Travel agencies confirm foreign airlines have devalued exchange rate to N551/$1
The constant inability of the Central Bank of Nigeria (CBN) to remit international airlines’ trapped funds may have led to the upward review of the foreign currency exchange rate charged by the airlines to their Nigerian customers.
A source close to one of the foreign airlines confirmed to Nairametrics that the exchange rate to the dollar has moved to N551 from the initial N444 issued to the airlines by the CBN in the last three years.
The source told our correspondent that the new regime commenced about two weeks ago.
What this means for Nigerian air travellers
With this review, airfares may rise on international routes for travellers emanating from Nigeria. Also, the aforementioned source said this could help to reduce foreign airlines’ trapped funds in Nigeria. They did not provide details on how this could work.
- Meanwhile, Nairametrics understands that the increase in ticket prices may also lead to a reduction in demand for air travel, especially among price-sensitive passengers.
- This could lead to a decline in the number of passengers flying, which could negatively impact the airline industry in Nigeria.
More details on this development
The Group Managing Director of Finchglow Travels, Mr Bankole Bernard, confirmed the latest development in an interview with Nairametrics. He explained that the travel agencies are currently issuing air tickets at the rate of N551 to a dollar, rather than the former N444.
He, however, regretted that the official rate was hitching towards the rate at the black market, but said this may reduce the pressure on the naira. He said:
- “Today, the rate at which we are issuing tickets is N551 to a dollar. Is that the official rate? No, but that is the rate we are issuing tickets, which is moving closer to the black market. This means the issue of trapped funds would not have been if it had been properly managed.
- “The funds became trapped because we were not ready to give them at the official rate. Why didn’t you come out all these while and tell them the rate you would give the airlines so that they can sell their tickets at particular rates as long as it is official? After all, we have multiple exchange rates.
- “So, what will make this one different? Then, there will not be an issue of trapped funds and people will be able to do their business, and the agony that you are putting a lot of travellers to will not be there.”
In case you missed it
Recall that Nairametrics first reported about this on March 23rd, 2023. The earlier report also noted that this is not indicative of an official devaluation of the exchange rate between the naira and the dollar.
What you should know
In the last three years, international carriers have been selling air tickets to air travellers at the rate of N444 to a dollar, while the black market rate has oscillated between N600 to N750 to a dollar.
But, the difficulty faced by the airlines regarding the repatriation of their funds from the country led to a mild crisis in the sub-sector.
- No fewer than two airlines (Etihad Airways and Emirates Airlines) have suspended flight services into the country due to the crisis, while many others have reduced frequencies in Nigeria.
- Just recently, the International Air Transport Association (IATA) declared that the trapped funds of foreign airlines in Nigeria had increased to $743,731,027 million, thereby becoming the highest in the world.
- IATA lamented that the sums had increased to $743,721,027 million within two months in 2023, from $662 million in January 2023 and $549 million in December 2022.
Sources: nairametrics.com, PM News Nigeria