Friday, November 17, 2017 /8:48AM /FBNQuest Research
Today we turn our
attention to Nigeria’s aviation sector. Trends within the industry are often
regarded as a sound private consumption indicator. Following the recent exit
from recession (as seen in the Q2 national accounts), air transport grew by
just 0.1% y/y. The sector has suffered from relatively low patronage due to
softer demand. However, business travel continues to drive air passenger
traffic across the country.
domestic travelers, ticket fares doubled earlier in the year and have remained
high. Passengers could then secure a return trip ticket for US$85 on the
Lagos-Abuja route. However, the cost has now risen as high as US$175 on the
current domestic providers (Arik Air and Air Peace). We expect even higher
prices over the next month as we approach the festive season.
operational costs lie behind the increased ticket fares. To give one example,
aviation fuel accounts for about 40% of operational costs. Industry sources
indicate that the price of aviation fuel currently stands at N265/l.
international travel, fx sourcing issues had a severe negative effect on
airline operators as they could not repatriate funds. Nigeria became less
attractive for operators and a few airlines reduced the frequency of their
flights. However, the CBN has managed to reduce the blocked funds to US$175m
from the initial US$600m according to IATA.
aviation industry has the potential to become a pan-African hub similar to
Kenya. However, the infrastructural deficit within the industry will not
permit. The three major international airports in the country are undergoing
renovation and expansion.