Dollar Availability Responsible for Aviation Fuel Hike

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Airplane landing in the evening with beautiful sunset background

CEM REPORT | Availability of forex has been identified as one of the reasons for hike in price of Aviation Turbine Kerosene (ATK), popularly called aviation fuel which gave rise to the general increase in air fare across the country.

According to News Agency of Nigeria, the Executive Director Systems, Storage and Retailing Infrastructure of the Nigerian Midstream and Downstream Regulatory Authority (NMDPRA), Mr Ogbogu Ukoha, highlighted this at the deliberation forum among stakeholders in finding solution to the challenge to ATK and airfare hikes.

“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.

“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.

“However, airline operators insist that they can’t buy products above a particular amount if air fares will remain affordable,” Ukoha said.

Speaking in similar vein, the Secretary of DAPPMA, Mr Olufemi Adebayo, explained that the scarcity of forex was a major issue in rising price 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.”

On his part, the Chairman of MOMAN, Mr Olumide Adeosun, stated that part of the challenge with the pricing of ATK was the fact that it is the most difficult to handle of all the middle distillates because it required extra licensing to produce.

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“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.

The House of Representatives and the Nigerian National Petroleum Company Limited (NNPC Ltd) had last week facilitated a deal between petroleum products marketers and airline operators to keep the price of Aviation Turbine Kerosene (ATK), at N500 per litre.

The agreement was reached on Monday at the second day of the investigative hearing of the House of Representatives Adhoc Committee on High Cost of Aviation Fuel which held at the National Assembly Complex, Abuja.

Presenting the highlights of the agreement, the Group Managing Director/Chief Executive Officer GMD/CEO of NNPC, Malam Mele Kyari, stated that both parties were represented.

The petroleum product marketers were represented by the Major Oil Marketers Association of Nigeria (MOMAN) and the Depots and Petroleum Products Marketers Association (DAPPMA).

At the other end, the aviation industry stakeholders were represented by the Airline Operators of Nigeria (AON) and the Nigerian Civil Aviation Authority (NCAA) as 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.

“That as requested by the Association of Airline Operators of Nigeria, they will be granted license 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,” Kyari said.

Stakeholders also resolved to engage and agree on a premium which would also 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 would throw up the real market value of the product.

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