International and domestic airlines operators in Nigeria have said they welcome the announcement of a full float of the naira, which will now enable the foreign exchange rate to now be determined by market forces.
Some of the operators who spoke to BusinessDay said that the new monetary policy would bring what many considered to be astronomical rise in air fares down and lead to restoration of categories or segments of fares as foreign carriers withdrew as a result on uncertainty in foreign exchange policy of the Nigerian government.
According to Godwin Emefiele, governor, Central Bank of Nigeria (CBN) said, “We’re talking about an open, transparent two-way system. It’s intended we don’t have speculators and rent-seekers. I don’t expect that any other exchange rate will be recognized.”
The CBN for the first time appointed primary dealers who are expected to help boost foreign exchange, FX, liquidity in the market and introduced a two way quote which basically means that the market will act like the stock market where buyers and sellers will state price and quantity they are willing to sell.
Kingsley Ezenwa, Spokesperson, Dana Airlines told BusinessDay that the airline is happy about it the development and expects better supply of forex with the new policy but will still wait to see how this affects the rate of exchange.
“Although there might be increased supply, all our revenue is earned innaira and an unfavorable exchange rate will still affect our cost levels,” Ezenwa added.
He said a favorable business environment will make the airlines stay.
Nogie Meggison, President, Airline Operators of Nigeria, (AON) told BusinessDay that the new policy will reduce financial, operational and technical challenges airline struggle with, that are related to transactions in foreign policy.
BusinessDay findings show that 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 it requires dollars to foot these bills.
Consumable spares for planes are hard to buy and stock in large quantities, while repayment for lease rentals and loans has kept dragging as the dollar shortage worsens.
“Most of the cost of operations comes from abroad. We are talking about financing of the aircrafts, payment of crew abroad, maintenance and many more that have to be settled abroad. This means we need hard currency, as only a few costs can be settled in naira,” the source from an international airline who craved anonymity told BusinessDay.
The source explained that the airlines had for long waited for this policy to enable CBN give them forex as the tickets are calculated in dollars which have to translate to naira for people to buy.
“It is one thing for the forex to be made available for airlines to operate but another it to be affordable. Affordability for is key,” the source added.
Nogie Meggison noted that with the recent development by the CBN, these mandatory routine activities can be done with ease and on time.
Meggison observed that before now, airlines in Nigeria see the falling value of the naira negatively affecting margins.
The AON president however faulted some section of the policy having to do with availability of forex as well as pricing.
He noted that now that forex will now be available through the CNN window but questions are been raised as to whatever the currency will be made available to them.