ANALYSIS: Reviewing the brokered deal between airline operators and fuel marketers

Last week, the House of Representatives and the Nigerian National Petroleum Company Limited (NNPC Ltd) facilitated a deal between petroleum products marketers and airline operators to keep the price of Aviation Turbine Kerosene (ATK) at N500 per litre.
The ATK is popularly known as aviation fuel. The agreement was reached on Monday, the second day of the investigative hearing of the House of Representatives Ad hoc Committee on High Cost of Aviation Fuel which was held at the National Assembly Complex, Abuja.
Presenting the agreement’s highlights, NNPC’s CEO Mele Kyari stated that both parties were represented. The Major Oil Marketers Association of Nigeria (MOMAN) and the Depots and Petroleum Products Marketers Association (DAPPMA) represented the petroleum product marketers.
On the other end, the aviation industry stakeholders were represented by the Airline Operators of Nigeria (AON) and the Nigerian Civil Aviation Authority (NCAA). Both groups agreed to have the pump price of aviation fuel pegged at N500 per litre for the next three days.
“In the next three days, representatives of MOMAN, DAPMAN and Airline Operators of Nigeria would sit down and adopt transparent bases of pricing,” stated Mr Kyari. “That as requested by the Association of Airline Operators of Nigeria, they will be granted a licence by their authority to also import ATK so as to have a way of benchmarking prices.
“They will also have a reference exchange rate for the naira.”
The stakeholders also resolved to engage and agree on a premium that would be different from client-to-client depending on the volumes they want to buy and the credit limit that each marketer can permit. This is expected to help establish a transparent basis for pricing, eliminate price discrepancies, and throw up the product’s real market value.
Earlier, the executive director of Systems, Storage and Retailing Infrastructure of the Nigerian Midstream and Downstream Regulatory Authority (NMDPRA), Ogbogu Ukoha, highlighted some factors that sent the price of ATK over the roof.
“One of the major factors influencing the high cost of ATK remains the issue of availability of forex, that is, the source from which marketers acquire their dollars either from the Central Bank of Nigeria (CBN) or the parallel market,” explained Mr Ukoha. “When that is added to the fact that ATK is deregulated, it becomes a commercial dilemma whereby marketers can’t sell below certain price due to forex barriers and challenges of landing cost.”
He further mentioned that “airline operators insist that they can’t buy products above a particular amount if airfares will remain affordable.”
Speaking in a similar vein, the DAPPMA secretary Olufemi Adebayo explained that the scarcity of forex was a major issue in the rising price of ATK.
“If we can buy dollars at N410 or N420, the price will be different. Unfortunately, we cannot. What you buy from the street is different from what you get from the banks, and for dollar, the more you want it, the cheaper it’s not,” he noted.
On his part, MOMAN chairman Olumide Adeosun stated that part of the challenge with ATK pricing was that it is the most difficult to handle of all the middle distillates because it requires extra licensing to produce.
“There are refineries in Nigeria today that produce ATK but can’t sell the product because it has to be licensed. Some of the modular refineries that produce diesel in the country can produce ATK, but these refineries are not certified for such production,” he said.
Mr Adeosun also disclosed that the look-back method of determining the price of ATK in the aviation sector lends itself to abuse by airlines that often want to take advantage of price variations in the market.
“Aviation fuel price index is determined by the previous month’s average. Habitually, product buyers want to take advantage of price variations in the market, which sometimes trigger loss,” Mr Adeosun pointed out. “You can buy products today when it is expensive and sell at a loss tomorrow, considering how the price index is determined on a look back.”
Speaking on behalf of the AON, Allen Onyema, Air Peace chairman, thanked the NNPC boss and the leadership of the House of Representatives for their forthright approach to the ATK price hike issue and pledged the group’s commitment to the welfare of Nigerians.
In his closing remarks, Deputy Speaker Idris Wase commended Mr Kyari and other stakeholders for reaching an amicable agreement. He said the house would continue to provide the needed support to ensure the welfare and security of Nigerians.
(NAN)
We have recently deactivated our website's comment provider in favour of other channels of distribution and commentary. We encourage you to join the conversation on our stories via our Facebook, Twitter and other social media pages.
More from Peoples Gazette

Agriculture
FG tasks ECOWAS on leveraging financing strategies for agroecology
The federal government has urged stakeholders in the agriculture and finance sectors in the West Africa region to leverage financing strategies to enhance agroecology practices

Politics
Katsina youths pledge to deliver over 2 million votes to Atiku
“Katsina State is Atiku’s political base because it is his second home.”

NationWide
Ogun speaker commends Dangote for economic interventions
He said the business mogul has commenced the export of products from the petroleum refinery to other parts of the world.

Lagos
Lagos: Policeman arraigned, remanded in Kirikiri for defiling 17-year-old inside station
The teenage girl was said to have gone to the station on June 29, 2024, to report about her stolen phone.

NationWide
14 million Nigerians abuse drugs: NDLEA
She described the younger people as the most vulnerable victims of drug abuse.

Heading 4
17th Headies Awards Nominees (Full List): Odumodu Blvck, Ayra Starr, Shallipopi, Mohbad top list
The 17th edition will hold in April.

Lagos
Lagos govt. to demolish shanties, illegal structures in Itu-Mara
He said that the removal of illegal structures was a step toward planned and sustainable growth.

NationWide
Reps seek Taiwan’s partnership on science, technology development
He said that Nigeria could not afford to lag behind in this era of rapid innovation.