International carriers may follow the example of United Airlines and Iberia and halt operations in Nigeria or cut flights as they struggle to move revenue out of the country because the oil-price slump has depleted the West African nation’s foreign exchange reserves. Iberia suspended its route to Nigeria on May 12, followed by United, which informed employees that it would end flights from the U.S. to Nigeria at the end of June because of a lack of demand and trouble collecting payments.
British Airways and Emirates have said they are facing difficulties obtaining outstanding air fares. The Lagos route became “untenable” for United, the CEO Oscar Munoz said Wednesday. Pulling out was a “tortured decision,” he told reporters after an annual meeting in Chicago. More airlines will probably cancel routes to Nigeria, according to John Ojikutu, CEO of Centurion Aviation Consultancy. “Besides an inability to repatriate profit, passengers are reducing because the economy is going down,” he said on the phone from Lagos.
Nigeria economy is on the verge of a recession, oil production has fallen to about a three-decade low, and the budget deficit has swelled to a record. The economy contracted for the first time since 2004 in the first quarter, and foreign-currency reserves have slipped to $26.4 billion, the lowest in more than a decade.
Faced with dwindling oil revenues, the central bank has restricted access to foreign exchange. Nigeria has held its currency, the naira, at 197-199 per dollar since March 2015, unlike many other oil producers affected by the slump in crude prices since mid-2014, which let their currencies weaken. As the dollar shortage has worsened, the naira’s value has plummeted on the parallel market, falling to 370 per dollar Wednesday.
