Foreign airlines operating in Nigeria have started to make their low-priced fares available on Nigerian routes again. This comes as the Central Bank of Nigeria finishes paying off a backlog of approximately $7 billion, which includes over $700 million in unremitted ticket revenue.
A couple of weeks ago, the CBN made an announcement regarding the payment of a $7bn legacy debt. This debt included FX forward contracts and other foreign exchange-denominated debts.
However, the Central Bank of Nigeria stated that a significant portion of the $7 billion debt, approximately $2.4 billion, was deemed invalid. The reason for this declaration was the inability to verify the debt due to improper documentation and other infractions.
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According to recent findings, foreign airlines have started to unblock their low-priced tickets, although the International Air Transport Association has not yet verified the clearance of the entire $700m.
Foreign carriers made the decision to suspend their low-priced tickets on Nigerian routes over two years ago, as they were unable to access ticket revenue worth hundreds of millions of dollars that had become stuck in Nigeria.
The recent development caused a significant rise in fares on Nigeria routes, which was further worsened by the sharp decline in the value of the naira compared to the United States dollar. As a result, economy fares for popular destinations like the Lagos-London-Lagos route are now priced at over N3m.
The CBN initiated the process of clearing the debt, which was later expedited by the new administration of the apex bank. As a result, significant portions of the debt have been cleared between late last year and the present year.
After the CBN made the announcement about clearing the $7bn, it was discovered that many airlines had already made their low-priced fares available.
The Chairman of the National Association of Nigerian Travel Agents, Susan Akporiaye, has confirmed the development.
Interestingly, she mentioned that almost all international airlines had already introduced their discounted fares prior to the recent announcement by the Central Bank of Nigeria regarding the $7 billion payment. These reduced fares were actually made available approximately two weeks before the official statement from the apex bank.
Akporiaye stated that foreign airlines had opened up their inventories before the final backlog of forex was cleared. It is no longer the case that it was cleared. It was confirmed earlier in March.
“It is the only airline that has not done that. All of them have opened up all the inventories before the final forex backlog was cleared.
“We had a few that had issues – the unverified ones. There were some transactions for which some documents were not available. They were unverified. And those that were not cleared in February because they were unverified are those that have just been cleared.”
The NANTA chairman pointed out that one foreign airline had yet to open up its low-priced tickets, saying, “Before this final clearance, the airlines had already reduced inventories, except for one airline, which I won’t mention due to privacy, and I’m sure that the reason why they haven’t complied is a management thing.”
She highlighted the airlines’ cooperation, although delays were encountered due to unverified transactions.
The airlines claim that the funds they are owed are held by commercial banks rather than the government, as these banks are privately owned. “They are not government entities,” Akporiaye emphasised.
According to Sunday PUNCH, commercial banks are currently working on reconciling with foreign airlines in order to settle the remaining payment after the Central Bank of Nigeria announced the clearance of the final backlog two weeks ago.
“At times, the commercial banks are slower than the communication from the CBN. We will ask the airlines to contact their banks and we will have a clearer position. Then we will be able to respond to your inquiry based on verified data,” an IATA official told one of our correspondents on condition of anonymity because the official was not authorised to speak on the matter.
A spokesperson from IATA has confirmed the latest development and mentioned that the organisation will be sharing its stance on the matter in the near future.
A spokesperson for the global body in Geneva provided an update when asked about the situation regarding blocked funds in Nigeria. IATA is actively communicating with its members on this matter.
Despite the opening of low inventories by foreign carriers, findings revealed that airfares on the Nigerian route experienced a decrease.
The NANTA chairman, Akporiaye, has confirmed this.
“The release of lower inventories will not necessarily make airfares low because of the rate of exchange,” she noted.
Our correspondents have come across a significant disparity in the prices of air tickets sold on March 4, 2024, as opposed to those on Saturday.
Prices for round-trip economy class tickets from Lagos to London varied among different airlines as of Saturday.
RwandAir Express provided a price of N1,102,563; Royal Air Maroc offered it at N1,628,675; and Ethiopian Airlines quoted N1,641,249.
Surprisingly, prices for a round-trip economy class ticket from Lagos to London skyrocketed on March 4, 2024. Air France set the price at N2,482,138, while Lufthansa provided a lower offer at N1,966,165. Qatar Airways offered the ticket for N2,016,824, while KLM priced it at N2,448,740.
On March 30, the average flight fare was around N1,457,495.67, showing a decrease compared to the prices on March 4, which averaged around N2,478,466.75.
The cost of round-trip economy class tickets from Lagos to London has decreased by 41.19 per cent, reflecting a significant price drop.
During the same period, there was also a decrease in the fare for a trip from Lagos to New York.
The ticket price for the Lagos to New York route on Qatar Airways was N2,982,049 as of March 4. Surprisingly, the price had dropped to N1,989,098 by Saturday.
On March 4, 2024, KLM, Air France, United Airlines, and Delta Air Lines each had different prices for a ticket. KLM charged N3,158,314, Air France priced it at N3,148,308, United Airlines listed it at N3,193,185, and Delta Air Lines offered the ticket for N3,310,097.
