Like Diesel, Aviation Fuel to Crash Below N1,500 After Dangote Begins Sale in Naira

• There are expectations that the aviation fuel will be sold at a price lower than it imported cost when Dangote Refinery begins to sell
• Stakeholders said the product would be sold less compared to the N1,500 per litre it is sold in Lagos, and about N2000 in Kano and Maiduguri
• They also plan to meet with Dangote and reach a deal with the company regarding the product's supply to the airlines without going through oil marketers

Nigerian airlines are thrilled to learn that Dangote Refinery will start supplying them with aviation fuel in the next few days after months of turmoil and almost going bankrupt over the cost of the fuel.

This is as the airlines anticipate a boost in their bottom line due to the anticipated decrease in aviation fuel prices brought about by this development.

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ThisDay reported that aviation fuel currently costs between N1,450 and N1,500 per litre in Lagos, more in Abuja and Port Harcourt, and about N2000 in Kano and Maiduguri.

According to research, aviation fuel accounts for almost 60% of domestic airlines' operating costs, rendering aircraft operations unprofitable.

As a result, there has been a discernible decline in passenger traffic at the airports owing to Nigerian airlines' inability to pass on the high cost of the product to customers, who are already grumbling that ticket prices have gone too high.

What stakeholders are saying

Chris Ndulue, the CEO of Cleanserve Energy, an oil marketing company and the former managing director of Arik Air, told THISDAY that although Dangote Refinery has not yet begun producing aviation fuel, everyone anticipates a significant price drop when it does.

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He expressed the hope that Dangote would not sell the product at the international pricing and stated that the logistical cost of importing the commodity would no longer exist because it is being produced locally.

Additionally, he pointed out that Dangote would sell the product in naira rather than dollars, relieving pressure on the naira and removing the difficulty merchants face when looking for dollars to import goods.

He projected that Dangote's product distribution would continue to operate under the existing framework, which involves transporting the product from the refinery to Apapa and dispersing it via the tank farms.

He said:

“Dangote has not started producing aviation fuel; however, everybody is expecting that soon it will start. The cost is expected to be cheaper as he is producing locally. First, there will be a significant reduction in logistics costs, which will reduce the price, and Dangote will not sell in dollars but in naira.

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This means that oil marketers will no longer source dollars for product importation. Dangote supply will ease the pressure on the naira; it will also reduce our imports and provide a fillip for the naira's recovery. When the naira is strengthened, and there is an end to importation.”

Speaking on behalf of the Airline Operators of Nigeria (AON), Professor Obiora Okonkwo, the Chairman of United Nigeria Airlines, stated that the association would meet with Dangote and reach a deal with the company regarding the product's supply to the airlines without going through oil marketers.

He further stated that Nigerian airlines would bear the full cost of the product through this process.

Additionally, he thinks a locally-made product should cost less than one imported.

Okonkwo said:

“We need to approach the company. There should be cost reduction. Import costs more, but we cannot say until we see his price. I believe AON should make a deal with Dangote without passing through vendors, and I heard that vendors have deposited money for the product already.”

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Samuel Oyekanmi, a macroeconomic analyst said that there is still a lot to be done in terms of oil extraction and refining before Nigeria will see impressive growth in the oil sector.

He added,

"The full implementation of Dangote Refinery is a potential growth propeller, however it will take time before we start seeing the full impact on the economy."

Nigerian airlines risk shutting down

Legit.ng reported that there are signs that the rising cost of aviation fuel, or Jet A1, may force certain domestic airlines to suspend operations.

The cost of aviation fuel has steadily risen for the past two years, forcing airlines to improve their operations by increasing ticket prices.

Due to the product's fluctuating price, local carriers struggled with a 109% price increase in less than eight months, notably between July 2023 and February 2024.

Source: Legit.ng