OrderPaperToday- Airline Operators of Nigeria (AON) have come to an amicable agreement of N500 per litre of aviation fuel (Jet-A1) pegging the price of unit cost per passenger at N85,000 over the next three days.
The price is, however, pending the final resolution on the actual price of aviation fuel per litre. This is as the Nigeria National Petroleum Company (NNPC) also agreed to grant licenses to the Airline Operators for the importation of aviation fuel in order to forestall crises like this in the future.
These resolutions were reached on Monday, at the resumed hearing of the House of Representatives Adhoc Committee on Aviation, Petroleum Resources (Upstream and Downstream) with stakeholders over the rising cost of aviation fuel and airfares in the country.
The meeting which was well attended by all parties involved was chaired by the Deputy Speaker, Idris Ahmed Wase.
A mild drama had ensued as the aviation fuel marketers could not give clear responses to questions posed to them by the House Committee members during the hearing. The back and forth led in to an emergency meeting between the oil marketers, Airline Operators, the NNPC Chief Executive Officer, Mele Kyari, and others.
Briefing the committee on the outcome of their meeting, the CEO said: “We know this is a very difficult situation. We know that once aviation fuel increases, prices of flight tickets will certainly increase and this can surely cost pain for Nigerians.
That is why we are working with you to ensure that those pains are minimised to the barest minimum and one of the elements is the pricing of aviation fuel.
So, what we have engaged with MOMAN (Major Oil Marketers Association of Nigeria), DAPMAN (Depot and Petroleum Marketers Association of Nigeria) and the Airline Operators is that in three days’ time, their representatives will sit down and agree on a transparent base for pricing.”
According to Kyari, “That means that they ought to have a referenced benchmark that is quoted transparently in the market. They will have a referenced exchange rate for the Naira so that anyone can compete.
They will also agree on a premium which currently differs from Customer to Customer, depending on the volume you buy and the credit level.
These are the things they can negotiate in three days and close so that going forward, there is a transparent decision on pricing. This will no doubt throw up the actual value of the product in the market.”
Communicating the decision to introduce a discount on prices over the next three days, the NNPC CEO added:
“You will no longer see these discrepancies we have seen where some people are selling at N445 and some are selling at N630. This will completely bring close such that you will not see these differences.
We also agreed that in the interim, between now and the three days that have to close negotiations, (the lowest price we have seen as at this morning was N445 and a high of N605. There is a trader that is selling at N630 and we don’t think this is normal and so, we discounted it).
We agreed that they will sell at N500 in the next three days and after that, they wil switch to the new price that everyone can assess.
Lastly, as requested by the Airline Operators Association of Nigeria, they will be granted license by the authority to import petroleum products, particularly ATK so that they can have a way of benchmarking the sales of other customers and can also bring in cheaper products whenever it is possible.”
Speaking earlier, Kyari said that at the moment, there were 19 oil companies with 88 million litres of aviation fuel in the country.
Earlier in his submission also, the representative of Airline Operators, Allen Onyema said they had only three days to shut down operations over lack of aviation fuel, stressing that they cannot afford the product anymore.
This came as the aviation oil marketers failed to convince the House of Representatives on why price of the product was hitting the rooftops on daily basis.
At the moment, the airlines were buying aviation fuel at a cost as high as N670 per litre from the normal price of N190 recently.
“Mr. Deputy Speaker, sir, nobody on this side of the divide has answered your question. You have been asking them one particular question. Everybody is dancing around it.
What the deputy speaker wanted to hear is how much did they buy this fuel per litre By now, you must have computed it. They are dancing around it and telling you stories. That is what you have been asking, sir. Before they came here, they were supposed to have computed their unit cost.
I have the mandate of every airline in this country to announce to you that if they can’t come down from their rooftops, we have only three more days to be able to fly. We are not threatening this country. We have been subsiding what we have been doing.
The rate as at today is N630, N640 and N605. We have an aircraft going to Kano, it has about 7,000 litres of fuel in it, multiply it, sir by N630. The unit cost per seat is about N70,000 per seat.” he said.
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Speaking on the issue of insurance, Onyema who doubles as Chief Executive Officer of Air Peace added:
“You have not talked about insurance that is very static. Nigerians pay heavy insurance premiums because this country is stigmatised.
You have to insure abroad. It is a must before all the insurance companies in Nigeria put together cannot even pay for one aircraft. So, you have to go abroad to insure.
Yet the fuel cost which is supposed to be about 30 to 40 percent in every clime, in Nigeria it about 70 percent even before time. So, you can now see the mortality rate of airlines in this country.
They refused to answer your simple question. Whether you got money from CBN or red market, how much is the unit cost of your acquisition so that we know if the airlines are cheating you or you are cheating the airlines; if you have formed a cartel to increase your prices overnight.
From what is happening, sir, if it continues this way, the least ticket will be about N120,000 for economy and we don’t want to do that. We want to inform the house that we are demanding that we should be given license to import this fuel.
If we can buy jets that cost hundreds of billions of dollars, we can afford to import this fuel. Let NNPC give us the right to import this fuel, we will not complain, sir.”
He expressed gratitude to the House of Representatives and the NNPC for standing by the operators.
“The Nigerian Legislature has been very wonderful. Without you, the Airlines in Nigeria would have crumbled. I am not saying this to please you. You fought for the Customs waivers on imported aircraft, Aircraft spares, and for the airlines to have sustainable operations. So, we owe you huge gratitude, together with the President of this country who signed it into law.
For the GMD, he was very transparent and was not on any side except on the side of truth. he told me it was possible to bring down the price to N200, but he brought it to where it is.
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The DG NCAA (Director General of the Nigerian Civil Aviation Authority) has always breth down our neck to ensure that we fly safe.
We thank the GMD for wading into this. Even though at N500, our unit cost per seat will now be about N85,000 barring insurance and other things. That is our pain. I wish we could buy this fuel at N200 so that Nigerians can afford to buy it.
That is our predicament and so, the public should understand if there is a shift in what they are paying and what they are going to pay later. Anybody can calculate it just as it has been done here, to buy 8,000 liters of fuels at N500 per liter. How much will that give you for just one hour flight,” he said.
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Earlier, the Deputy Speaker who doubles as Chairman of the Committee had picked holes in the presentation of the Chief Executive of Nigerian Midstream and Downstream Regulatory Authority (NDMPRA).
Ahmed Farouk who was represented by an Executive Director, Ogbogu Ukoha said the prices had been discounted.
Wase had asked the regulatory body the current price of the product and why it was so exorbitant but was referred to the marketers who however sidestepped the questions and could not give specific answers.