International airfares skyrocket as exchange rate jumps by 38% - PUNCH
BY Oyetunji Abioye and Funmi Fabunmi
nternational airfares on Nigeria routes to various global destinations have skyrocketed again as the International Air Transport Association’s exchange rate for ticket sales has risen by 37.5 per cent above the official rate.
The PUNCH findings confirmed on Wednesday that IATA, the global trade association for world airlines, had approved the sale of flight tickets in Nigeria at N634/dollar.
This is about N173 or 37.5 per cent above the Central Bank of Nigeria’s official exchange rate pegged at N461.06 as of 6:31 Wednesday.
Following the latest increase in the IATA exchange rate, travel agencies and international airlines operating in Nigeria have adjusted the exchange rate for ticket sales.
The development has led to significant increases in airfares ahead of the peak summer travel season which has gained momentum.
Already, Nigerian travellers have been grappling with high airfares worsened by the inability of foreign airlines to repatriate their ticket sale proceeds out of Nigeria due to a shortage of dollars from the CBN
International airlines in Nigeria have closed their low-price ticket inventory in order to cushion the effect of blocked funds put at $802m as of April.
A few months ago, foreign airlines sold tickets at N444/dollar in line with the CBN official exchange rate. However, in recent weeks, IATA has reviewed the exchange rate for ticket sale in Nigeria to N462/dollar, N551/dollar, N582/dollar, N610/dollar and currently N634/dollar even though the CBN official exchange rate has remained around N461/dollar
The increases in the IATA exchange rate have led to a commensurate jump in airfares on the Nigerian route.
IATA officials justified the exchange rate increases, saying they were in line with the spot rates the CBN has been selling foreign exchange to foreign airlines in Nigeria for the repatriation of their ticket sale proceeds.
Foreign airlines submit FX bids to the CBN through their respective commercial banks every fortnight.
“The increases in the IATA exchange rate are in line with the changes in the CBN exchange rates for airlines. The airlines are just matching the rate at which the CBN is selling the dollar to them. It is not a unilateral change from the airlines,” an IATA official who spoke on condition of anonymity, told The PUNCH.
“You can also check with the banks the rate at which CBN sold USD at the last retail auction for spot bids. We got the results today from the banks. If you check you will see that the airlines are even matching the lowest point on the spot rate in order to reduce the increase in airfares,” the official added.
Meanwhile, findings show that despite the significant increases in the IATA exchange rate, the amount of trapped funds in Nigeria has yet to reduce.
“The CBN is not reducing the backlog of trapped, even at this increasing exchange rate. Airlines have been receiving less than 25 per cent of their bids. Thus, the unabated increase in the backlog of airlines trapped funds in Nigeria,” an airline official who spoke on condition of anonymity because of a possible government backlash, said.
The President of the National Association of Travel Agents of Nigeria, Susan Akporiaye, while reacting to the current development, expressed disappointment lamenting that passengers would suffer the most from the increment.
Aporiaye said, “Fares will definitely increase and passengers have to pay more. As a result, Passengers won’t travel as much as they should and this will affect travel agents.”
Also, a former Director of General Aviation of the Nigerian Civil Aviation Authority, Captain Dele Sasegbon, said, “Foreign airlines sell tickets just that some of their funds are trapped here but as far as tickets are concerned they’re going to be more expensive. All the foreign airlines want is to get their money out of Nigeria which Nigeria is making it difficult for them. As for the passengers, the best thing is not to go anywhere and wait for things to get better or if you can afford it, then fly.”
In March, the IATA Area Manager West and Central Africa, Dr Samson Fatokun , in a letter to the Minister of Aviation, Hadi Sirika, said trapped funds belonging to foreign airlines operating in the country had risen by 12.39 per cent to $743,721,097 in January 2023 from $662m in the corresponding period last year.
“For over a year, Nigeria has been the country with the highest amount of airline-blocked funds in the world. Please find attached the comparative table of airlines’ blocked funds by country.
“Moreover, as of January 2023, airlines’ blocked funds in Nigeria have increased to $743.721.092 from $662m in January 2022 and $549m in December 2022,” the letter read in part.
However, about a month later, Sirika, in a meeting with the IATA team, foreign airlines and travel agents assured the foreign operators that he would take the issue up with the Presidency and the CBN.