After foreign airlines raised the exchange rate for ticket sales from N462 to N551 per dollar, international airfares on Nigerian routes increased further by more than 20%.
The latest increase in the naira-dollar exchange rate for ticket sale by the International Air Transport Association, the Switzerland-based trade association of the world’s airlines, is expected to worsen the plight of Nigeria travelers who are already paying higher airfares. This is because carriers blocked their inventory of cheaper tickets in order to cushion the effects of the rising amount of trapped funds. International travelers on Nigerian routes have been paying higher airfares.
Reports have it that a number of travel companies that global distribution system companies had informed them of the most recent increase.
They asserted that the development was unrelated to the difficulties foreign airlines face in repatriating ticket sales proceeds from Nigeria.
Travel agents claim that the rise in the exchange rate has increased international airfares by more than 20%.
“Virgin Atlantic, which is offering a promotion worth about N800,000. Due to the increase in the exchange rate, the same promotion is selling for approximately N1.1 million, according to a travel agency’s chief executive officer, who requested anonymity.
In Nigeria, foreign airlines with flights into Nigeria had approximately $743 million in unused funds as of January of this year. According to IATA, Nigeria has the most trapped funds from foreign airlines in the world.
However, stakeholders and travel companies have emphasized the need for the Federal Government to direct the Central Bank of Nigeria (CBN) to expedite the release of the trapped funds.
Mr. Bankole Bernard, a former president of the National Association of Nigerian Travel Agents, a trade group for local travel agents, confirmed the most recent increase in IATA’s exchange rate for ticket sales. He said that the Federal Government needed to uphold the terms of the bilateral air services agreement it signed with other countries, especially the part about getting money back home.
We are issuing tickets at a rate of N551 per dollar today. Is that the established rate? No, yet that is the rate we are giving tickets, which is drawing nearer to the bootleg market rate. He stated, “The funds became trapped because we (the government) were not ready to give foreign airlines funds at the official rate. This means the issue of trapped funds would not have been.” Why didn’t you let them know how much money you would give them so that they could sell their tickets at a certain price as long as it was agreed upon? All things considered, we have different trade rates. So, what will set this one apart from others?
Then there won’t be a problem with funds that are stuck, people will go about their business, and the pain that travelers are going through won’t be there.
Bismarck Rewane, the managing director of the research company Financial Derivatives Company Limited, stated that foreign airlines were not to blame for the most recent increase in the exchange rate.
He stated, “In dollars, airfares have not increased; they have remained the same amount.” The increment will just influence the people who purchase their tickets in naira. But foreign airlines are not to blame. We must place ourselves in their position. Why are they unable to return their funds? Because they are unable to return their funds, they are losing money. Since most of their costs are in dollars, how will they pay for all of these services and goods if they can’t get their money back?
As of January 2023, IATA estimated that foreign airlines’ Nigerian trapped funds totaled $743,721,097.
In a letter signed by its Area Manager for West and Central Africa, Dr. Samson Fatokun, and addressed to the Minister of Aviation, Hadi Sirika, IATA made this disclosure.
The IATA pleaded with the minister to step in and resolve the issue of airlines’ blocked funds in Nigeria.
“For over a year, Nigeria has been the country with the highest amount of airline-blocked funds in the world,” the letter read in part.
The comparison table of airlines’ blocked funds by country is attached. In addition, airlines’ blocked funds in Nigeria have increased to $743.721.092 as of January 2023, up from $662 million in January 2022 and $549 million in December 2022.
Fatokun said that the growing backlog of international airlines’ blocked funds would hurt foreign direct investment in Nigeria, even though the country was expecting investment in the concession of some of its major airports. He also talked about the social and economic effects of airline-blocked funds in Nigeria.
He also said that BASA is broken by not allowing foreign airlines to return their funds on time.
Later, Sirika made a promise that the Federal Government would make sure that the unpaid balances were paid.
