Aviation Sector: GDP Declines By 61% Amid Crisis
The aviation industry has been beset by fuel and foreign exchange difficulties, which appear to have reduced the sector’s contribution to Gross Domestic Product(GDP) by 61.47 percent.
The National Bureau of Statistics’ most recent Q2 2022 GDP data shows that the sector’s nominal GDP output fell from N84.73 billion in the first quarter to N32.65 billion in the second quarter.
There have been significant worries regarding the millions of dollars that international airlines operating in the nation earned but were unable to remit abroad owing to foreign scarcity.
Concerns about the rising price of aviation fuel have also contributed to the high operating costs experienced by local aircraft operators.
Due to these difficulties, domestic and foreign airlines operating in the nation have been increasing prices and decreasing flights.
In an exclusive interview with the PUNCH, Prof. Obiora Okonkwo, Chairman of United Nigeria Airlines and spokesman for Airline Operators of Nigeria, stated that domestic airlines have been grappling with high operating costs due to the increase in aviation fuel.
He added that the Central Bank of Nigeria’s shortage of sufficient foreign exchange had forced airline operators to purchase currency on the illicit market at exorbitant prices.
Obiora said, “It is a big problem because 95 per cent of the funds we need are sourced from the parallel market, which makes things very expensive. Sometimes, it is not even available.
“This cash, even when you have naira, is not available in US dollars, and then it affects your delivery time, further increases your aircraft-on-ground period and your operational efficiency. So, it is really a huge issue.”
Allen Onyema, the Chairman of Air Peace, recently revealed that over 70 airlines had shut down in Nigeria over the past five years, and three more that were still operating would go out of business soon.
He added that the primary factor currently capable of causing the operations of airlines to collapse is the high cost of aviation fuel, also known as Jet A1, which he blamed for the ongoing demise of airlines in Nigeria among other issues.
He added, “There are so many issues in the aviation industry. Issues like high taxes are making airlines unprofitable here.
“We pay excessive charges to the Nigerian Airspace Management Agency. Paying navigation charges is absurd for domestic operations. The mortality rate of airlines in Nigeria is alarming. Over 70 airlines have gone into extinction in the last few years.”
According to the International Air Transport Association, the global organization representing international airlines with headquarters in Switzerland, if the government does not handle the repatriation of the $464 million held in Nigeria, more airlines may cease flights to Nigeria.
As foreign airlines struggled to return over $464 million in ticket sales earnings to their various home nations, British Airways forbade travel agents in Nigeria from selling their tickets.
The change happened just a week after Middle Eastern airline Emirates Airlines announced that it would stop flying to Nigeria as of September 1, 2022. The Dubai-based airline attributed the change on its failure to bring $85 million in ticket sales revenue home.
To counter a developing problem in the nation’s aviation sector, the CBN nonetheless stated on Friday that it has issued $265 million to airlines operating in the nation to settle unpaid ticket sales.
According to a breakdown of the amount, $35 million was made available through the Retail SMIS auction, and $230 million was issued as a special foreign exchange intervention.