- Economy tickets up by 200 per cent, business class too
The recent devaluation of the Nigerian currency, Naira, has disrupted the summer holiday plans of many travellers as airfares soar to unprecedented levels, leaving many intending travellers grappling with the financial burden.
The cost of airfares from Nigeria to various destinations has seen a sharp rise since the exchange rate for ticket pricing hit over N760/$.
The development came a few days after the Central Bank of Nigeria floated the naira and directed commercial banks to sell foreign exchange at market-determined rates.
The CBN said all forex windows should be collapsed into the Investors & Exporters Window.
Days after the decision, the exchange rate has since fluctuated on the International Air Transport Association platform from N663.04/$ to now N770/$.
Investigations by The Point revealed that many Nigerians have had to suspend their travel plans to the United States and Europe as a result of the increase in fares which has tripled as a result of the high exchange rate for ticket pricing.
Investigations show that an economy class ticket from Lagos to London and Lagos to France and most European countries which cost around N1.5 million a month ago, now cost an average of N1.9million to N2.2million depending on the airline.
For instance a Lagos to France economy class ticket on British Airways cost about $2,500, using the N770 exchange rate to a dollar, this cost about N1.92 million.
The Lagos to London economy class ticket on British Airways cost about $2,800 which amounts to about N2.15 million.
Lagos to London economy class ticket on Qatar Airways cost around $2,900, which amounts to about N2.23 million
Also an economy class ticket from Lagos to the United States which cost about N1.7million a month ago is currently pricing between N2.2million and N2. 6million.
An economy class ticket from Lagos to the United States on Delta Airlines cost about N2.4m. The same ticket on Lufthansa and Qatar Airways cost around N2.6million.
A Business class ticket from Lagos to London, Lagos to France and most European countries which cost around N2 million, now cost an average about N2.9m to N3.4million.
A Business class ticket from Lagos to London on Lufthansa Airline cost about N2.9mIllion and N3.4million on Qatar Airways.
Also a Business class ticket from Lagos to the United States which cost an average of N2.4million a month ago now cost about N4.9 million on Qatar Airways and N6.9 million on Ethiopian airlines. Air Maroc appears to have the cheapest ticket on this route costing about N2.4million.
Since last year, foreign airlines operating in Nigeria have blocked low ticket inventories (cheap tickets), leaving high inventories (costly tickets) to be sold in naira only, while the low ticket inventories on most airlines’ websites could only be bought with dollar cards only.
This was in a bid to cushion the effect of their trapped funds in Nigeria which kept rising.
While airlines gradually opened up low ticket inventories which they had blocked, as the CBN released their trapped funds in trickles, investigations show that high ticket inventories were still more on the websites, making ticket prices high.
The rising costs of air travel have also caught the attention of industry professionals.
Susan Akporiaye, President of the National Association of Travel Agents of Nigeria, highlighted the impact on passengers and travel agents, stating, “Fares will definitely increase and passengers have to pay more. As a result, passengers would not travel as much as they should and this will affect travel agents.”
The devalued naira, foreign exchange challenges, and blocked funds of international airlines operating in Nigeria have led to a surge in airfares, impacting the crucial tourism industry. Small and medium-sized enterprises in tourism, like hotels, tour operators, and travel agencies, face reduced bookings and cancellations, worsening the economic impact.
Already pressured external reserves and foreign exchange are expected to worsen as Nigeria owes Airlines as much as $812.2 million trapped funds, the highest globally.
The International Air Transport Association said on June 4, 2023 that Nigeria owes $812.2 million out of $2.27 billion trapped funds, making it the country with the highest trapped funds globally.
The association warned that rapidly rising levels of blocked funds are a threat to airline connectivity in the affected markets.
IATA in a statement listed the top five countries that account for 68.0 percent of blocked funds to include Nigeria ($812.2 million), Bangladesh ($214.1 million), Algeria ($196.3 million), Pakistan ($188.2 million) and Lebanon ($141.2 million).
The industry’s blocked funds have increased by 47 percent to $2.27 billion in April 2023 from $1.55 billion in April 2022, IATA disclosed.
“Airlines cannot continue to offer services in markets where they are unable to repatriate the revenues arising from their commercial activities in those markets. Governments need to work with industry to resolve this situation so airlines can continue to provide the connectivity that is vital to driving economic activity and job creation,” Willie Walsh, IATA’s Director General said.
Amidst promises to unify exchange rates in Nigeria, President Bola Tinubu’s administration recently initiated the floating of the naira, resulting in over 37% depreciation in the value of the local currency as it rose to N763.17 against the US dollar.
This devaluation, coupled with existing challenges such as forex scarcity and aviation fuel shortages, has forced airlines to review their airfares upwards, leaving travellers in a state of dismay.