A recent report by the Central Bank of Nigeria (CBN) has revealed that foreign airlines operating in Nigeria withdrew a whopping N795 billion from the country in the first half of 2023. This represents a 25% increase from the same period in 2022, when they withdrew N636 billion.
The report, which was obtained by our correspondent, attributed the huge outflow of funds to the high demand for foreign exchange by the airlines, as well as the scarcity and volatility of the naira.
The report also noted that the COVID-19 pandemic and the insecurity challenges in some parts of the country have adversely affected the aviation sector, leading to low passenger traffic and reduced revenue.
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According to the report, some of the major foreign airlines that withdrew funds from Nigeria in H1 2023 include Emirates, British Airways, Lufthansa, Air France, Turkish Airlines, Ethiopian Airlines, Qatar Airways, and KLM. The report stated that these airlines accounted for 80% of the total outflow of funds by foreign airlines in Nigeria.
The report further revealed that the CBN has been intervening in the foreign exchange market to meet the needs of the airlines, as well as other critical sectors of the economy. The report stated that the CBN sold $2.6 billion to the airlines in H1 2023, compared to $2.1 billion in H1 2022. The report added that the CBN has also been working with other stakeholders to address the challenges facing the aviation sector and to ensure its sustainability and growth.
The impact of this situation is manifold. On one hand, it shows that Nigeria is still a lucrative destination for foreign airlines, despite the economic and security challenges. On the other hand, it also indicates that Nigeria is losing a huge amount of foreign exchange that could have been used for other developmental purposes.
Moreover, it puts pressure on the naira and makes it more difficult for Nigerians to travel abroad or import goods and services. Therefore, there is a need for more policy measures to stabilize the naira and boost domestic aviation.
One of the ways that Nigeria can boost its domestic aviation is by improving its infrastructure and safety standards. According to a report by the International Air Transport Association (IATA), Nigeria ranks among the lowest in Africa in terms of airport infrastructure quality and aviation safety performance.
The report also stated that Nigeria has one of the highest costs of doing business in aviation in Africa, due to high taxes, fees and charges. These factors discourage both local and foreign investors from entering or expanding their operations in the Nigerian aviation market.
Another way that Nigeria can boost its domestic aviation is by supporting its local airlines and creating a level playing field for them. Currently, Nigerian airlines face stiff competition from foreign airlines that have access to cheaper and more reliable sources of funding, maintenance and fuel. Nigerian airlines also suffer from multiple taxation, regulatory bottlenecks and operational challenges that affect their profitability and viability.
The government should provide incentives and subsidies to Nigerian airlines to enable them to acquire new aircraft, upgrade their fleets and expand their routes. The government should also ensure that foreign airlines comply with the bilateral air service agreements (BASAs) that regulate their operations in Nigeria.
A third way that Nigeria can boost its domestic aviation is by promoting its tourism potential and attracting more visitors to its various destinations. Nigeria has a rich and diverse cultural heritage, natural beauty and wildlife that can appeal to both domestic and international tourists.
However, Nigeria’s tourism sector is underdeveloped and underutilized due to poor infrastructure, security issues and negative perception. The government should invest more in developing and marketing its tourism products and services, as well as improving its security and hospitality standards. This will increase the demand for air travel within and outside Nigeria and create more opportunities for domestic airlines.