High Fare ‘Pandemic’ hits Nigeria as airlines move against NCAA, sell tickets in dollars
Fresh indications have emerged that the Federal Government is yet to release over 50 per cent or $265 million foreign exchange for foreign airlines operating in the country to repatriate to their countries.
The foreign airlines collect Naira for their tickets to customers and exchange same for foreign currencies for their operations. But recently they said they have been unable to do so through the official foreign exchange market due to scarcity of foreign exchange in Nigeria.
Following the development, the Federal Government promised to release about $265 million of the over $456 million trapped funds to the airlines penultimate week. The move was acknowledged by the IATA, hailing the country for taking strategic measures to end the problem.
However, findings by Saturday Vanguard showed that the airlines have only received 25 percent ($133 million) of the amount promised.
Further findings showed that the 25 percent was released to few of the airlines, while some others were yet to receive any fund.
The development has forced most airlines operating in the country to stop receiving payment for air tickets in naira, which contravenes the Nigerian Civil Aviation Authority, NCAA, directives.
To beat the law, the airlines simply direct passengers, travel agents to their portal where payments are done in dollars or pounds. They don’t openly reject Naira but make it impossible for people to buy tickets with Naira.
However, the foreign airlines have noted that their inability to source foreign exchange to repatriate their money has made them to lose confidence in operating in the country although Nigeria remains most lucrative route for many of them.
It would be recalled that the Federal Government, through the Central Bank of Nigeria, released about 265 million dollars to service these trapped funds. The move was acknowledged by the International Air Transport Association, IATA hailing the country for taking strategic measures to end the problem.
Sadly, that gesture has not brought a breather to the industry. Ticket fares are so high that economy tickets to USA range between N1. 5m to N2m or above. The exploitative tendencies of the foreign airlines have had a toll on passengers. Qatar Airways and their Moroccan counterparts are among the few still accepting Naira.
NCAA to deal with airlines breaching laws
The Minister for Aviation, Hadi Sirika has said that the NCAA, had been directed to deal with any airlines willfully breaching the country’s laws in order to protect the interest of Nigerians against reported airlines’ operational malpractices, warning that no violator, no matter how highly placed, would be spared if caught.
He said: “I want to use this opportunity to say that reports are reaching us that some of the airlines are refusing to sell tickets in naira. That is a violation of our local laws, they will not be allowed. The high and the mighty among them will be sanctioned, if they’re caught doing that.
“NCAA had been directed to swing into action and once we find any airline violating this, we will definitely deal with them. Also, they blocked the travel agents from access. They also made only the expensive tickets available and so on so forth.
“Our regulators are not sleeping; we have a very vibrant Nigerian Civil Aviation Authority. Once they find any airline guilty, that airline will be dealt with because we need to protect our people. It is according to our agreements, to what we have signed and this is according to international convention.”
FG should open further windows of engagement —NANTA.
In a swift reaction to the development, the National Association of Nigeria Travel Agencies, NANTA, through Mrs. Susan Akporiaye stated that, “Indeed, the delay in the repatriation of funds of foreign Airlines in the country, assumed an embarrassing scenario when IATA bared its fangs and labeled our country a debt bearing nation, which brought us knocks to no end.
“As you are aware, NANTA embarked on empathy visits to all the foreign Airlines to share in their pains and rob minds on engaging Government through the Ministry of Aviation and the Central Bank of Nigeria, to readily find solutions.
“Indeed, most of you in the media engaged me weekly, on how to solve this problem of forex. We are grateful for your dedication and reportage on the efforts we made, even in face of threats by some of the foreign Airlines to cease and wind up operations in Nigeria.
In between these strangulating circumstances, the airlines withdrew lower inventories across board, selling at the highest possible openings as a way to cushion their funds being trapped.
“As usual with them, their response which we could describe as ‘High Fare Pandemic’, is solely targeted at Nigeria and Nigerians.
“It is sad that Nigerians have to buy tickets to the tune of three to four million naira and be charged as high as one million naira to change travel dates even on tickets bought before these issues began.
“This is unacceptable, exploitative, and hostile to the survival of Nigerian aviation downstream sector and to which we call for sanity and return to the best inventory practices and deployment.
“And to our Government, we appreciate the response to the release of some funds, but we urge Government, as a matter of urgency to open further windows of engagement by calling for a meeting with all parties involved; to include CBN, Minister of Aviation, Minister of Finance, Foreign Airlines, NCAA, IATA and NANTA.
“No doubt, our clients, Nigerians, are badly hit by this obnoxious response by the foreign Airlines, we wish to submit that despite the issues at stake, Nigeria remains a high net worth destination for the Airlines to do business.”
CBN devalues Naira to 630/$1
The Central Bank of Nigeria (CBN) has devalued the Naira to N631 to the dollar from N461.6 it sold at the Importers and Exporters (I&E) window the previous day, Daily Trust gathered.
The devaluation came 48 hours after President Bola Ahmed Tinubu announced the plans of the federal government to unify the country’s exchange rate to stimulate the economy.
In his inaugural speech, minutes after he was inaugurated as the 16th president of the country, Tinubu said, “Monetary policy needs a thorough house cleaning. The Central Bank must work towards a unified exchange rate. This will direct funds away from arbitrage into meaningful investment in the plant, equipment and jobs that power the real economy.”
There has been a wide margin between the I&E window and the parallel market, a situation that experts say encouraged round-tripping with Bureau de Change operators.
The situation has seen the CBN devise several measures to check the practice as well as completely stop the sale of forex to BDCs.
On Tuesday, President Tinubu met with the top echelon of strategic institutions including the CBN Governor, Godwin Emefiele, at the presidential villa.
At the end of the meeting, neither the presidency nor Emefiele disclosed the outcome of the briefing. It was, however, gathered that the issue of the exchange rate was discussed at the meeting.
The President also met with the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited, Mele Kyari. The removal of petrol subsidy was discussed, it was gathered.
Findings, however, revealed that at the resumption of the weekly bidding for foreign exchange, the apex bank sold the spot rate to banks on behalf of their customers at N631 to a dollar and most bidders got the full amount they requested.
One of the customers told this paper that they applied and that their request was fully granted at N631 as against N461.6.
The move has also seen prices at the parallel market trend downwards. Checks by this paper revealed that prices dropped from N750 to a dollar in the early hours of yesterday to N745 by evening in Abuja and Kano respectively.
The naira weakened in the parallel market to the lowest level in a year on expectations of a possible change in exchange rate management after Tinubu takes office on Monday.
The naira dropped to N762 a dollar on Friday from 775 the previous day in the unauthorized market in Lagos, said Umar Salisu, a BDC operator who tracks the data in the nation’s commercial capital.
The unit has weakened steadily in the parallel market since last week after stabilizing for most of this year.
The market arbitrage (difference between the official and parallel markets) has widened in the past three years from N100 per dollar or about 30 per cent in 2020 to over N400 per dollar (above 100 per cent) sometime last year when the black market rate spiked to N880/$.
Development institutions, including the International Monetary Fund (IMF), are wary of exchange rate differential in excess of five per cent and warn that such could trigger unhealthy manipulation that could negatively affect other efforts on market stabilisation.
From 2020 to 2022, the CBN spent about $42 billion intervening in the foreign exchange market to stabilise the naira. The amount was sold to the end-users, including students and tourists, at the official rates, which are way off the effective exchange rate of the naira.
According to the Financial Stability Report, a publication of the CBN, the apex bank sold $9.2 billion in the market in the first half of last year.
The full data for the second half are not available, but the annualised value is assumed to have surpassed that, especially with the level of social and economic activities associated with the second half.
Whereas the black market rate averaged N730/$, the I&E window finished at suppressed N447/$ on average. That puts the arbitrage at N283/$, pushing the CBN’s FX subsidy in the year to about N3.65 trillion.
EEDC blames rainstorm for lack of electricity supply in South East
The Enugu Electricity Distribution Company PLC, EEDC, has informed her esteemed customers across the South East that the loss of supply in some areas within its network was due to the rainstorm which occurred on Sunday evening and early hours of Monday
EEDC explained this through a message issued by Mr Emeka Eze, its Human Capital Development Head and made available to reporters.
This he explained had resulted in faults, occasioned by fallen trees and a high rate of broken High and Low Tension poles, causing supply disruption to their 11KV and 33KV feeders across the business districts.
He explained that their various technical/maintenance teams have since commenced patrol of the network to evaluate the extent of damage and treat faults where they are minimal.
EEDC expressed regret over the inconveniences these developments have caused their esteemed customers and appealed for their patience and understanding while these challenges are addressed.
Emeka Eze maintained that EEDC remained committed to delivering improved services to her esteemed customers.
CBN gives reason for raising interest rate to 18.5 per cent
The Central Bank of Nigeria has opened up on why it raised the Monetary Policy Rate, also known as the interest rate, to 18.5 per cent from 18 per cent.
In a communique from the 291st Monetary Policy Committee meeting posted on CBN’s website on Wednesday, the Governor of the apex bank, Godwin Emefiele, stated that its investigation and research found that the country’s interest would have been higher but for its intervention by raising interest rates.
According to Emefiele, Nigeria’s April inflation rate of 22.22 per cent would have been 30.48 per cent if the MPC had not raised the interest rate.
The bank’s decision to raise interest rates since May 2022 positively moderated the country’s rising inflation rate.
“The results revealed that following each monetary policy rate hike, the rise in inflation moderated relative to what it could have been if the MPC had not aggressively raised rates at all.
“The empirical evidence provided showed that whereas inflation in April 2023 stood at 22.22 per cent, the counterfactual evidence suggests that, it could have risen to 30.48 per cent in April 2023, had the MPC not taken any action to raise policy rates as it did since May last year,” he said.
CBN’s MPC raised the interest to 18.5 per cent.
CBN retained the Asymmetric Corridor of +100/-700 basis points around the MPR, Retained the CRR at 32.5 per cent, and Retained the Liquidity Ratio at 30 per cent.
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