The high exchange rate of the naira to other currencies has grounded air cargo business in Nigeria according to a Thisday report. It reports that Air cargo business hit its last peak in December 2014 just before severe capital controls mechanism were introduced by the Central Bank.
The CBN had at several moments this year issued policy circulars that restricted the purchase and sale of dollars in Nigeria as well as banning a list of 41 items from accessing its forex market. This has basically hurt imports as importers can’t readily access dollars and even when they do it is at an exorbitant rate.
The collateral damage this can cause cannot be over emphasized as the report suggests. Already top cargo handlers like NAHCO (Quoted company) and Skyway Aviation Handling Company Limited (SAHCOL) are said to have lost about 35% of their market. NAHCO did report an 8.9% growth in revenues in the first half of this year and reported a 3.2% drop in profits. Ironically NAHCO reported a 2% rise in revenues in the first half of 2014 compared to same period in 2015, whilst revenues in the whole of 2015 was just 0.5% higher than the year before.
Looking at the Thisday article it appears counter-intuitive that revenues should have risen this year when one should have expected a drop if the comment made by AFRAN President to Thisday is anything to go by.
“The situation is very, very bad now because most important importers are no more importing, so they are no more bringing in cargo. Most of the airlines that are into cargo import are threatening to stop operating into Nigeria because it is not possible for a 100-ton aircraft to be bringing 10-ton cargo. No matter the quantity of the cargo the airline must pay the same charges to the Federal Airports Authority of Nigeria (FAAN) and the Nigerian Airspace Management Agency (NAMA) and it will also pay for fuel. So it is not profitable bringing cargo into the country now,” President, Association of Foreign Airlines Representatives in Nigeria (AFRAN), Kingsley Nwokoma
NAHCO did confirm in its annual report that the Ebola crisis and disagreement with Nigeria Customs had a negative impact on their 2014 performance. They also however cited the Naira devaluation as also a major factor
“Our 2014 performance was stable despite the impacts of the Ebola scare which resulted flight cancellations and limited passenger movements in West Africa for four months, the three-week closure of our warehouse due to operational disagreement between the Nigeria Customs and licensed clearing agents, in addition to the rising cost of business due to Naira devaluation and high interest rates.”
Revenues were up by 21% half year 2013 closing the year with a revenue growth of 9.4%. One then wonders if the last two quarters of this year could produce results that reflect the true situation of things in the industry.