Airline troubles portend deeper Nigeria forex woes

Significance

This follows the fallout from an August 18 decision by Emirates Airlines -- and subsequently others -- to suspend operations in Nigeria due to their inability to repatriate an estimated USD464mn in airline ticket sales. This stems from a wider CBN effort to manage its foreign exchange reserves by rationing dollar access.

Impacts

• The dependence of wealthy Nigerians on international air travel will give international airlines some leverage over government policy.
• Airline ticket prices will continue to rise, making travel harder for many Nigerians.
• Pressure on the naira will increase the gap between the official and parallel market exchange rates.
• The CBN will pursue its forex rationing policy at least until the next presidential administration.