“These conversions use the official prevailing exchange rate provided by the country’s financial system.”
“IATA simply applies the spot rate at which the Central Bank of Nigeria sells USD through banks to the market, at its fortnightly retail foreign exchange auctions. The rate is not static, i.e. if the rate at which the CBN sells USD goes up, the exchange rate applied to airfares will follow and vice versa,” IATA said.
Notably, the international aviation sector has experienced a trapped funds issue over the past year, which has had an impact on stocks, asking prices, and the verging-on-collapse of local travel firms.
The Central Bank of Nigeria (CBN) did pledge $265 million as part of its earlier intervention in August 2022, leaving a balance of $200 million in Nigeria. However, daily ticket sales continued to lack money, and by late October 2022, Emirates Airlines would have had to stop flying to Nigeria. Industry sources stated that the total accumulated was well over $800 million as of the most recent check.
According to The News Chronicles, after negotiations to break the impasse, the authorities recently agreed to switch the official CBN window for the repatriation of foreign airline cash in Nigeria to the considerably more volatile I&E window.
Both travel agents and industry experts agreed that the higher pricing were both unavoidable and, in some ways, a sign of things to come given the present market conditions.
Bankole Bernard, the chairman of the International Air Transport Association’s (IATA) Airlines and Passengers Joint Committee (APJC), claimed that foreign airlines using the I&E window may provide a long-term solution to the problem of stuck funds and unleash the commercial viability of the global market.
Bernard emphasized that the government’s indecision about the FX liquidity problem and its repercussions on the international airlines was to blame for the stuck fund situation’ regrettable inordinate length of time.
“The government has been neither here nor there. If you are telling the airlines not to sell at NAFEX rate, but in Naira, and they are not getting their equivalence for repatriation, then the government is the creator of the problem.”
“But the airline has started getting their monies because they are not waiting for the CBN anymore. They are doing I&E window, though it is higher, but it is good for the airlines, and even the government. The only people that are suffering in all of this are the masses,” Bernard said.
