Although domestic airlines have expressed satisfaction over their recent inclusion in the interbank FX market, they have however argued that its implementation is a totally different ballgame. Chinedu Eze reports
It was an elated Minister of State, Aviation, Senator Hadi Sirika that conveyed the good news last weekend that the Central Bank of Nigeria (CBN) had included domestic airlines in the Interbank Foreign Exchange Market.
This came after many months of agitation by the domestic carriers through the Airline Operators of Nigeria (AON) and after series of meetings with concerned government agencies, spearheaded by the Minister.
Since last year the airlines had been appealing to the federal government for this inclusion because everything about aircraft management and repairs is imported, including training and even manpower engagement.
“This is after much intervention on behalf of the airlines both foreign and domestic. The Central Bank has yielded and we are happy because this means a lot to the airlines and us. They have been going through a lot and we are so happy that this is will be a huge succour to their operations”, Senator Sirika said.
In a circular sent by CBN to the concerned sectors it said, “In order to further engender market confidence, ensure access to FX by end users and sustain the integrity of the Nigerian Inter-bank FX market, the Central Bank of Nigeria (CBN) has resolved to intervene in the Inter-bank FX market through forward settlement”.
The inclusion of airlines in the interbank market was designated as Special Secondary Market Intervention Sales (SMIS).
CBN explained that the exercise was to clear backlog of the sectors concerned, adding, “This is an important one-off exercise dedicated to the clearance of the backlog of matured FX obligations for: Raw materials and machineries for manufacturing companies; agricultural chemicals; and airlines”.
Since early this year, Sirika had facilitated meetings between AON and the CBN, Nigeria Customs Service and the Ministry of Petroleum Resources on how to enhance airline operation, secure forex, tariff waiver and access to aviation fuel at cheaper prices.
The new forex window is also expected to benefit the foreign airlines that operate in Nigeria and this is expected to create the opportunity for them to repatriate funds from their ticket sales after government allowed them move 50 per cent of their earnings before now.
While the airlines expressed happiness over this development, they seemed sceptical about its implementation, because beyond the announcement, they are yet to see the sign of the implementation of the new decision.
As the policy is yet to be implemented, world’s fastest growing carrier, Emirates and the East African airlines, Kenya Airways announced the suspension of their operations to Abuja, Nigeria’s capital, citing their inability to repatriate their revenues and the difficulty in getting aviation fuel, known as Jet A1.
Emirates, which is one of the biggest foreign airlines operating in Nigeria said it would stop flights from October 22, 2016, while the East African carrier Kenya Airways, has also announced that it would suspend flights to Abuja with effect from November 15, 2016 as part of its restructuring and loss saving efforts.
Reports indicated that Emirates had since written the Minister of State, Aviation over its intention to stop flight operations into Abuja, indicating its inability to buy forex.
The letter was said to have been received by the Permanent Secretary, Ministry of Transportation
Emirates was reported to have said if after weeks of the Abuja suspension, no drastic change happened, it would also suspend Lagos operations indefinitely prior to its exit from the Nigerian market.
Emirates like many major international carriers operating in Nigeria, has huge money in naira at the bank that it could not exchange to dollars and repatriate.
However, the Nigeria Civil Aviation Authority (NCAA) has applauded the CBN window and urged the airlines to take advantage of it.
The Director-General of NCAA, Captain Muhtar Usman explained that the Special Secondary Market Intervention Sales (SMIS) – Retail is an important one-off exercise dedicated to the clearance of the backlog of matured forex obligation for airlines.
“It is however worthy to note that other sectors were similarly availed priority in the inter-bank forex market. These are raw materials and machineries for manufacturing companies and agricultural chemicals,” a statement from the agency said.
NCAA said Muhtar facilitated AON delegation to hold meetings with the Ministers of State for Aviation, Finance and their Petroleum counterparts including the CBN Governor.
“As a result of the meeting, Honourable Sirika was able to extricate for the foreign airlines 50 per cent clearance of their forex obligations. This present success is another step ahead in seamless operations in the aviation industry.
“It is expected that this is a major window for those airlines which had earlier ceased their operations to recommence in earnest. Therefore, with this intervention comes a landmark incentive for both local and foreign operators to carry out safe, secure and lucrative operations in Nigeria,” NCAA said.
It further explained that in addition, all scheduled and mandatory checks, which are done in the Diasporas, would be undertaken with this leverage at a reduced cost.
“The Director General of the Regulatory Authority therefore expects the foreign operators to carry out their operations with renewed vigour,” NCAA said.
According to the Director-General, all problems associated with repatriation “is now a foregone conclusion”. He advised all airline operators to take full advantage of this laudable gesture of the federal government of Nigeria and adhere strictly to the provisions of the Bilateral Air Services Agreement (BASA) with Nigeria.
THISDAY spoke to the Managing Director of Arik Air, Mr. Chris Ndulue, who confirmed the inclusion of the airlines in the interbank forex market and said Arik was notified about the change last weekend.
“Our bank told us yesterday (last Friday) that airlines have been included in the interbank forex market and they asked us to now make new request for forex because all the ones we had made in the past did not receive positive response, so we are going to make a new request,” he said.
He applauded the Minister’s efforts and noted that the airlines have been begging for this and it was good government had made it possible.
“We have been applying. We need to see it happen. We have been agitating for this for a long time. The banks told us that both manufacturers and airlines have been included so we need to reapply. But this is still a promise until it happens,” Ndulue said.
The Managing Director of Medview Airline, Alhaji Muneer Bankole in reaction to the new policy commended the federal government but urged it to give more support to the airlines because of the pivotal role they play in the economy of the country.
“Airline is the backbone of aviation anywhere in the world. Air transport in Nigeria is dollar denominated and the non-availability of foreign exchange is not helping the situation. You are all aware of what is going on. We have cried out to the government to create an environment and window in Central Bank of Nigeria for airlines to have access to forex so that the airlines would have dollars to do their business.
“Everything we do in this industry has nothing to do with Naira. We carry out maintenance at the Maintenance, Repair and Overhaul (MRO) organisation overseas. In most cases we do D-check for a minimum of $2 million. In D-check we change a lot of components on the aircraft and bring the aircraft back home for the next 18 months.
You are also aware that some of the aircraft are on dry lease (leased aircraft operated by the airlines crew and maintained by the airline). The airline needs to pay lease rentals. It has to be fulfilled because it is a contract obligation. Such payments are done in dollars. We pay insurance in dollars; it is not paid in local currency because the Nigerian insurance companies do not have the capacity to carry the risk alone. That is why most of us go back to the foreign insurance brokers and underwriters,” Bankole explained.
He said that what government ought to do was to open the forex channel first where airlines have access to that in order to sustain their operation; otherwise, “I don’t wish any negative thing to happen to anybody but the way we see our airlines going down, it can be anybody anytime. So this is one area we are telling government to look at.”
Bankole said the airlines had spoken to government to source Jet A1 (aviation fuel) locally in order to reduce the pressure on the foreign exchange.
“At the beginning of this administration we thought they were going to dedicate one of the refineries to produce Jet A1so that the product would no more be imported and that would reduce the pressure on dollars. Currently fuel supply is at the mercy of marketers. They are now selling aviation fuel N204 per litre. This product in January last year was N101 per litre; some sold N98 per litre, but today, it is N204 per litre. Up to Maiduguri and Yola the price of Jet A1 can go as far as N240 per litre. The fuel marketers say they are looking for the same dollar to get the product for us. I wish those of us remaining in the industry that we continue to pray to God Almighty,” Bankole said.
He however commended the Minister, Senator Sirika for the invaluable support and assistance he has given the airlines.
“We went together to the Nigeria Customs Service and we succeeded in getting his support on the waiver on tariffs on the importation of aircraft and spares. We need to commend the federal government on this. So we want government to continue to support the industry,” the Medview MD said.
On the inclusion into the interbank forex market, Bankole said, “I wish to say that I also heard the report, just as you did, but for now there is nothing on the table. We are hopeful that this would materialise very soon. I have spoken to the banks and they said there is nothing yet on the table.
The airlines may be apprehensive because of the rigour and the challenges they have gone through to obtain forex. When this new window is implemented their doubts obviously would turn to optimism and graciousness.