Nigeria: Russia-Ukraine War Sparks Turbulence in Nigeria

Lagos, Nigeria Nigeria Bureau — THE steep rise in the price of fuel, attributed to the Russia-Ukraine crisis, is weighing heavily on Nigeria’s airline operators.

This has dampened the significant growth of the sector over the past year following the easing of the coronavirus-related restrictions globally.

However, the latest national accounts released by the National Bureau of Statistics (NBS) show the continuous recovery of the air transport sector, with growth of 50,7 percent year-on-year (y/y) in the first quarter (Q1) of 2022.

This is compared to Q1 2021 when it contracted by 11,8 percent.

Air transport was the second fastest-growing segment in Q1 ’22, following rail transport (grew by 124,5 percent y/y).

Coronation Merchant Bank noted following the United States ban on Russian oil imports, oil prices surged above $100 per barrel to hit their highest level since 2008.

Aviation fuel is a deregulated product and as such, its price is dependent on movements in global oil price and the foreign exchange rate among others.

Hence, aviation fuel has increased from N190/litre ($0,46) in 2021 to N700/litre in May 2022.

Coronation said the surge was placing pressure on operational costs.

Based on the bank’s channel checks, aviation fuel accounted for 40 percent of operating cost in 2021 and has risen to 95 percent this year.

“This increase in operating cost has resulted in upticks in ticket fares across airline operators within the country and has also led to a significant decline in the frequency of domestic flights.”

Based on data from the Nigeria Bureau of Statistics, the average airfare for select routes (one-way) increased by 52,4 percent y/y from N36 409 recorded in April 2021 to N55 501.

On a m/m basis, it rose by 18,6 percent from N46 810 recorded in March 2022 to N55 in April 2022.

Last month, the Airline Operators of Nigeria (AON) announced a shutdown of operations within the industry due to the price surge in aviation fuel and other operating costs.

Discussions with government officials curtailed the shutdown.

The Nigerian National Petroleum Corporation has reportedly agreed to fix the price of the commodity to N480/litre.

– CAJ News

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