Foreign Airlines’ Economy Ticket Hits N2m

The International Air Transport Association (IATA) has adjusted the exchange rate for one-way Economy class tickets on international routes from Nigeria. The new rate, set at N770 to $1, replaces the previous rate of N663 to $1. This change follows the Central Bank of Nigeria’s decision to float the Naira. Additionally, the inability of international airlines to repatriate ticket sales for over a year has contributed to the high airfares on Nigerian routes.

Under the new International Rate of Exchange (IRoE) registered by the Global Distribution System (GDS), a six-hour Economy class ticket from Lagos to London now sells for between N1.3 million and N2.5 million, depending on the airline, location, and time of booking. Business class tickets range from N3.36 million to N4.8 million. Previously, Economy ticket prices were around N400,000 before jumping to approximately N1.2 million, while business class tickets ranged from N4 million to N6 million. With the adjusted exchange rate, fares are expected to rise further to around N2 million.

Stakeholders have expressed concern about the impact of these increased fares on average Nigerians and the stability of the travel market. The fluctuating exchange rate has led to a decline in the number of foreign travellers, prompting calls for a weekly exchange rate system to bring stability to the industry. Travel agents and travellers alike find the daily changes disruptive and are seeking a more predictable framework.

The IATA clarified that airfares for international flights from Nigeria are denominated in US dollars and converted to the local currency for sale in the Nigerian market. The association applies the prevailing exchange rate provided by the country’s financial system, based on the rate at which the Central Bank of Nigeria sells USD through banks during its retail foreign exchange auctions. The rate is subject to change in accordance with fluctuations in the CBN’s selling rate.

There is hope that the issues surrounding foreign airlines’ blocked funds in Nigeria will be resolved with the new I&E instructions. Nigeria currently has the highest amount of trapped funds, with $818.2 million, followed by Bangladesh, Algeria, Pakistan, and Lebanon. The IATA warns that the increasing levels of blocked funds pose a threat to airline connectivity in affected markets and calls for swift action to address the situation.

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