The most interesting news out of Nigeria’s business section is the country’s aviation sector. International Airlines have gone bonkers over their inability to repatriate their funds back to their base.
Over USD 575 million of their net ticket sales. Their going concern is threatened by the lack of funds to finance their activities and make returns to their headquarters.
Before the current development, Iberia threw in the towel running back to their base in Spain. United Airlines has confirmed quitting the market, claiming the Lagos-Houston route is no longer lucrative due to the lull in economic activities. British Airways denied it is quitting but the company is also pressured to leave as well. The fate of Lufthansa and Delta is still unknown. People with the knowledge of the matter claim Turkish Airlines, Emirates, Qatar and other Gulf carriers are not contemplating jumping the ship.
While the Central Bank of Nigeria, CBN has not made public details of its new flexible Forex policy. Randomly sampled Analysts have actually predicted that the flexible Forex policy might partly address the grievances of the airlines. However, they still admit that such forecast is a speculation.
However, from a bigger picture, the CBN’s tortoise-movement in itemising and executing monetary policies that the market can work with has not only damaged business for the airlines industry. Other sectors have been pushed to the wall. From eCommerce to commodity traders. No one knows what their next move should be.
While there is a good side to this fix, in terms of burgeoning local production and local participation in such business that would reduce pressure of on the local currency, it will take at least three years before such impact can be felt.
However, international airlines should take it as a note of caution not jump the ship too quickly. The cost of leaving the market might be sensible but the price to be paid for a re-entry might be costlier. The CBN and Nigeria’s Ministry of Finance would become plain saboteurs if they allow these airlines to leave the country. They might not be too ‘big to fail’ but their impact in terms of tax revenues to the government, job creation and its potential impact on the socio-economic outlook of the company cannot be over-emphasised