In a fresh revelation, marketers of petroleum products under the aegis of Major Oil Marketers Association of Nigeria (MOMAN) have alleged that the federal government through the Nigerian National Petroleum Company (NNPC) Limited has been subsidising the price of Aviation Turbine Kerosene (ATK) commonly known as aviation fuel, in the past weeks, against the international price.
This was just as Airline Operators of Nigeria (AON) yesterday reached a truce with the leadership of the House of Representatives and other government agencies to cancel the plan of shutting down flight operations in the country. The operators had last Friday announced their plan to stop flight operations due to the high of cost aviation fuel that had risen to N700 per litre. This, was however shelved.
MOMAN specifically said in comparative terms, the aviation industry was already benefitting from government’s intervention when local prices are compared to West African regional prices, despite the deregulated status of aviation fuel.
The marketers warned that the situation was not sustainable given the already humongous N4 trillion annual subsidy cost being borne by the country.
The association stated this yesterday in a statement signed by its Chairman, Mr. Olumide Adeosun, which was sent to THISDAY.
“In comparative terms, the aviation industry is already benefitting from 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,” MOMAN stated.
It explained that with respect to aviation fuel, verifiable prices in West Africa ranged from $1.25 per litre in Ghana to as high as $1.51 per litre in Liberia, saying even then, the product has remained scarce across the sub-region.
MOMAN maintained that due to the intervention of NNPC over the last several weeks, aviation fuel was landed into marine terminal tanks in Nigeria at between N480 and N500 per litre, depending on the logistics efficiency of the operator.
It further explained that, “due to 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.
“During this period of NNPC intervention, as NNPC uses the nominal Central Bank of Nigeria (CBN) exchange rate, no independent importer would import aviation fuel as it is unable to access foreign exchange at the same rate, leaving NNPC as the major importer of aviation fuel for now, even though the product is deregulated.”
However, the marketers admitted that those interventions were sometimes necessary to mitigate shocks and help the economy, the operating environment and the public to adjust to the new realities while efforts were being made and innovations introduced to optimise costs and increase efficiencies.
While noting that those interventions cannot be permanent in nature, MOMAN expressed hope that the war in Ukraine came to a speedy conclusion.
It also expressed hoped that the integration of products from the local refineries including the four NNPC’s refineries under rehabilitation, the Dangote Refinery under construction as well modular refineries into the supply chain, would mitigate the high costs being borne by the government and Nigerians.
MOMAN opined that a return to cost recovery, free market and competitive economics including access to foreign exchange at competitive rates was inevitable for the sustainability of the production and distribution framework in the petroleum downstream industry in the country.
It added that there was an immediate need to prepare the operating environment and indeed the larger economy for this eventual return.
MOMAN restated its committed to the institutionalisation and sustainability of a viable petroleum downstream sector in Nigeria, pledging that it would continue to lend its support towards easing the burden of Nigerians at this difficult time.
The marketers also empathised with all users of petroleum products including airline operators, private vehicle owners, logistics and transport companies, manufacturers, cooking gas users in homes and all members of the public who were affected by the worldwide petroleum products price increases, which impact logistics, transportation, distribution, and operation costs.
It observed that the petroleum products downstream industry, which was engaged in logistics and distribution, was also suffering the impact of these higher costs brought about by the post-Covid world economy and the war between Russia and Ukraine.
According to the body, “the escalating fuel price cycle we find ourselves in, is unfortunate, MOMAN wishes to clarify to Nigerians that the situation in Nigeria is not country-specific, but a global issue.
“Aviation fuel (Jet A1), like other petroleum products used in Nigeria is not produced in-country and is subject to international price movements which are currently suffering the twin shock of increased post pandemic demand and the ongoing sanctions against Russia, a large producer of petroleum products.
“These shocks have seen international trading premiums, costs of vessel freight, and other transport costs skyrocket to worrying levels. Separately, international traders are exploiting the situation by selling only to the highest bidders.”
Meanwhile, at a meeting attended by the airline operators, the Group Managing Director of the Nigerian National Petroleum Company, (NNPC) Mele Kyari, the Governor of Central Bank of Nigeria (CBN), Godwin Emefiele and other stakeholders, the operators agreed to cancel the planned suspension of their services.
At the meeting chaired by the Speaker of the House, Hon. Femi Gbajabiamila, it was agreed that six million litres of jet fuel would be made available through the intervention of the CBN governor, at the rate of N480 to the operators.
As a long term measure they also resolved that the operators would begin the process of application for their licence to import jet fuel directly for their operations.
Reading the resolutions Gbajabiamila said: “That we move the language of suspension to canceled. That the issues of shut down has been canceled based on this meeting. “The NNPC and the airline operators both agreed that in the interim of three months, the marketers of choice that you are comfortable with and you know their markup will not drive you out of business would be supplied with jet fuel.
“The third resolution is that in the mid-to-long term, in fact right now, you will begin the process of application for your own license for you to be able to import your own jet fuel, to assist you in your business. Also to the benevolence of the CBN governor that six million litres are available now at N480.
“You will get allocation for the next three months through the companies you have nominated. In the process of application for license, midstream should as much as possible grant waivers that would not touch on the security and safety of the process. Committee chairmen on aviation and downstream should follow up.”
Speaking for the airline operators, the Vice President of AON, Mr. Allen Onyema, alleged that their woes in the industry was compounded when the Nigeria National Petroleum Company (NNPC) Limited refused to make available 25,000 metric ton of aviation fuel approved by President Muhammadu Buhari to be sold to them at landing rates to ameliorate the losses they suffered over the months.
Onyema who’s the Chairman of Air Peace, told the gathering how his association was invited by the Nigeria Midstream and Downstream Regulatory Authority (NMDRA) to notify them of the President’s gesture, and the need for them to nominate trusted and established marketers to take delivery of the 25,000 MT and sell to them at the landing rate.
He said having nominated 10 established marketers to take the product, he, in the presence of his members, called the NNPC GMD informing him of the President’s gesture and that their selected marketers would be in touch regarding the product, adding that Kyari refused.
“We were told that a week later that is when the consignment would be arriving Nigeria and when this happened, the next we got to hear from the marketers was that they had already been given the consignment that we were all jostling for.
“So we waited thinking that they would sell as agreed. They never. I actually called the MD of NNPC, in the presence of our members. We wanted to hear from him. “He answered that there was no way they would leave us to get direct products that it was dangerous.
“But I said no, that the marketers you are going to give are the same marketers that would handle it for us. He said he did not want any crash or anybody adulterating it. I said how could they adulterate it because they are the same marketers.
“We are not taking it on our own. Long and short of the story is that this product was not given to us and we noticed that it continued rising and rising,” he said.
The President of the Association, Abdulmanaf Yunusa who’s also the Chairman of Azman Air, corroborated the allegation levelled against the NNPC GMD.
In his response, Kyari said they considered safety issues involved in releasing aviation fuel directly to operators, or even marketers, saying that not everyone can handle ADK which necessitated his refusal.
“It is more complex than they say. Somebody must handle aviation fuel. We cannot surrender the safety of Nigerians to just anyone. It is not every marketing company that can handle ATK including the chairman’s company.
“We cannot give him. He has a marketing company. We cannot give ATK to handle. That is why they have to bring the people that we can deal with,” the GMD said
When asked by Gbajabiamila if they nominated those that can handle it, he said “why not, we have no problem with that.”
Asked to comment on the possibility of granting forex at a special rate for the airlines, Emefiele told that gathering there was nothing the apex bank could do since it depends on forex generated by the NNPC through crude oil sales which has been quite low due to oil thefts in the Niger Delta.
“The availability of forex is very important and the issue of constraint from forex arising from issues bordering on theft in the Niger Delta is a big issue. It is when NNPC is able to export that dollars can come in.
“We do not have forex to sell. It would be difficult for us to grant any concession. It means we would be taking a hit or we would be providing some sort of subsidy for the industry”, Emefiele said.
culled From THISDAY