Business

Nigeria dollar squeeze hits global airlines

Lagos in Nigeria Image copyright Getty Images

Foreign airlines are halting flights to Nigeria, where a foreign exchange crisis has led the government to limit access to dollars.

US carrier United Airlines has said it will end daily flights between Houston, Texas and Nigeria's commercial capital, Lagos, on 30 June.

It follows Spanish airline Iberia's decision to pull out in May.

Falling oil prices have hurt Africa's biggest economy, which has contracted for the first time since 2004.

As a result of the foreign currency restrictions, airlines have been unable to repatriate up to $600m (£417m) in ticket sales, according to the International Air Transport Association (Iata).

Foreign currency reserves have dwindled to their lowest level in more than ten years and the government introduced a currency peg last year that has created a black market for the naira currency.

"The inability of airlines to access forex in Africa's largest economy, if not solved, will affect air transport services to, from and within Nigeria and undermine the country's position as West Africa's aviation hub," Iata said this week.

Iberia said it was leaving Nigeria due to "very difficult operating circumstances and dwindling passenger numbers."

Black market

Businesses operating in Nigeria are struggling to get their hands on dollars, sterling or euros, says the BBC's West Africa correspondent Martin Patience. The official exchange rate, which is controlled by the government is also very low compared to the black market rate.

"If you take $1, the official rate is 200 naira but if you then go on the black market where you will get the cash it can often cost you double that and airlines...simply can't go on the black market to get business done," says Patience.

Nigeria's economy contracted 0.4% in the first quarter of this year and last month Nigeria's central bank governor said a recession appeared "imminent." The central bank also announced plans to introduce a greater flexibility into the foreign exchange market.

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