• Sunday, April 14, 2024
businessday logo

BusinessDay

FX gap to boost diaspora Christmas spend

The spread between the official and parallel market exchange rates is seen attracting Nigerians abroad and boosting dollar liquidity in the foreign exchange market during the festive season.

Other incentives expected to encourage more Nigerians in the diaspora to come home during the festive season are the relaxed COVID-19 rules and the approval by the government for airlines to allow Nigerians with expired passports board.

Already, the pressure on the naira is beginning to moderate across foreign exchange markets as dollar supply improves. The naira-dollar exchange rate on Wednesday remained unchanged at the parallel market, popularly called the black market.

The dollar traded at N446/$ at the official market, known as the Investors and Exporters forex window as on Wednesday.

The spread between the official (N446) and the parallel market rate (N745) stood at N299 per dollar.

Year-on-year, the naira has depreciated by 23.62 percent from 569 per dollar in December 2021 to 745/$ the current rate at the black market. The local currency fell by 6.99 percent year-on-year from N414.80 as at December 14, 2021 to N446/$ at the official market.

Travel experts say that in addition to the premium, the relaxation of COVID-19 rules and approval for Nigerians with expired passports to come back will serve as incentives for many Nigerians to return to the country this season.

Travel agents say flights from London, United States, France and Canada to Nigeria are already fully booked, showing an increase in the number of travellers coming to Nigeria this festive season.

“Nigerians in diaspora who have urgent needs to come home will be delighted because they will not need to go through huge protocols and stress to get either their passports renewed or get travel visas on their acquired foreign passports,” Seyi Adewale, chief executive officer of Mainstream Cargo Limited.

He said the cancellation of Covid tests would boost travel because of the additional and significant costs these tests charge plus the inconveniences.

Any effort by the government in general that is aimed at reducing the overall cost of air travel will largely encourage citizens to fly amid the current high airfares and inflation, he said.

The federal government, through the Nigerian Civil Aviation Authority recently reviewed the COVID-19 health guidelines for the aviation industry in the country, cancelling COVID-19 PCR irrespective of vaccination status.

Also, in a recent development, the Nigeria Immigration Service ordered airlines and all relevant authorities to allow Nigerians with expired Nigerian passports board.

“With the high exchange rate spread, more Nigerians in diaspora are eager to seize this opportunity to travel back and change the currencies to spend. The high exchange rates will mean more naira for them to spend,” a financial expert said in Lagos.

Johnson Chukwu, managing director/CEO of Cowry Asset Management Limited, believed that the huge exchange rate spread might be an incentive but it is not sufficient to boost liquidity in the foreign exchange market.

He said if the Central Bank of Nigeria increases dollar supply at the official market, it would narrow the spread between the official and parallel market rates.

Ayodele Akinwunmi, relationship manager, corporate banking at FSDH Merchant Bank Limited, said what will be a game changer is when there is the real business, “when we export more goods to earn more dollars and that can only happen when the environment is good.”

Sindy Foster, principal managing partner at Avaero Capital Partners, said the cancellation of Covid tests and vaccination protocols will make travel cheaper and less stressful.

She said this is unlikely to have an immediate effect because flights are already fully booked for the holiday period but would encourage more travel next year.

“Unless capacity increases, this will lead to increased fares, wiping out the savings made on Covid tests. The low capacity to and from Nigeria on popular routes is a hindrance to lower fares. More competition and more available seats is what is needed to reduce the cost of tickets,” Foster added.

Read also: Pressure on naira slows as dollar supply improves

Susan Akporiaye, president of the National Association of Nigeria Travel Agencies (NANTA), told BusinessDay that lot of people are still travelling back home for Christmas, even though the tickets are not being issued by their members.

“We are not selling tickets, yet flights are fully booked for Christmas. Nigerians in diaspora are booking tickets from travel agents outside Nigeria because the cost of tickets in Nigeria is quite high,” she said.

Akporiaye said parents have been buying tickets from other travel agents outside Nigeria and students are returning from all over the world including US, Paris, Poland and UK for the festive season.

Bankole Bernard, managing director/founder of Finchglow Travels and former NANTA president, said people are travelling back to Nigeria, adding: “It is cheaper for people to buy tickets outside Nigeria than buying from Nigeria because the naira exchange rate is very high.”

He said the airlines are opening cheaper ticket inventories outside Nigeria but closed these inventories in Nigeria.

The National Bureau of Statistics says about 13 million passengers travelled through Nigerian airports in 2021. The figure represents a growth rate of 43.41 per cent from 9 million recorded in 2020.

According to the report, the total number of arrivals in 2021 stood at 6.5 million, which was higher compared to the 4.9 million recorded in 2020.

Also, departure stood at 6.5 million in 2021 compared to 4.2 million in 2020.

The reports added that 2.2 million international passengers passed through Nigerian airports in 2021, as against 1.4 million passengers in 2020. It represents a 57.61 per cent growth rate.

Breakdown of the foreign movement statistics showed that arrival in Q1 2021 was 212,977 while passengers’ departure stood at 222,453 in the same quarter. Similarly, second-quarter 2021 recorded 220,171 (arrival) and 232,501 (departure).

In Q3 2021, passengers’ departure stood at 285,189, and arrival was 318,841. In Q4, the figure arrival stood at 391,284, and departure was at 335,730.

Travel experts say with relaxation of Covid rules and Nigerians with expired passports being allowed to come back, these passenger numbers are expected to increase this year.