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Nigeria airline industry flying low

12 August 2016, 11:42

LAGOS, (CAJ News) - Nigeria's aviation industry has not been spared the prevailing economic challenges.

The national accounts provided by the National Bureau of Statistics (NBS) indicate air transport contributed 8 percent to transportation in the first quarter of the year and grew by only 2,2 percent year-on-year in the same period.

This compares with a growth of 6,2 percent year-on-year in Q1 2015.

First Bank of Nigeria says the general moderation in traffic is a reflection of the slowdown in consumers’ purchasing power and therefore the broader economy.

“In addition to the squeezed pockets of consumers, forex challenges are weighing on the sector as the importation of aviation fuel has slowed down. The fx available is channelled towards importing PMS (gasoline) which is regarded as priority.”

The bank says its channel checks reveal that aviation fuel is sold at as high as N280 per litre, compared with N165 per litre a year ago.

In order to maintain profit margins, marketers sell it at a higher price to airlines.

FBN notes this has led to delays and in some cases cancellation of domestic flights, putting a strain on corporate Nigeria as many businesses require frequent air travel, particularly on the Lagos-Abuja and Lagos-Port Harcourt routes.

Scarcity of aviation fuel is not the only challenge created by forex sourcing issues, FBN points out, adding the inability of airlines to repatriate their funds has also plagued the sector.

Anecdotal evidence shows foreign airlines have increased their fares to make up for their trapped funds as industry sources predict that by December, an Economy Class ticket for a six-hour trip could cost as high as N800 000 (US$2 500).

The International Air Transport Association (IATA) estimated a few months ago that no less than US$600 million belonging to foreign airlines was trapped in Nigeria.

Following the recent announcement of the new fx regime, the Central Bank of Nigeria made forward sales of about $4 billion to clear the backlog accumulated of which airline operators were included.

- CAJ News


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