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The economy will become unstable for a variety of reasons. This may be the outcome of poor decisions or occasionally a result of a natural occurrence. Who would have predicted, for instance, the COVID-19 pandemic and the Russian invasion of Ukraine, which have caused a global economic collapse? The answers to this puzzle are no longer the issue. What matters more is what we’re doing to get out of the challenging circumstances rather than the possibility that these things could occur and upset not just businesses but the entire economy.
In the light of this, I thought the recent CBN action to stop the crisis in the nation’s aviation sector was admirable. Last Monday, the CBN issued $265 million to domestic airlines operating in the nation to pay unpaid ticket purchases. In my opinion, the intervention was long overdue, but thank God it finally happened.
According to a breakdown of the amount, $35 million was made available through a retail SMIS auction, and $230 million was issued as a special FX intervention. The CBN’s Director of Corporate Communications, Mr. Osita Nwanisobi, confirmed the news and stated that Governor Godwin Emefiele and his team were concerned about the development and what it would mean for the industry and the nation as a whole in the international community.
Mr. Nwanisobi reaffirmed that the bank supported an orderly withdrawal for anyone who might be interested in doing so, adding that the bank was not opposed to any corporation returning its money to the nation. This is a tremendous comfort for investors as well as airline operators who wanted to be sure they could recover their money.
In the past year, Nigeria’s aviation sector has faced a variety of crises. The COVID-19 pandemic and the extraordinary restrictions put in place by the government to stop the virus’s transmission had a detrimental effect on the aviation and transportation sectors.
For the business owners in the sector, the shortage and high cost of Jet A fuel became a significant problem.
They increased the price for flight travellers in retaliation. However, they soon discovered that the naira in their possession was nearly worthless, as the price hike didn’t address the issue. The operators were unable to fulfil their responsibilities to their international counterparts because the majority of the aircraft are leased. Nigeria has been identified by the International Air Transport Association (IATA) as holding back the largest amount of the revenues, estimated at over $500 million. Nearly all of the operators were having trouble paying foreign partners their revenues that had been blocked in Nigeria due to a lack of forex.
Additionally, operators have been finding it extremely challenging to send their aircraft abroad for maintenance due to the lack of foreign currency. By itself, this made the sky dangerous and posed a serious risk to passengers who would be unintentionally patronising flying coffins. NCAA was aware of this and had been making every effort to enhance air travel and guarantee that airlines continued to run safely. The Minister of Aviation intervened when the issue of expensive aviation fuel arose to try and help the airlines in some way. In Nigeria, we don’t refine Jet A1 (aviation fuel).
The supply and price of the commodity were impacted by the Russia-Ukraine War and the Naira’s depreciation. Because aviation fuel is not distributed equally across the nation, the issue of scarcity and high cost also contributed to aircraft delays. The Director General of NCAA acknowledged the efforts made by the airlines but expressed sadness that they had come to be in a predicament where they were fighting for survival. The Director General of NCAA noted that airlines were established as businesses with the goal of making profits.
“It’s bad that ticket costs are so expensive, but this is business, and the airlines need to make a profit somewhere. For now, at least. However, I would sooner end an airline than jeopardise safety. The situation in the aviation business shouldn’t be separated from other areas of the economy,” he said, adding that “while NCAA is unable to give forex, we are collaborating with the ministers of aviation and finance to see how it may be better.” The majority of the aircraft had to be taken out of the nation for substantial maintenance, which Nuhu regretted. Since fewer seats would be available as a result of some aircraft needing maintenance, it is anticipated that tickets will rise. Out of the ten currently operating airlines, Aero recently ceased operations, and NCAA recently grounded Dana Air, bringing the total number of airlines to eight.
According to the NCAA Director General, the authority is presently conducting a financial and economic examination of the airlines to make sure that they continue to run safely despite the difficulties facing the sector. Nigeria has been identified by the International Air Transport Association (IATA) as holding back the largest amount of the revenues, estimated at over $500 million, Nigeria is also having difficulty paying foreign airlines their revenues that have been blocked in Nigeria due to a lack of forex.
Air travel in Nigeria may be in danger, according to Nuhu, who bemoaned the fact that aviation fuel has risen to the top of the pricing structure for airlines. The DG of NCAA recently pointed out that the aviation sector crisis cannot be separated from all the other economic sectors, adding that it is crucial to address these problems because many Nigerians now prefer to travel by air, particularly given that travel by other modes of transportation is threatened by insecurity.
The NCAA would do everything possible to ensure that airlines continue to operate safely’, he added, despite all the efforts being made to improve air travel. He explained that aviation fuel is not evenly distributed throughout the nation, noting that while it is available in Lagos, it is scarce in many other areas, making it difficult for airlines to operate their flights on time while waiting for the product. Flight delays have gotten worse since the limited supply and high cost of aviation fuel.
The Director General expressed appreciation for the airlines’ efforts but lamented that they had come to be in a predicament where they were fighting for survival. The Director General noted that airlines were established as businesses with the goal of making profits.
“It’s bad that ticket costs are so expensive, but this is business, and the airlines need to make a profit somewhere. For now, at least. However, I would sooner end an airline than jeopardize safety. The situation in the aviation business shouldn’t be separated from other areas of the economy, he said, adding that while NCAA is unable to give forex, we are collaborating with the Ministers of Aviation and Finance to see how it may be better.”
The majority of the aircraft had to be taken out of the nation for substantial maintenance, which Nuhu regretted. Since fewer seats would be available as a result of some aircraft needing maintenance, it is anticipated that tickets will rise. Out of the ten currently operating airlines, Aero recently ceased operations, and NCAA recently grounded Dana Air, bringing the total number of airlines to eight.
According to the NCAA Director General, the authority is presently conducting a financial and economic examination of the airlines to make sure that they continue to run safely despite the difficulties facing the sector.
Given this, praise should be given for the most recent CBN action to save the airlines. Additionally, the initiative will increase investor confidence. The fact that the nation is unable to account for its oil revenue is nevertheless unfortunate and disappointing. The economy’s future being subject to conjecture is likewise not desirable. To save the Naira and save the country, all hands must be on deck.
