Nigeria’s top banker defends policy of limiting imports

ARABIAN Gulf airlines — arguably the most successful global businesses the region has produced — look set for a period of transformation under the triple pressures of changing industry circumstances, international geopolitical strains, and their own internal dynamics.

How they react, especially Emirates and Etihad Airways of the UAE, will determine the future of the aviation industry in the Gulf and beyond. The great aviation disruptors of the Middle East are facing their own period of disruption.

Sir Tim Clark, president of Emirates, spoke of a “gathering storm” at an international tourism conference in Berlin last week, as the airline’s successful “super connector” strategy comes under pressure from lower- cost airlines and more efficient aircraft.

His comments could apply in some degree to Etihad and Qatar Airways, which also exploit the geographical location of the Gulf, combined with big long- haul aircraft, to make themselves the indispensable stopover destinations in global air travel.

The strategy has worked brilliantly for the airlines, and has benefited the economies of both the UAE and Qatar. But what if a new generation of airlines outside the region, with a low- cost model and more fuel- efficient aircraft, make the stopover redundant?

Two new disruptor airlines — from Norway and Singapore — have already made inroads into the global market, offering flights between Europe and North America on the one hand, and Southeast Asia and Europe on the other. Neither touch down in the Gulf.

Emirates’ business model — built on widebody jets offering the full- scheduled airline experience with as much luxury as you can pay for — would have to adapt to these changed market conditions, leading to the “few years of instability” of which Clark spoke, before world aviation growth rises to compensate.

Etihad is facing its own strategic challenges. The plan to build a “partnership” via alliances with other airlines has had mixed results. Some of the partners are sound and profitable businesses, while others are still problematic.

The loss- making Air Berlin has been restructured, reducing Abu Dhabi’s exposure to the intensely competitive European shorthaul market, and a new tentative alliance entered into with Lufthansa, the big beast of European aviation.

The immediate task facing Etihad is to turn Alitalia into a profitable airline that can compete with the new low- cost carriers based in Europe. Big job losses and further capital injections from Etihad would seem to be required, but inertia at the formerly Italianstate- supported and heavily unionized airline works against rapid or radical change. LAGOS: Hard currency curbs imposed by Nigeria’s central bank have helped boost local food production, central bank Gov. Godwin Emefiele was quoted as saying by two newspapers on Sunday.

Entrepreneurs have criticized a halt to hard currency allocations by the central bank for the import of almost 700 goods to prop up the naira hammered by a fall in oil revenues and boost local food production.

“This policy was basically borne out of necessity to conserve foreign exchange,” Emefiele said in a speech, referring to the import ban,

Perhaps in the future Etihad will consider seriously whether its involvement in Alitalia is worth the big financial bill it is footing, but that stage has not been reached yet. This will be a decision for the new head of the UAE airline, following the announcement that James Hogan, architect of the partnership strategy, would leave this coming June.

Gulf airlines also face a newly testy transatlantic environment in which political issues have the potential to damage their business significantly.

Clark revealed in Berlin that bookings on his flights to the US fell by 35 percent when the newly inaugurated President Donald Trump announced a travel ban affecting seven countries in January. A new ban — slightly less restrictive — will come into effect this week.

That makes the ongoing standoff between some in the US aviation industry and the Gulf airlines even more difficult to read. Three big American airlines have called for restricting Gulf access to the US under “open skies” deals because of what they allege are anti- competitive subsidies by Gulf states.

At some stage, Trump will have to rule on this. His protectionist inclinations would seem to suggest he would take the “America First” side; but his good relations with key Gulf allies might soften the stance against Emirates, Etihad and Qatar. The point with the mercurial President Trump is that you just cannot predict what he will do.

Often an industry in a state of flux will throw up some quite incredible news headlines, and this happened at the end of last week as the Berlin gathering wound down.

“Sheikhs discussed Emirates- Etihad merger,” screamed the global edition of the German newspaper Handelsblatt, going on to report that increased competition might soon turn the “bitter rivals” from the UAE into partners.

The denial from Emirates was immediate and emphatic: “There is no truth to the report that Emirates and Etihad are considering a merger or have been in talks for the same,” the Dubai airline said.

The idea does look far- fetched. Too much financial resource and policymakers’ time has been invested on both sides — and there is a good deal of pride involved — to make a pan- UAE merger feasible.

Nonetheless, it is a sign of the seriousness of the challenges ahead that such an idea has surfaced at all. As the UAE airlines grapple with their own challenges, they will probably have to grow used to the lurid headlines. Frank Kane is an award- winning business journalist based in Dubai. He can be reached on Twitter @ frankkanedubai according to Vanguard newspaper.

“This policy needs to be supported not just in response to the pressure on the naira but as an opportunity to change the economy’s structure, resuscitate local manufacturing and expand job creation for our citizens,” he added.

Emefiele also said Egypt’s experience with a free float of its currency did not convince him Nigeria should follow suit as it might increase inflation.

“I have heard commentators suggest we should follow Egypt’s example and free the naira,” to Emefiele said, according THISDAY newspaper.

“What they do not tell you is that following their currency adjustments inflation today in Egypt is over 30 percent. Is that what we want in Nigeria?” he said.

The central bank has faced criticism from investors for keeping the naira at a rate some 30 percent above the black market where entrepreneurs are forced to go amid dollar scarcity on official channels.

The central bank was not immediately available for comment.