The Nigeria National Petroleum Corporation (NNPC) Limited, Central Bank of Nigeria (CBN) and airline operators have agreed to provide six million litres of aviation fuel at N480 a litre for three months.
It was part of the agreements reached at the end of the meeting summoned by the house of representatives on Monday to avert airline operators’ planned shutdown.
The Airline Operators of Nigeria (AON) on Friday announced plans to shut down operations from Monday over the high cost of aviation fuel.
The group complained that aviation fuel, also known as Jet A1, has reached an all-time high of N700 per litre.
Femi Gbajabiamila, speaker of the house, announced the resolutions after about four hours of the meeting.
Gbajabiamila said the Central Bank of Nigeria (CBN) has agreed to provide the aviation fuel at N480 — in what seems like a forex subsidy — pending when the carriers would be granted license to import the commodity.
“In the long term, you commence the process of applying for your own licence to be able to import your own jet fuel. So that it will remove, whether it is middlemen or frontmen or whatever. You will know the landing cost to assist you in your business,” he said.
“There is the benevolence of the CBN governor that six million litres available now at N480. You will get an allocation in the next three months through the companies (marketers) that you have nominated so that you would not come back and say jet fuel is now a certain amount and it is the fault of the NNPC. You have nominated those people that are selling to you.”
As a long-term solution, the speaker said the airline operators must commence the process of securing a license for the importation of aviation fuel to avoid suspicion over the landing cost of the product and other associated logistic issues.
While appreciating all the stakeholders for the efforts put in at resolving the issue at stake, he thanked the airline operators for being nationalistic in calling off the strike.
“I hope that the outcome of this meeting will usher in a lasting solution to these challenges of Jet A1 bearing in mind that there is a laissez-faire economy of demand and supply,” he added.
Speaking at the meeting, Allen Onyema, vice-president of AON, said the scarcity can be addressed if airliners are allowed to purchase aviation fuel directly.
“We were told here at that last meeting that fuel would be sold to us at N500 which we protested that it was still on the high side because even when fuel was selling at N200 or N250, the operating cost was about 40 per cent,” he said.
“It rose to N400 and N450, and that was when we were alarmed, and you noticed that everybody tweaked his inventory when we now raised our base fare to about N50,000, which did not address the matter.
“We were invited to the house, and when we came here, it was reached that they would give us fuel at N500 within three days. That never happened. We continued writing, and nothing happened.
“Much later, we were invited by the midstream and downstream authority and we were told that the president approved 25,000 metric tonnes for us as a palliative to help us. We were very grateful to the president. We were happy. We were told to nominate marketers that would market this product for us.
“We were told to have a meeting with these marketers. We called all the marketers and held a meeting with them. We decided the logistics, so they would take their logistical costs and everything, and at the end of the day that fuel was getting to them, they told us at N335, so we put everything together, and it would be getting to less than N400 for the cost, and we said even if they sell to us at N450 it would be okay.
“We were told that a week later that is when the consignment would be arriving in 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.”
Onyema said the matter was reported to Mele Kyari, group managing director of the Nigerian National Petroleum Company (NNPC) Limited, but no action was taken.
“I called the MD of NNPC in the presence of our members. He replied, saying there was no way there would leave us to get direct products that was dangerous,” he said.
“With due respect, Mr Speaker, we were not striking. We did not intend to go on a strike. It was not a strike. What AON was saying on Friday when we released our communique was that we do not have the money anymore to pay.”
Speaking at the meeting, Kyari said aviation fuel cannot have a fixed price because it is a deregulated product.
“So you cannot hold unto any price and indeed what you have seen in the media is N700 reference point. It cannot be a reference point. It depends on the market condition. It can be higher than N700 depending on the market. This market shifts. As we speak, it is closely related to the price of crude oil,” he said.
“It is our role to ensure we intervene. We did. We brought in products so that we can dampen the price. In March and April, we brought in cargo and made it available to the entire industry at N460. There is a build-up to that price. When the customer takes marine at N435, he has to transport, he has to the charter vessel, bring it to his depot, to his fuel station and transport it. So there cannot be two same price in Lagos and Maiduguri.
We cannot fix the price. We cannot ask for N500. We cannot say it must be below N600 or N700.
On his part, Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), said the apex bank has no control over the flow of the dollar.
“We do not have FX 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,” he said.