International airlines lose $240m as a result of CBN's new foreign exchange policy

FOREIGN airlines operating within Nigeria have lost a combined sum of $240m following the adoption of a new foreign exchange policy by the Central Bank of Nigeria (CBN) that re-valued the naira.

 

Over the last year, the naira has been under pressure as a result in the drop in global oil prices, which has significantly hurt government revenue. This fall has also resulted in an acute scarcity of foreign exchange as the CBN has sought to limit the amount of dollars it makes available to commercial banks.

 

According to the International Air Transport Association, the global trade body for about 260 airlines, in May the unremitted ticket sales proceeds in Nigeria by foreign carriers, stood at $600m. However, the movement of the CBN’s interbank exchange rate from N197 per dollar to over N280 per dollar, following the adoption of the new forex policy, has made these foreign airlines lose at least 40% of the $600m.

 

What this means is that the foreign airlines will lose about 40% of the amount, which has been held in naira in Nigerian banks for several months due to dollar shortage, which translates to about $240m (N67.2bn). Confirming the development, the country manager of one European carrier, said foreign airlines operating in the country had lost at least 40% of their ticket sales proceeds, which had been trapped for several months.

 

These foreign carriers are expected to complete the repatriation of the outstanding ticket sales proceeds this month. Mbuvi Ngunze, the chief executive of Kenya Airways, said that his airline, sub-Saharan Africa’s third-largest carrier, was expected to start receiving payments for outstanding fares from the CBN this month.

 

He said the carrier had been unable to collect $25m from its sales agents in Nigeria, Angola and Sudan because of dollar shortages in the oil-producing countries. On June 20, the CBN abandoned its 16-month currency peg and sold $4bn in the spot markets to clear a backlog of demand for hard currency.

 

Following the CBN's forward and spot sales, the naira settled at 280 to the dollar on the interbank market. Commenting on the loss made by foreign airlines, travel expert and chief executive of Gashire Travels, Gbenga Adebayo, said it was unfortunate that the foreign carriers were losing money to the new forex policy.

 

He, however, said it was better for that to happen than for the carriers to keep having their funds trapped in the country. “Business is full of ups and downs but they have made huge profits in the Nigerian market in the past and they will still make more in the future,” Mr Adebayo added.