As IATA Adjusts Exchange Rate
One-way Economy class tickets on international routes from Nigeria may hit N2 million as the International Air Transport Association (IATA), sets the exchange rate from N663/$1 to N770.
The change in the exchange rate was as a result of the floating of naira as ordered by the Central Bank of Nigeria (CBN).
Also, the inability of international airlines to repatriate ticket sales for over a year has contributed to high airfares on Nigerian routes.
LEADERSHIP, gathered that at the new IATA Rate of Exchange (IRoE), registered by the Global Distribution System (GDS), a six-hour Lagos-London Economy class ticket sells for between N1.3 million to N2.5 million – subject to airline of choice, place, and time of booking. Its Business class variant sells for between N3.36 million to N4.8 million.
Recall that the Economy ticket price was from N400,000 before it jumped to about N1.2 million, while business class tickets ranged from N4 million to N6 million, depending on the airline and booking time. With the new exchange rate, fares are expected to rise further to N2 million.
While stakeholders regretted that the development has further pushed international air travel beyond the reach of average Nigerians, they acknowledged the inherent respite on foreign airlines that are patronising the Investors and Exporters (I&E) FX window for fund repatriation, and reopening of naira inventories to travel agencies in the countries.
Speaking to LEADERSHIP, the former national Financial Secretary, NANTA, Daisi Olotu, said the increment is affecting the stability of the travel market.
According to Olotu, the exchange rate has brought down the numbers of foreign travellers, thereby urging the airlines to adopt a weekly exchange rate system.
“The change in exchange rate doesn’t go down well with travelers and travel agents because it reduces the number of people traveling. It also leads to instability in the market. We give a price today and the price changes the following day.
“So, to create stability in the system, they shouldn’t change the exchange rate daily, rather they should adopt a weekly exchange rate system,” Olotu stated.
Also speaking, former President, National Association of Nigeria Travel Agencies (NANTA), Mr. Bernard Bankole, however, rued the new exchange rate saying tickets sales or fares would be out of reach.
He stated that the already high fares had been worsened by the instability in the airline business occasioned by the recent monetary policy of the federal government.
He said he expected strong leadership from the NANTA executive on reaching a middle ground on the stability of the IROE, stressing that there had been four adjustments in one week which did not do the sector any good.
The clearing house in a statement recently reiterated that airfares for international flights from Nigeria are denominated in U.S. dollars and converted into Naira, the local currency, 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.
There are high hopes that foreign airlines’ stuck funds issues with Nigeria may be a thing of the past following the new I&E instructions.
It could be recalled that earlier in the month during its 79th Annual General Meeting (AGM) held in Istanbul, Turkey, the organisation had raised the alarm that its member airlines’ blocked fund in Nigeria had increased to $818.2 million as at end of April from $744 million in March.
The association said that the figure put Nigeria as the country with the most trapped funds in the world. A statement by Willie Walsh, IATA’s director general put the total trapped funds in the world at $2.27 billion as at April, 2023.
Apart from Nigeria, other countries where foreign airlines’ funds are currently trapped are Bangladesh; $214.1 million, Algeria; $196.3 million, Pakistan; $188.2 million and Lebanon; $141.2 million. IATA maintained that the top five countries account for 68 per cent of blocked funds worldwide.
Walsh warned that rapidly rising levels of blocked funds are a threat to airline connectivity in the affected markets.
He emphasised that the industry’s blocked funds have increased by 47 per cent to $2.27 billion in April 2023 from $1.55 billion in April 2022.
He declared that airlines could not continue to offer flight services in countries where they have found it difficult to repatriate their funds and called for quick action to address the situation.