Nigerian government’s decision to unify exchange rates leads to fluctuations in airfares for air travellers, especially international passengers.
Unification of exchange rates aims to enhance transparency, efficiency, and stability in the foreign exchange market.
Travel agents advise booking tickets early and seeking professional guidance to navigate potential increases in airfares due to exchange rate fluctuations.
After the Federal Government’s decision to unify exchange rates, air travellers, particularly those traveling internationally, have been advised to anticipate fluctuations in airfares based on the exchange rate between the Nigerian naira and the US dollar.
The Federal Government of Nigeria recently announced the unification of all segments of the foreign exchange market, abolishing the multiple windows that existed before.
This policy change has significant implications for air travellers, especially international passengers, who have been told to expect airfares to fluctuate, depending on the naira rate to a dollar.
According to the Central Bank of Nigeria (CBN), the unification of exchange rates is aimed at eliminating distortions arising from multiple rates, enhancing transparency and efficiency in the FX market, and improving liquidity and stability.
The CBN also stated that the operational rate for all government-related transactions would be the weighted average rate of the previous day’s executed transactions at the Investors and Exporters (I&E) window, where the exchange rate would be determined by market forces.
The President of the National Association of Nigeria Travel Agency (NANTA), Mrs. Susan Akpoariaye, in an interview with Nairametrics, said that the foreign exchange unification was good for the Nigerian economy and would make the repatriation of ticket sales funds easy and possible.
She, however, clarified that the International Air Transport Association (IATA) does not have the power to fix foreign exchange for airlines as claimed in some quarters.
“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.
She explained that airfares are denominated in dollars and converted to naira at the prevailing exchange rate at the time of booking or payment. Therefore, if the naira depreciates against the dollar, airfares would increase accordingly. Conversely, if the naira appreciates against the dollar, airfares would decrease.
She advised air travellers to book and pay for their tickets early to avoid paying higher fares due to exchange rate fluctuations. She also urged them to patronize registered travel agents who would offer them professional services and guidance.
The unification of exchange rates is expected to have positive effects on the Nigerian economy in the long run, as it would boost investor confidence, attract foreign capital inflows, reduce arbitrage opportunities, and enhance fiscal discipline.
However, in the short term, air travellers may have to brace up for volatile and unpredictable airfares as the naira adjusts to market realities.
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