Nigerian airlines are ecstatic to hear that Dangote Refinery will begin supplying them with aviation gasoline in the coming days, after months of unrest and verging on bankruptcy due to the excessive cost of the fuel.
It was discovered that the airlines plan to benefit financially from the anticipated decline in aviation fuel prices brought about by the development.
Aviation fuel currently costs between N1,450 and N1,500 per liter in Lagos, more in Abuja and Port Harcourt, and about N2000 in Kano and Maiduguri.
According to research, aviation fuel accounts for almost 60% of domestic airlines’ operating costs, rendering aircraft operations unprofitable.
There has been a discernible decline in passenger traffic at the airports as a result of Nigerian airlines’ inability to pass on the high cost of the product to customers, who are already grumbling that ticket prices have gone too high.
Operators of airlines warned that if they dared to raise fares any higher, traffic would plummet and the airlines would cease operations.
The Nigerian Civil Aviation Authority (NCAA) reported that more people flew domestically in 2022 than in 2023, and if the cost of aviation fuel does not decrease, passenger movement this year will be less than last year.
Cleanserve Energy CEO Chris Ndulue expects Dangote Refinery to start producing aviation fuel soon, with the expectation of a significant reduction in product prices. He believes that the cost of logistics for importing the product will no longer be there as it is being produced locally, and Dangote will sell the product in Naira, reducing pressure on the naira and eliminating the struggle marketers go through sourcing for dollars to import the product.
Dangote’s distribution system will still follow the current system where the product is moved to Apapa from the refinery and distributed from tank farms there. Some marketers have made financial commitments for the supply of the product, indicating that selling aviation fuel through Nigeria’s latest refinery has become imminent.
Ndulue believes that when the refinery fully comes on stream, the naira will appreciate further due to the high price of aviation fuel, which could account for about 30% of Nigeria’s total import. The high price of aviation fuel also contributes to high airfares, forcing many to seek alternative means of transport.
United Nigeria Airlines Chairman Professor Obiora Okonkwo said the association would meet with Dangote to agree on the supply of the product to airlines without passing through oil marketers, ensuring that Nigerian airlines reap the full benefit of the cost of the product.
Nigeria’s oil and gas industry is facing a significant forex challenge due to the high cost of aviation fuel. The National Bureau of Statistics (NBS) reported that Nigeria spent N292.56 billion on the importation of Jet A1 in the first three months of 2022, accounting for 4.96 per cent of Nigeria’s total import of N5.9 trillion. This fuel was the second most imported commodity in the country in the first quarter.
In the first quarter of 2022, aviation fuel imports represented a 287.29% increase compared to the N75.54 billion spent on its import in the fourth quarter of 2021. In the fourth quarter, jet fuel import was the sixth most imported commodity, accounting for 1.27 per cent of the period’s total import figure of N5.94 trillion.
The value of total imports in the first quarter of 2022 stood at N5.90 trillion, which decreased by 0.67 per cent compared to the fourth quarter of 2021 but increased by 21.04 per cent compared to the corresponding quarter of 2021, which was N4.875 trillion. China, The Netherlands, Belgium, India, and the United States were the top five countries of origin of imports to Nigeria in the first quarter of 2022, with the values of imports from these countries amounting to N3.44 trillion, representing 58.34% of the total value of imports.