Nigeria’s tanking currency has left its airline industry on the brink of collapse – Washington Post

Nigeria is between a rock and hard place, and every day it is getting more and more difficult to leave it — literally.

The country is grappling with two full-on rebellions — one by Boko Haram in the north and the other by armed gangs in the oil-rich Niger Delta — as well as persistently low crude oil prices that have stripped away revenue from an economy significantly dependent on them.

In June, the government decided to deregulate the naira, Nigeria’s currency, allowing it to devalue. Since then, the flow of dollars into the country has drastically decreased, as traders and companies hold on to them, fearing an unstable naira. The currency has lost more than half of its value against the dollar as of early September.

The move has devastated Nigeria’s airline industry, which uses dollars to pay for imported jet fuel. On Tuesday, the country’s largest airline, Arik Air, announced that it would be suspending operations because it could not afford fuel (although it indicated it may be able to reopen soon). Aero Contractors, the country’s oldest airline, indefinitely suspended operations two weeks ago. Another airline, First Nation Airways, also has suspended operations, but unlike the others, it did not cite fueling costs as a reason.

Soaring costs of jet fuel have also led United Airlines and Spain’s national carrier, Iberia, to shutter their Nigeria routes. As the fuel gets more costly, it also becomes more scarce. That means other international airlines have begun flying there with extra fuel, using smaller planes or refueling their jets on newly added stopovers outside the country instead of doing so in Nigeria. Otherwise, they risk stranding their planes because of sudden shortages.

According to an airline executive reached by Reuters, major fuel companies such as Total, Sahara and ConocoPhillips have nearly doubled their prices since June.

The volatility has sapped investor confidence in Africa’s most populous country. How can companies — airlines or otherwise — invest in a country they can’t even be assured of flying to?

“It’s an impossible situation. The oil marketers don’t want to sign long-term agreements anymore, so we have to accept whatever prices they demand,” one airline executive told Reuters. “We sell tickets in naira and now they want us to come with dollars.”

Emirates, one of the world’s largest airlines, now has an added stopover in Ghana on its once-daily flight to Nigeria’s capital, Abuja — a route that once had two flights a day. Emirates’ route to Lagos, Nigeria’s largest city, has similarly been chopped to once daily.

When push comes to shove, though, everyone needs food more than they need to fly. If airlines keep failing to pay up, suppliers will inevitably sell the fuel through middlemen to local buyers. Jet fuel, after all, can be substituted for the kerosene that many Nigerians use to cook and heat their houses.