- United and Iberia respond to falling energy sector traffic and curbs on foreign exchange by: Maggie Fick in Lagos
Two international airlines have suspended flights to Nigeria, partly in response to falling trade but also because of foreign currency restrictions that have trapped up to $1bn of the industry’s earnings in the west African nation.
In the latest illustration of the economic crisis engulfing Nigeria, United Airlines is to discontinue daily flights between Lagos, the commercial capital, and Houston in the US at the end of the month. Iberia, the Spanish airliner, cancelled all four of its weekly flights to Nigeria in May.
Other top carriers, including Air France, British Airways, Virgin and Emirates, are also being affected by the currency controls. The restrictions were introduced last year by President Muhammadu Buhari as his government grapples with the country’s worst economic crisis in decades, triggered by the collapse in oil prices.
Two Nigerian bankers told the Financial Times that arrears to the aviation sector stand at $1bn or more. Iata, the industry trade body, put the figure at $600m.
Oil-dependent Nigeria now ranks second only to Venezuela as a top blocker of the repatriation of airline funds, according to Iata. It said last week that the airlines were discussing the matter with Nigerian authorities, adding that both sides are “seeking possible measures to make the funds available”.
The impact on the airline industry highlights how Nigeria’s economic crisis — and the subsequent foreign exchange restrictions — is affecting all areas of Africa’s biggest economy and most populous nation.
Once one of Africa’s fastest-growing economies, Nigeria suffered its first contraction in more than a decade in the first three months of the year.
Jonathan Guerin, a spokesman for United Airlines, said the Lagos route was no longer sustainable.
“The recent downturn in the energy sector has caused some customers to spend less on travel between Houston and Lagos and repatriation [of funds] has also been a significant issue,” said Mr Guerin.
A spokeswoman for Iberia said a drop-off in oil-related business travel was a key reason for halting its flights to Nigeria. The Spanish group has also cancelled its flights to Angola, Africa’s other main oil producer.
Privately, airline executives express frustration with the situation.
“We understand the need for these [currency] restrictions but we need our money. In order to fly a certain route we need it to be profitable,” a Nigeria-based executive said. “We don’t want to be the highest priority but we need to be a priority.”
Routes to Nigerian cities have long been highly profitable for the likes of British Airways, which operates two daily routes between London and Nigeria — one to Lagos and one to Abuja, the capital.
A spokesman for BA said the company had no plans to pull out of the country.
Other foreign companies operating in Nigeria, particularly manufacturers which import raw materials, have been complaining for months that the government’s policies are exacerbating the economic woes, saying they are choking businesses.
