National carriers exit Nigeria over forex scarcity

Captain Roland Iyayi, former Managing Director, NAMA

Captain Roland Iyayi, former Managing Director, NAMA

United Airlines recently shocked many people when it announced its decision to stop flying into Nigeria effective July 2016. But for many industry watchers, it was an announcement that was long in coming given the outlook of the aviation sector.

The United States’ carrier, with several years of operations and at least one frequency per day, is quitting for reasons not unconnected with low patronage and millions of dollars trapped in Nigeria. Citing reason for the exit, United Airlines’ spokesman, Jonathan Guerin, said that “repatriation has been a significant issue, as has been the downturn in the energy sector.”

The announcement contained in a note to employees came barely three weeks after Spanish national carrier, Iberia Plc, stopped flights to Nigeria, citing dwindling passenger traffic as the reason.

Such exit comes at a cost for the workforce. The National Union of Air Transport Employees (NUATE) recently estimated that no fewer than 2,000 Nigerian aviation workers may be sacked by foreign airlines.
There is a considerable consensus among aviation stakeholders that unless the Federal Government grants the sector a quick bailout, more airlines are due to follow Iberia and United Airlines.

British Airways has denied any plan to exit the Nigerian airspace, though it had lately withdrawn about 10 categories of fares to triggered fare hike regime, far higher than rates in neighbouring countries.

President Muhammadu Buhari’s administration had in the wake of global slump in oil prices and attendant dwindling revenue, unveiled a fiscal policy through the Central Bank of Nigeria (CBN) restricting access to foreign exchange and funds transfer out of the country. And since then, revenue made from ticket sales by foreign airlines has been difficult to repatriate. An estimate put the sum of trapped fund at about $600million.

Reports have it that both Delta and United Airlines have an estimated sum of $180 million hanging in the Nigerian economy. Those of Air France-KLM are estimated to be over $150 million. British Airways has a total of $100 million as at March 2016, while Iberia, which has left, had $5 million of its funds trapped.

Piqued by the development, coupled with pressure from international aviation agencies, the Minister of State for Aviation, Hadi Sirika, recently said that the ministry was working with the CBN, Ministry of Budget and National Planning and Ministry of Finance to include airlines in priority list of foreign exchange allocation. Sirika, at a meeting held with airline operators, aviation agencies and experts, observed that the sector heavily relies on foreign exchange and promised that government would find an amicable solution to the problem.

However, Captain Roland Iyayi, a former Managing Director of Nigerian Airspace Management Agency (NAMA), believes that a forex bailout might not be the solution in the current clime. “When you create anything that gives a waiver in government, it is often subject to abuse. So, when you say give aviation a special dispensation, I can see very quickly non-aviators trying to take advantage of such window. There has to be some sort of structure put in place to authenticate those really in need of such,” he said.

He added that if the economy was fully diversified today, foreign earning from other sectors would be accruing to the government and this problem would not have arisen.  “My view is that this is a temporary situation and it is not going to last for too long, particularly if the government now deregulate certain areas of the aviation sector; such as airports concessioning. It will increase Foreign Direct Investment (FDI) and the reliance on forex for operations will reduce. We encourage government to concession key areas of the industry so that it can encourage FDI,” Iyayi said.

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