More woes as aviation fuel, diesel prices soar - Financial Daily News Site

More woes as aviation fuel, diesel prices soar

  • Jet A1 hits N815/litre; diesel nears N800

  • Inflation spikes as transport cost rises

  • Banks, others cut down services

  • How FG can intervene – Expert

 

There is no reprieve yet for airline operators over the skyrocketing price of aviation fuel known as Jet A1 even as operators fear the worst is yet to come. This is just as diesel prices per litre hovers between N750 and N820, worsening many value chain indices.

These major fuel oils are increasing the logistics and production costs for Nigerians, adding to rising inflation at 17.71 per cent in May 2022, amidst poor electricity supply to businesses and households.

Barely days after the operators cried out that the price of Jet A1 has hit N714 per litre, findings by our correspondent indicated that the product has increased further selling for N715 in Lagos and as much as N815 in Kano.

In Abuja and Port Harcourt, the fuel price was also much higher, according to the operators.  Vice-President of the Airline Operators of Nigeria (AON), Mr Allen Onyema had last Wednesday raised an alarm that three airlines are facing liquidation over the constant rise in the price of Jet A1.

The increment in prices came despite several interventions by stakeholders to address the skyrocketing price, which has threatened flight operations. The last of such interventions was on May 10 after the airlines suspended plans to shut down operations.

The House of Representatives at the time summoned a meeting of stakeholders where the Nigerian National Petroleum Corporation (NNPC) Ltd, airline operators and marketers resolved on common ground in the interim to take measures that will keep the aviation sector functioning in the country.

Part of the agreement was the supply of 10,000 metric tonnes of aviation fuel to the operators for the next three months.

However, more than a month after, the intervention is yet to materialise while the price of jet fuel continues to rise, peaking at N815 at the weekend.

One operator who spoke with our correspondent on Sunday said, “As at Monday, it was N730 in Kano but yesterday (Saturday) and today, it is about N800 to N815.

“The irony of it is that it is not even available. It is scarce. It is unfortunate we cannot position our country as a hub when you are not even sure of the necessary variables that can make an airplane move.”

An airline operator who spoke with our correspondent said they are hopeful that something positive would be done with the agreement reached recently with the NNPC and fuel marketers.

“As I am talking to you, the situation is not normal. We are still experiencing scarcity and this is why we are having flight delays and cancellations in recent times. However, we are getting some assurances from the government but as I am talking to you, we are struggling to survive,” the operator said.

Chief Operating Officer of Ibom Air, Mr George Uriesi in an interview also confirmed that the intervention of the federal government is not forthcoming yet.

He said, “If we are to sit down and wait for that, we will probably not be around for much longer. We appreciate the efforts by the government but it is not happening any time fast.”

Airfares skyrocketing, travel agents say

There are fears the prices of tickets may increase further even as a one-way Lagos-Abuja ticket selling for N71,000 as of yesterday.

Airline passengers had earlier expressed frustration when operators increased a one-way ticket to N50,000 across board.

Travel agents say the current exorbitant price of tickets is not sustainable, adding that since the increase in flight tickets, the turnout of passengers has reduced drastically while airline schedules have equally dwindled.

President of the National Association of Nigerian Travel Agencies (NANTA), Mrs Susan Akporiaye in a chat with our correspondent said individual travel on the domestic routes has reduced, disclosing that only corporate passengers frequent the routes.

She said, “We have been buying tickets for N100,000 from when the thing (increment) started. So there is no current increase except there is no availability. Definitely, sales have reduced from the local ticketing. It is only more of corporates we are seeing now. Only corporate people are still travelling for official trips and all that. For individuals, it has to be very, very necessary.”

According to her, the various interventions cannot bring about a permanent solution to the problem unless Nigeria begins to refine Jet A1 locally. 

She said, “The root cause is we don’t have refineries. Whatever you see that the government is doing, we are not addressing the root cause. The root cause is not being addressed, which is the fact that we are not refining our products here.”

Also speaking, aviation consultant, Mr Tayo Ojuri who noted that the Jet A1 crisis is a global phenomenon stated that the situation in the country was worsened by her inability to refine locally.

He said, “We have to import everything. So what is affecting it is the cost of importation and foreign exchange. The first thing is the foreign exchange, which has been volatile at the moment.”

Ojuri highlighted that the economy would suffer when people are unable to move from one point to another on account of an increase in airfare, saying, “Don’t forget there is already inflation, which is also a global issue. It is also affecting the cost of tickets. We need to have a sustainable cost of doing business.

“We need to move, people need to move around. What we need to do is to ensure the cost of aviation is sustainable. Forex must be available, Jet A1 must be available,” he added.

Diesel, petrol scarcity rages as banks, others cut services 

In an official confirmation of the rising diesel price, a report by the National Bureau of Statistics (NBS) last weekend said the average price of Automotive Gas Oil (diesel) rose by 181 per cent from N238.82 per litre in May 2021 to N671 in May 2022. The latest report showed a price hike trend from N654 in April 2022 at a 2.54% increase rate to the N671 in May.

As at the weekend, diesel prices have gone to N780 in some stations while some other major petroleum marketers still sell the product in Abuja for N750.

The diesel price hike has had critical effects on the transportation of petrol from the coastal areas, especially in Lagos to the hinterland since it worsened in May. Residents of Abuja, Kano and other states farther from Lagos have witnessed prolonged queues at the filling stations to buy petrol.

A member of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Suleman Garba, in Abuja, explained the cause of the queues for petrol as he said most tanker drivers were not loading due to the high cost of diesel.

“When you turn to the drivers, they complain of the high cost of diesel and the government said they were looking at the situation but NNPC has supplied the stock, especially at the private depots in Lagos but we are having issues bringing it,” he noted.

The IPMAN chapter in Ogun, last week, said its members would begin to sell petrol for N180/l, above the N165/l official rate due to the diesel cost impacting on petrol transportation.

Daily Trust also found that the diesel price hike is also affecting banks as some of them had notified their customers since last month that some branches would close by 2pm daily until the situation improves.

Even bakeries and water producing factories are affected by the shortage in diesel due to the price hike. An entrepreneur and owner of Blessed Bakery in Mararaba, Nasarawa State, Mr John Okoronkwo, said he is now forced to buy in jerrycans rather than in tankers for his business.

“The money is not even there, and even our suppliers don’t give credit anymore. It is a big challenge for us as we speak,” Okoronkwo noted.

And in Gwarinpa, Abuja, a printing press operator said it is now a luxury to turn on his diesel-fired generator if the volume of work is minimal. According to George Odoh, “I buy 10 litres of diesel for N8500 and it can only power my structure for one hour. What we no do now is to pile work and appeal to customers, so we can produce at once. What that means is that it has reduced our job delivery time and the overall turnaround of the business.”

To cushion the diesel effect on petrol, the Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA), at the weekend, announced a fresh increase in freight rate for the tanker drivers. By this, the National Association of Road Transport Owners (NARTO) would have more funds from the bridging fund paid by NMDPRA for differentials in loading petrol from the coast to inland states. The authority said this will enable them to meet their diesel obligations and increase petrol freight to Abuja and other places hitherto suffering the product scarcity, expectedly this week.

How FG can intervene – Expert

Commenting on how the government can tackle this issue besides what it has done to douse the petrol queues, Engr Ochube Onuh, an oil and gas expert and manager at Green Energy, said the logistics issue requires special funding in the meantime until the Ukraine/Russia war ends and global supply chain fully restored.

“We are in a dilemma because on the one hand, we are asking the federal government to end petrol subsidy but the global diesel crisis is prompting another form of subsidy for diesel until the Russia and Ukraine war ends. 

“The overall solution is when the Dangote Refinery or any of the government owned refineries become active where we can now have diesel refined locally. Until such a time, Nigeria and other countries are in for a long ride,” explained Engr. Onuh.



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