Nigeria’s tanking currency has left its airline industry on the brink of collapse – The Washington Post

A Boeing 737-7BD Arik Air airplane is seen parked on the tarmac at the local airport in Lagos in 2012. (Akintunde Akinleye/Reuters)
Nigeria is between a rock and hard place, and every day it is getting more and more difficult to leave it — literally.

The country is grappling with two full-on rebellions — one by Boko Haram in the north and the other by armed gangs in the oil-rich Niger Delta — as well as persistently low crude oil prices that have stripped away revenue from an economy significantly dependent on them.

In June, the government decided to deregulate the naira, Nigeria’s currency, allowing it to devalue. Since then, the flow of dollars into the country has drastically decreased, as traders and companies hold on to them, fearing an unstable naira. The currency has lost more than half of its value against the dollar as of early September.

The relatively stable naira plunged against the U.S. dollar after it was allowed to devalue in June. (Bloomberg)

The move has devastated Nigeria’s airline industry, which uses dollars to pay for imported jet fuel. On Tuesday, the country’s largest airline, Arik Air, announced that it would be suspending operations because it couldn’t afford fuel (though it indicated it might be able to reopen very soon). Aero Contractors, the country’s oldest airline, indefinitely suspended operations two weeks ago. Another airline, First Nation, has also suspended operations, though unlike the others, it did not cite fueling costs as a reason.

Soaring jet fuel costs have also led United Airlines and Spain’s national carrier, Iberia, to shutter their Nigeria routes. As the fuel gets more costly, it also becomes more scarce. That means other international airlines have begun flying there with extra fuel, using smaller planes, or refueling their jets on newly-added stopovers outside the country instead of doing so in Nigeria. Otherwise they risk stranding their planes due to sudden shortages.

According to an airline executive reached by Reuters, major fuel companies such as Total, Sahara and ConocoPhillips have nearly doubled their prices since June.

The volatility has sapped investor confidence in the country with Africa’s biggest population. How can companies — airlines or otherwise — invest in a country they can’t even be assured of flying to?

“It’s an impossible situation. The oil marketers don’t want to sign long-term agreements anymore so we have to accept whatever prices they demand,” one airline executive told Reuters. “We sell tickets in naira and now they want us to come with dollars.”

Emirates, one of the world’s largest airlines, now has an added stopover in Ghana on its once-daily flight to Nigeria’s capital, Abuja — a route that once had two flights a day. Emirates’ route to Lagos has similarly been chopped to once daily.

When push comes to shove, however, everyone needs food more than they need to fly. If airlines keep failing to pay up, suppliers will inevitably sell the fuel through middlemen to local buyers. Jet fuel, after all, can be substituted for the kerosene that many Nigerians use to cook and heat their houses.