Nigeria’s forex crisis is escalating, gradually impacting the nation’s bilateral ties in a way that could undermine the already troubled aviation sector.
In June, the International Air Transport Association (AITA), expressed concern over Nigeria’s inability to repatriate $450 million belonging to its members.
Now Emirates Airlines has announced it is reducing its flight operations to Nigeria from August 15, due to the Central Bank’s continued withholding of $85 million from its ticket sales in Nigeria
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“As of July 2022, Emirates has US$ 85 million of funds awaiting repatriation from Nigeria. This figure has been rising by more than $US 10 million every month, as the ongoing operational costs of our 11 weekly flights to Lagos and 5 to Abuja continue to accumulate. With effect from 15 August 2022, Emirates will be forced to reduce flights from Dubai to Lagos from 11 per week to 7 per week,” the airline said in a letter dated July 22 2022 that was signed by Sheik Majid Al Mualla, the DSVP International Affairs, which was addressed to Nigeria’s aviation minister Senator Hadi Sirika.
The arising situation is as a result of the troubled Nigeria’s forex market that has seen the naira, the country’s currency, tumble to its lowest at N710 per dollar. The Central Bank of Nigeria (CBN) is helplessly trying to contain the situation but a lot of factors that include its policies and measures stand in the way.
Al Mualla said that Emirate’s attempts to work out a solution with the CBN have been futile as response from the apex bank has been negative. He also said that meetings had been held between Emirates’ own bank in Nigeria and IATA to discuss improving Forex allocation, but they did not yield positive results.
The bottom line is that Nigeria does not have enough dollar liquidity to fulfill the repatriation obligation. The situation has touched every sector of the nation’s economy, stoking inflation to 17.70%, according to the data last published by Nigerian Bureau of Statistics.
On Thursday, the CBN blamed the Nigerian National Petroleum Corporation (NNPC) for the country’s forex crisis. The apex bank said the naira is on free fall because the NNPC has not been remitting dollars to Nigeria’s foreign reserve.
The central bank said that domestically, there has been zero dollar remittance to the country’s foreign reserve by the NNPC, noting that the CBN does not print dollars.
The NNPC and its subsidiaries are the sole managers of crude oil which accounts for more than 80 percent of Nigeria’s Foreign Exchange (forex) earnings.
Though the CBN said it is working to address the forex crisis, there is nothing yet to show for its efforts as the situation bites harder.
The financial regulator’s initiatives such as the “RT200 FX’’ Programme and the “Naira4Dollar’’ rebate scheme have failed to ameliorate the raging crisis.
Major sources of Nigeria’s forex liquidity have been liquidated. Nigeria’s Excess Crude Account (ECA), has been depleted from over $2 billion where it stood in 2015 to $376,655 in July, 2022.
Against this backdrop, Emirates Airline’s decision to downsize its flight operations in Nigeria may be the beginning of a turmoil in the nation’s aviation sector. There is concern that many other airlines whose monies are also being trapped in Nigeria will soon follow the step of Emirates.