Date: July 1, 2023- In a recent announcement, the International Air Transport Association (IATA) has cautioned air travelers about the likelihood of facing fluctuating and unpredictable airfares as the Nigerian naira adapts to market conditions. As a result of the Nigerian government’s decision to unify exchange rates, passengers, especially those traveling internationally, have been advised to expect airfare variations based on the exchange rate between the naira and the US dollar.
The Nigerian government’s move to unify the foreign exchange market by eliminating multiple exchange rate windows has significant implications for air travelers. The unification aims to eradicate distortions arising from multiple rates, enhance transparency and efficiency in the foreign exchange market, and improve liquidity and stability, according to the Central Bank of Nigeria (CBN).
Mrs. Susan Akpoariaye, President of the National Association of Nigeria Travel Agency (NANTA), expressed her support for the foreign exchange unification, highlighting its potential benefits for the Nigerian economy, particularly in facilitating the repatriation of ticket sales funds. However, she clarified that the IATA does not have the authority to determine foreign exchange rates for airlines, as some misconceptions suggest.
Explaining the relationship between exchange rates and airfares, Mrs. Akpoariaye emphasized that airfares are typically denominated in dollars and converted to naira at the prevailing exchange rate at the time of booking or payment. Consequently, if the naira depreciates against the dollar, airfares will increase accordingly. Conversely, if the naira appreciates against the dollar, airfares will decrease.
“So, that policy they brought was to unify the rates so that we will have only one rate, and that one rate will be determined by the I&E window, and anyone that understands this, will know that there will be a lot of fluctuations in the rates,” she said.
To mitigate potential financial challenges, air travelers are encouraged to book their tickets early and seek the assistance of registered travel agents who can provide professional services and guidance. The unification of exchange rates is expected to have long-term positive effects on the Nigerian economy, including increased investor confidence, attraction of foreign capital inflows, reduction of arbitrage opportunities, and enhanced fiscal discipline.