Nigeria: Forex Issues Ground Nigeria Aviation Sector


Yemisi Izuora

Nigeria’s aviation sector has not been spared the economic slowdown currently afflicting the country. Based on data from the Nigerian Civil Aviation Authority, last year, passenger traffic declined by 0,5 percent year-on-year (y/y) on domestic flights.

Furthermore, the recent national accounts released by the National Bureau of Statistics show that air transport contracted by 3,1 percent in the third quarter of 2016. “We link this underperformance partly to the continued squeeze on household pockets which has eroded disposable income,” markets watcher FBN Quest stated. It said the lingering foreign exchange sourcing issues continued to pose a major challenge for the aviation sector. “Securing spare parts for maintenance as well as jet fuel imports is difficult,” noted FBN Quest.

It added the price of aviation fuel, unlike that of premium motor spirit was unregulated.

“Thus operators have to bear the full inflationary cost pressures associated with fx volatility as well as fluctuations in oil prices,” FBN Quest stated.

” While domestic air fares have almost doubled, the increases have been insufficient to offset the cost pressures,” it added.

A welcome development, analysts said, was the recent listing of Medview Air on the Nigeria Stock Exchange (NSE). Given that newly listed companies deepen the market, this has been seen as a step in the right direction. Although its share of the NSE’s market capitalisation is relatively insignificant (at 0,2 percent), it is the only listed firm that gives investors exposure to the aviation sector.The government recently took over the operations of a debt-plagued Arik Air, the biggest airline in the country. United Airlines and Iberia pulled out of the country over the financial challenges.

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