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Marketers push back, urge FG to stop meddling in Jet-A1 affairs

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Aviation fuel marketers have told the Federal Government to stop meddling in activities relating to Jet-A1, especially the price at which the product is being sold to airlines.

The marketers, under the aegis of the Aviation Fuel Marketers Association of Nigeria (AFMAN), reminded the authorities that the product remains deregulated and susceptible to the forces of demand and supply.

Secretary-General of the association, John Abegunde, in his presentation at the Federal Airports Authority of Nigeria (FAAN) National Aviation Conference (FNAC) in Abuja, said it was high time the government handed off from all commercial-related issues between airlines and marketers, in line with the spirit of deregulation.

The pushback was apparently in reaction to the recent intervention by the National Assembly, the Nigerian National Petroleum Corporation (NNPC) and the Central Bank of Nigeria (CBN) to force a temporary reversal from N700 to N580/litre, in response to airlines’ threats to shut down operations.

The airline operators had said that aviation fuel now accounts for between 30 to 40 per cent of operating cost in aviation and is unsustainable for the scheduled carriers.

Speaker of the House of Representatives, Femi Gbajabiamila, during the mediation, said the situation was a crucial moment for the country. “The shutdown of airline operations has the potential of shutting down this government. We cannot sit here as stakeholders and fold our arms and watch this happen. We need to address this matter once and for all. I agree with you; I think the problem is with the marketers.”

Abegunde, however, said that the marketers were as well faced with numerous challenges that include the availability of the product to supply to the airlines, uncompetitive price, logistic hiccups in transporting the product and inequality in standard operating practices – all of which rob-off on the pump price.

He added that the industry and its investors would be better off if regulators focused more on having a stringent aviation fueling requirement and harmonised oversight responsibilities to ensure quality.

“FAAN too should watch out for portfolio and unlicensed suppliers to discourage racketeering and black-market business of aviation fuel. Throughput? No! Joint ventures, yes! All parties should encourage joint ventures and have JV agreements. We should be wary of portfolio investors who come in when there are opportunities in the sub-sector but move out with their briefcases immediately after there are challenges. FAAN needs to review land lease arrangement and multiple charges as the volumes are no longer looking good to the initial business projection,” he said.

Chairman of Major Oil Marketers Association of Nigeria (MOMAN), Olumide Adeosun, had denied selling at such an exorbitant rate alleged by the airline.

Adeosun explained that the verifiable prices in West Africa range from $1.25 per litre in Ghana to as high as $1.51 per litre in Liberia.

“Due to the intervention of NNPC over the last several weeks, aviation fuel is landed into marine terminal tanks in Nigeria at between N480 and N500 per litre depending on the logistics efficiency of the operator. Due to the high costs of specific handling of Jet-A1 (special transport and continuous filtration), the product is sold on the tarmac at Ikeja (our benchmark) between N540 and N550 per litre and across other airports at between N570 and N580 per litre.

“In comparative terms, the aviation industry is already benefiting from the government’s intervention when local prices are compared to West African regional prices, despite the deregulated status of aviation fuel. This situation is hardly sustainable given the already humongous N4 trillion cost of the PMS subsidy,” Adeosun said.

Vice President of the Airline Operators of Nigeria (AON), Allen Onyema, had warned that if the present challenge of aviation fuel was not fully addressed, about three airlines may quit operations due to the unbearable cost of operations.

Onyema noted that the aviation fuel challenge was not exclusive to Nigeria, but “ours is made worse because of the slump of naira against major currencies, especially the dollars.”