International airlines operating in the country may have lost the sum of $208 million (N58.6bn) out of the outstanding $700 million stuck in the economy prior
to the recent introduction of flexible foreign exchange rate policy by the Central Bank of Nigeria (CBN).
The implication is that while the floating of the naira introduced last month may have brought some succour to some sectors of the economy, the aviation sector is suffering a shortfall of an estimated $208 million dollars on account of the difference between the old exchange rate of N199/$ and the present N282/$.
The aviation sector saw about $700 million blocked funds which had continued to threaten operations because the foreign airlines could not remit earnings due to the capital control policy of the CBN before the June 20 policy relaxation.
Consequently, the value of the amount which was at the exchange rate of N199/$ had reduced to $492million based on the new floating exchange rate of N282/$.
For instance, the naira adjusted by 29 percent to N282 against the dollar in the interbank foreign exchange (FX) market last Monday, as the Central Bank of Nigeria, (CBN) intervened to ease demand for the greenback.
The CBN sold $4.02billion in special secondary market intervention sales (SMIS) and $46.5 million on the interbank market at N281 to N285 to the U.S dollar on the first day of the trading, after its currency peg was removed, Thomas Reuters data showed.
Tayo Ojuri, an aviation consultant told BusinessDay that international airlines have started applying through their banks to access forex and some of them are beginning to take some of their monies out.
Ojuri added that the challenge was that the airlines were losing a lot of monies because of the difference in exchange rate of N199 to N282 per dollar.
John Ojikutu, Secretary-General, Aviation Round Table Initiative, told BusinessDay that with over $700million stuck in Nigeria, each of the 25 international airlines operating in the country have nothing less than $20 million stuck in the country.
Ojikutu said this amount can affect the operations of the airlines and could cause more of them to pull out of the country.
Nogie Meggison, President, Airline Operators of Nigeria, (AON) told BusinessDay that the new policy would reduce financial, operational and technical challenges which airlines struggle with, relating to transactions in foreign policy.
The AON president however faulted some section of the policy having to do with availability of forex, as well as pricing.
The previous difficulty accessing foreign exchange had forced two international airlines, Spain’s Iberia Airlines and United States Carrier, United Airlines, to stop operations in Nigeria.
In the process, jobs were lost, as airlines left the country for greener pastures in other countries and customers re-ordered their priorities, flying local carriers which ply the same routes.
Jonathan Guerin, United Airline spokesman, who confirmed the planned pull out, said , “Repatriation has been a significant issue, as has been the downturn in the energy sector.”
A travel agent who craved anonymity told BusinessDay that since the forex challenge, Virgin Atlantic, which often flew full to various destinations, now finds itself operating with several empty seats.
The source added that airline’s weekly flights have been reduced from five to about three times weekly, as a result of the biting forex policy.
The CBN’s increase in dollar sales in March and April led to external reserves haemorrhaging and resulted in restricted sales of cheap ticket classes in naira.
Total forex sold by the CBN in April was $699m. The naira traded flat at N321/$ at the parallel market in April. The official/parallel corridor remained at 62%. This is sharply lower than the February figure of 101%.
A few months ago, the National Union of Air Transport Employees, (NUATE) disclosed that about 2,000 Nigerian aviation workers might be sacked by foreign airlines.
This is because workers were unable to transfer their earnings to their respective home countries to meet operational costs in accordance with international rules because of the new CBN policy on forex and fund transfers.
This is in view of the International Air Transport Association (IATA) rule that monies that are not repatriated within a period of two months, should be considered as blocked.
About 15 million air travellers passed through Nigerian airports in 2015. The figure for 2014 was about 14million. Analysts say this number may have declined as a result of the crunch caused by the former exchange policy.