The Nigerian aviation industry has experienced notable growth and faced significant challenges over the years. Despite the numerous challenges, the sector is still pushing ahead, staying resilient.
The aviation industry’s growth is largely attributed to increased domestic air travel demand. This sector includes activities such as scheduled and chartered air transport services, as well as air cargo transport services.
BusinessDay takes a look at key issues that will shape the aviation sector in 2024.
Trapped funds fiasco
In the last two years, foreign airlines have been finding it difficult to access their funds from tickets sold in the country as a result of foreign exchange scarcity and have resorted to buying dollars from the black market.
As a consequence, some carriers opted to suspend flights into Nigeria, while others responded by hiking their fares.
Recently, the Central Bank of Nigeria (CBN) announced on Tuesday that it had settled all verified claims by foreign airlines, disbursing an additional $64.44 million.
This brings the total amount paid to the aviation sector to $136.73 million, with the CBN confirming the clearance of all verified airline claims.
However, the International Air Transport Association welcomed the latest $64.44 million payment but highlighted that approximately $700 million remained unpaid, urging further action.
In a statement, the Geneva-Switzerland-based body representing global airlines, said: “IATA welcomes the Central Bank of Nigeria’s announcement that it has released an additional $64.44 million in blocked airline funds. While this development is encouraging, it’s crucial to recognise that approximately $700 million remains blocked with Nigeria’s commercial banks.”
The naira hit an unprecedented low against the US dollar recently, plummeting to nearly 1,500/$, according to FMDQ Exchange data on Monday.
Over the past three months, the CBN has cleared $2.5 billion in overdue foreign exchange debts.
Nigeria’s ability to clear all backlogs will be a key trend that will shape the aviation sector in 2024.
Surging fight tickets
A noticeable hike in airfare also greeted the confines of 2023. To illustrate, the cost of one-way tickets for flights between Lagos and Abuja, previously at N65,000 in 2022, soared to N190,600 in 2023, marking a substantial 192.31 percent price increase.
Similarly, ticket prices that stood at N50,000 in 2022 surged to N266,800 by the end of 2023. This sharp escalation represented a concerning development for air travellers amidst the economic challenges in the country.
To this end, passengers experienced an unstable stream of ticket fares that differed noticeably from the stretch of 2022. This change caused groans from passengers.
Some clung to their consistent patronage of air travel due to the outcry of insecurity in the country; they did not want to take the risk.
Stakeholders blamed the hike in jet fuel prices as aviation fuel prices rose from N800 to N1,000 per litre. With the continuous high cost of operations, air tickets will continue to make rapid climbs and this will impact the sector’s growth for the year.
FAAN relocation to Lagos
The Federal Airports Authority of Nigeria (FAAN) recently announced its intention to relocate its headquarters from Abuja to Lagos.
While the planned relocation has led to several reactions, with some supporting the government’s decision, saying it was in the interest of the sector and would eliminate unnecessary expenditures, others are opposing the move, stressing that attention should rather be channelled into infrastructure upgrade rather than relocating to Lagos.
Stakeholders in the aviation sector have said if the relocation is properly carried out, it would benefit the aviation sector, considering that 60 percent of aviation activities and even passenger traffic emanates from Lagos.
Seyi Adewale, chief executive officer of Mainstream Cargo Limited, said there are significant benefits of relocating FAAN critical headquarter departments back to Lagos, one of which is protecting the sanctity and wellness of the family unit.
Adewale said this is critical to the well-being of society, adding that any policy geared at maintaining, retaining, and securing the well-being of the family unit should be prioritized and preserved.
