By Ismail Auwal
Oil marketers in Nigeria alleged that airline operators are attempting to put pressure on the government to control the price of Aviation Turbine Kerosene (ATK), also known as aviation fuel, through fiat.
Fiat is a formal authoritative order with absolute sanctions.
Tunde Oyebanji, immediate past chairman of the Major Oil Marketers Association of Nigeria (MOMAN), said on Sunday that if the government caves to pressure to control aviation fuel prices by fiat and the Nigerian National Petroleum Company (NNPC) Limited begins importing and selling to airline operators at below-market prices, it will result in another subsidy.
Oyebanji added that airline operators should instead focus their efforts on ensuring that airline passengers pay the correct ticket price.
“Airline Operators are trying to pressurise the government to control prices by fiat. In the alternative, let people pay the appropriate price for airline tickets. Aviation is not a social welfare business. Why are international airlines that we also sell to, not threatening to stop flights,” ThisDay quoted Oyebanji as saying.
According to him, it was surprising that airline operators had not been able to proceed with plans to import aviation fuel even after the opportunity was given to them.
The marketer claimed that the price of ATK was determined by the international price of the product and the exchange rate, but that the cost of importing the product was high.
According to MOMAN chairman Olumide Adeosun, the Russia-Ukraine war, foreign exchange scarcity, inflation, as well as logistics and administration costs, are the primary factors driving the rising price of aviation fuel in international and domestic markets.
Adeosun said traders of the product in the international market were putting a premium on-demand and supply and were selling their products to the highest bidder, making it difficult for local marketers to import the product and sell at a cheaper rate.
“Russia controls over 30 per cent production. What we are seeing is that traders are putting premium attention on the price of aviation fuel because all of us are scrambling for exactly the same barrel,” Adeosun said.
“So, the traders are paying premium attention on demand and supply and they are selling to the highest bidders only. We should try and look at the financial factors and the predominant driver, look at all of the issues around storage cost, administration cost, and, of course, you have to think about where you are going to buy your next round of products from.”
He added that international airlines entered into long-term contracts, which allowed them to secure supply of products for a long time and pre-empt the price of ATK on a month-on-month basis.
According to Adeosun, airline operators in Nigeria bought products on demand.
“You cannot do that when your business is dependent on the availability of fuel. Aviation fuel is not like petrol for taxi. You are not driving Uber. So, this is a very serious business that requires strategic planning,” he said.
The Airline Operators of Nigeria (AON) on Sunday suspended its plans to shut down flight operations over a hike in the price of aviation fuel.
