Share
Nigeria's aviation sector reeling from COVID-19 shock
The approval of 4-billion-naira palliative for Nigeria’s aviation sector by the government has been heavily criticised for being insufficient. More recently, domestic airline operators raised their fares by almost 100 per cent citing forex scarcity and operational cost among other reasons. Gbenga Olowo, President of Aviation Safety Round Table Initiative joins CNBC Africa to discuss the future of Nigeria’s aviation sector in the near term.
Wed, 02 Dec 2020 11:45:38 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- The aviation sector in Nigeria has been severely impacted by the COVID-19 pandemic, with a meager 4 billion Naira support package raising concerns over the sector's sustainability.
- Airlines have had to grapple with a sluggish recovery, escalating operational costs, and forex scarcity, leading to a significant spike in airfares by nearly 100%.
- The Central Bank of Nigeria's restrictions on foreign exchange transactions have compounded the industry's financial woes, highlighting the need for a comprehensive and strategic approach to address the sector's challenges.
Nigeria's aviation sector has been enduring a tumultuous period in the aftermath of the COVID-19 pandemic. The announcement of a 4 billion Naira palliative for the industry by the government has drawn criticism for being inadequate. Domestic airline operators have recently surged their fares by nearly 100%, attributing the spike to foreign exchange scarcity, escalating operational costs, and other challenges. Gbenga Olowo, the President of the Aviation Safety Round Table Initiative, shed light on the current predicament faced by the aviation sector in the country, emphasizing the looming uncertainties and the arduous journey ahead. Olowo highlighted the stark reality that airline operators and industry players have been grappling with significant adversities for the past 10 months. Despite a partial reopening of air travel approximately two months ago, business has only managed to recover to about 25% of its pre-pandemic levels. This falls far short of the anticipated recovery trajectory, which was initially projected at 58 billion Naira before being revised downward to 27 billion Naira, and now a mere 4 billion Naira support package has been tabled, a woefully insufficient lifeline according to industry insiders. Olowo underscored the indispensable role of financial assistance in providing a lifeline for the struggling airlines, stressing that without substantial support, the sector would continue to languish in distress. Looking ahead to 2021, a marginal uptick in business activity to possibly reach 30-35% is foreseen, but the sector remains rife with challenges and uncertainties that threaten its viability. The surge in airfares by close to 100% has been a direct response to the economic crunch faced by operators. The confluence of escalating operational costs, forex scarcity, and the necessity of revenue generation has forced airlines to hike ticket prices, albeit at the risk of pricing out passengers who might find the increased fares prohibitive. The additional challenge posed by the Central Bank of Nigeria's restrictions on foreign exchange transactions further compounds the industry's woes, limiting the airlines' ability to meet crucial international financial obligations. The fluctuating exchange rates and the stringent limitations on dollar transactions present formidable obstacles for airlines seeking financial stability. Amidst these financial challenges, the imperative for a comprehensive and strategic approach to addressing the aviation sector's myriad issues becomes increasingly urgent. Olowo emphasized the need to move beyond mere infrastructure development, such as airport expansion, and focus on the core issues plaguing the industry. He cautioned against the simplistic solution of resurrecting a national carrier, asserting that under the current business climate, any such endeavor would likely flounder. The intricate interplay of financial, operational, and regulatory hurdles underscores the imperative for a holistic reevaluation of Nigeria's aviation landscape. As the sector navigates the choppy waters ahead, stakeholders must collaborate to chart a sustainable path forward, cognizant of the multifaceted challenges that lie ahead.
SIGN UP FOR OUR NEWSLETTER
DAILY UPDATE
Get the best of CNBC Africa sent straight to your inbox with breaking business news, insights and updates from experts across the continent.
Get this delivered to your inbox, and more info about about our products and services. By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.