Effect of Exchange Rate Variability on Aviation Sector Performance in Nigeria (1994-2024)

This paper explored the implication of exchange rate variability on the performance of the aviation sector in Nigeria over the period 1994 to 2024. It specifically investigated the influence of black market, official, inter-bank, and cross-currency exchange rate fluctuations on air transport output. The paper employed the ex post facto design and relied on data from the Central Bank of Nigeria, Federal Airports Authority of Nigeria, World Bank Development Indicators, IATA, ICAO, and other credible databases. Descriptive statistics were used to summarize trends, and the cointegration test was applied to determine long-term relationships, and a VEC Model was employed to examine both short-term and long-term exchange rate negatively and significantly impacted air transport output, while cross-currency exchange rate fluctuations exhibited a positive but marginal effect. Black market and official exchange rates were found to have insignificant effects in the short run. The lagged error correction term was adverse and substantial, indicating that deviations from the long-term equilibrium were corrected over time. These results underscore the sensitivity of the aviation sector to exchange rate volatility, highlighting the importance of stable monetary policy and effective foreign exchange management. The study recommended that regulatory authorities, financial institutions, and airline operators coordinate strategies to mitigate exchange rate risks, enhance operational efficiency, and strengthen sector resilience to external shocks, thereby supporting sustainable growth and development in Nigeria’s aviation industry.