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Forex Shortage Hits Airlines as $575m Gets Stuck in Nigeria
Airline operators in Nigeria have started feeling the negative impact of the current foreign exchange policy of the federal government, as they have an estimated build-up of $575 million held in the country, which they are unable to repatriate, according to the Financial Watch.
Experts said this development might result in a drop in investments and loss of jobs in the country’s aviation sector, as many airlines may be faced with the option of laying off staff.
The National Union of Air Transport Employees (NUATE) warned last month that about 2,000 Nigerian aviation workers might be sacked by foreign airlines.
This is because airlines are unable to transfer their earnings to their home countries to meet operational costs, in accordance with international aviation industry rules.
The acting General Secretary of NUATE, Olayinka Abioye, called on the federal government to intervene in the situation and prevent the anticipated job losses in the sector.
In addition, many airlines operating in Nigeria might be tempted to cut corners in their maintenance schedules as the scarcity of forex makes it harder to buy and stock consumables for aircraft in reasonable quantities, some aviation experts have said.
This is in view of the International Air Transport Association (IATA) rule that monies that are not repatriated within a period of two months should be considered as blocked.
Further checks revealed that it was this situation that informed the British Airways (BA) downgrade of its flight operations to Nigeria from B747 – 400 with capacity to carry 406 passengers to the B777-200ER which only carries 217 passengers.
“Airline operators are required to change their tyres on a weekly basis, pay for wear and tear on a monthly basis and fix old engines when the need arises, and this is often done outside the country and requires dollars to foot the bills,” Chairman, Airline Operators of Nigeria, Nogie Meggison, said.
Meggison said these routine activities which are mandatory are becoming very difficult for the airlines, as forex is not made available.
Some airline operators said the high exchange rate is also taking toll on domestic airlines operations because major checks are carried out overseas and payments for such services are made in foreign currency, whereas they earn their revenue in naira.
The slide in the value of the naira since last year, prompted airlines to vote more funds from their meagre earnings on maintenance.