Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, Mele Kyari, has said the price of petrol in the country should be N256 per litre and not the current selling price of N162 per litre.
This was made known by Mr. Kyari while speaking at a stakeholders meeting organised by the NNPC to stop fuel smuggling.
Commenting on the current PMS and subsidy payment, Mr Kyari noted that the petrol pump price should be N256 per litre given the current exchange rate.
“If we are to sell at the market today at the current exchange rate, we will be selling the product at about N256 to a litre. What we sell today is N162, so the difference is at a cost to the nation,’’ he said.
According to him, the country cannot sustain subsidy payment with the high volume of daily consumption, pointing out that the country coughs up N150 billion every month on subsidy.
The NNPC boss further explained, “As long as we don’t regulate volume until we are able to exit this current level, which I know so much work is going on, then we have to manage the volume that we are exposed to between this price of N162 and N256. The difference comes back to as much as N140 billion to N150 billion cost to the country monthly.
“As long as the volume goes up, that money continues to increase, and we have two sets of stress to face: the stress of supply and stress of foreign exchange for the NNPC. We may not see foreign exchange cheque taking place for importation.’’
Meanwhile, despite an upswing in the global price of crude oil and attendant blessings for oil-producing countries, the price of aviation fuel has spiked nationwide and much to the pains of airlines and travelers in Nigeria.
A fact-check showed that aviation fuel, also called Jet A-1, has lately sold for between N215 at airports in the South and N300/per litre in low traffic aerodromes in the Northern region of the country.
The price had risen in April 2021 to between N250 and N275 per litre, which was about a 200 per cent increase from 2016, when it was sold at N110. It rose to N200 in 2018, hovering around N160 and N170 in 2019.
An average 50 per cent surge in fuel cost, a critical component of airlines’ operation, has also forced airlines to increase airfares with an average Economy Class ticket on less than an hour flight selling for over N65,000.
There are fears of fuel contamination in some quarters, which experts say, could threaten flight safety. Engr. Femi Adeniji of Tropical Arctic Logistics, a helicopter operator, said any jet fuel cheaper than N270 could have been contaminated.
Chairman and CEO of United Nigeria Airlines, Dr. Obiora Okonkwo, decried the development, which he said, has added to the cost of operation.
Okonkwo, whose airline debuted about four months ago, said: “We started operations at N160 per litre barely four months ago and when you move from that price to over N270 within two months, you should expect whatever we are experiencing now. Aviation fuel alone takes between 30 to 40 per cent of airlines’ costs. This is cause for grave concern to everyone.”
It was learnt that the extra burden on end-user airlines and travelers alike is not unconnected with the naira-to-dollar exchange rate, logistics hiccups of importing the product through chaotic Apapa ports, and more expensive distribution to nationwide airports by road.
Aside from the multiple taxes and charges on the product, the monopoly of marketers at less viable airports has also raised the price by some notches – making the product one of the most expensive in the West African region.
Indeed, aviation fuel is the oxygen of the airline business. Though an oil-producing nation and the sixth largest producer in the world, Nigeria’s perennial inability to refine the product locally has made jet fuel susceptible to dictates of the exchange rate, and therefore expensive, accounting for between 30 to 40 per cent of airlines’ operating cost.
Of dire consequence is the recent appreciation of crude oil price to $73.5 per barrel in the world market, and Naira’s free-fall to N500/$1 at home. At these rates, the landing cost of all imported products, including aviation fuel, could only reach for the rooftop.
But the dynamics of aviation fuel is more complicated. As a deregulated arm of the dollar-dependent aviation industry, jet fuel price is directly proportional to the price of crude oil. However, during the plunge of crude oil price late last year, aviation fuel prices did not fall accordingly.
Chief Operating Officer of CITA Petroleum, a major marketer in local aviation, Olasimbo Betiku, said Nigeria is a “situational economy” where pricing is heavily hinged on logistics cost elements.
Betiku said besides the dollar and liquidity constraints, transporting the product through poor infrastructure readily keeps the price comparatively high.
He explained that the product, like others, comes into the country through the Lagos ports, while intractable congestion at Apapa causes a delay in cargo clearance of between four and seven days or more.
Stakeholders were unanimous that for each idle day, an importer pays between $10,000 to $25,000 extra charter cost per vessel. At more efficient ports, like Cotonou in Benin Republic where clearance takes between three to four hours, such add-on costs do not apply.
The risk of conveying the product in trucks remains a challenge in the sector. Since the early 90s, moving aviation fuel from the Mosimi pipeline to Lagos airport has been abandoned for more expensive road transport. While the cost of transportation within Lagos is about N3 per litre, it is about N15 per litre travelling up North as far as Maiduguri.