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While backlogs of funds from their previous ticket sales
remain trapped, BusinessDay’s findings show that some airlines have been able
to repatriate funds from recently sold tickets, an indication that the
unification of exchange rates is yielding some positive results.
The CBN had last month directed banks to remove the cap on
the Investors’ and Exporters’ (I&E) window of the forex market to allow for
the free float of the naira.
The country’s currency was floated after years of sticking
with a hard peg that spooked investors and drained dollars from the economy.
The naira closed at 788.42 per dollar on Tuesday at the I&E window,
compared to around 460/$ before the exchange rate unification.
Airlines in Nigeria have had as much as $812.2 million of
funds stuck within the country as of April.
Susan Akporiaye, president of the National Association of
Nigeria Travel Agencies (NANTA), said that from ongoing meetings with foreign
airlines, some of them revealed that since the unification of exchange rates,
they have been repatriating their money from the recent ticket sales.
“So far, it looks good. There is nothing definite yet but at
least one thing I take out is that it is a mixture of both sides. For some, the
status quo is still the same, while some have better experiences. They say
since the unification of the rates, they are beginning to get their funds but
it is just the backlog that has remained trapped,” Akporiaye said.
She said the airlines have agreed to release lower
inventories (cheaper fares) as a response to the positive development.
She said: “Most of the airlines appealed to the travel
community to be a bit patient with them. They said it is looking good and very
soon, there may be good news. They all agreed that there is no justification
for not releasing the lower inventories.
“I think they just want to see how it goes. Some say they
are willing to release inventories but they want to monitor the process and see
how the process goes. If the process continues for a month or two, then they
will release lower fares.”
Since last year, airlines blocked low ticket inventories,
leaving high inventories to be sold in naira only while the low ticket
inventories on most airlines’ websites can only be bought with dollar cards
only. This was in a bid to cushion the effect of their trapped funds in
Nigeria.
Bankole Bernard, chairman of Airlines and Passengers’ Joint
Committee of the International Air Transport Association (IATA), had earlier
predicted that the introduction of the single rate would reduce the amount of
trapped funds in the country.
He said: “What this means is that the market will be even. At
this point, a lot of people are going to lose money; some things will become
more expensive. The black market man on the street will now go and look for a
job because he would no longer have a job to do. Everything will be the same.
“So, this is good news for airlines as more funds will be
repatriated. All the issues of not being able to repatriate their money will
end. This is because there would be no difference in the rate. The airlines
will lose money initially because they already have money that has piled up.”
Last month, IATA disclosed that Nigeria owed $812.2 million
out of $2.27 billion trapped funds globally, making it the country with the
highest trapped funds.
The top five countries account for 68.0 percent of blocked
funds, including Bangladesh ($214.1 million), Algeria ($196.3 million),
Pakistan ($188.2 million) and Lebanon ($141.2 million).
IATA warned that rapidly rising levels of blocked funds were
a threat to airline connectivity in the affected markets.
Kingsley Nwokeoma, president of Association of Foreign
Airlines and Representatives in Nigeria (AFARN), told BusinessDay that the only
reason why most airlines are still operating is because there is a new
government and they are watching to see if there would be anything that would
be different.
He said: “Ticket prices are still high and summer this year
is low. Those that managed to travel for summer this year were downgraded.
Those that would have travelled using business class downgraded to economy and
some of the people that use regular economy had to cancel their travel plans
because they cannot pay over one million naira because they are travelling for
a six hour flight.
“The exchange rates increased. It is a new administration
and we hope that once we have a substantive minister, perhaps things will
change. The trapped funds are close to $1 billion and that is a lot of money.
Most people travel to Cotonou, Lome and Accra and take two days’ holidays and
leave from there to London. If there is a committed paying system, most funds
will have been repatriated.”
The price of an economy class ticket for Lagos-London and
Lagos-France has increased to N1.9 million to N2.2 million from around N1.5
million a month ago.
Cost of air fares from Nigeria to various destinations have seen a sharp rise since the exchange rate for ticket pricing hit over N740/$.
-BusinessDay