9 February 2018

Nigeria: Perennial Shortage of Aviation Fuel

There are key factors that determine the growth and success of an airport: facilities, including navigational aids, traffic, aircraft maintenance, facilitation, fuel supply and price of fuel.

When it is difficult to obtain fuel at good price, airlines search for alternative airports close by and that is the situation at the Murtala Muhammed International Airport (MMIA), Lagos, the busiest airport in Nigeria and the second busiest in Africa.

At a recent briefing in Lagos, CITA, a major aviation fuel supply in Nigeria, noted that there are two major hindrances to aviation fuel supply to the airports in the country. One is the process of supply and the second is the price of the product.

The company noted that the Lagos airport is the second busiest airport in Africa after OR Tambo International Airport, Johannesburg, but Lagos would soon lose this slot to Cape Town Airport also in South Africa because the Lagos airport does not have adequate supply of aviation fuel and it comes at a higher price compared to the price of the product in neighbouring airports in Accra, Lome and Cotonou.

So what cargo and passenger airlines do is that when they fly to Nigeria and drop passengers and cargo, they then fly to these neigbouring countries to tank fuel and from their move to their next destination. This is one of the reasons Ethiopia Airlines established its operational hub in West Africa in Lome; the same with Rwand Air, which is also building its hub for the sub-region in the small city, all targeting Nigerian passengers.

According to experts, considering the volume of fuel consumed by aircraft, the price of the product is critical to an airline and also considering the fact that it amounts to about 30 percent of the cost of operation for an airline, good price of the product is irresistible. So airlines are inclined to gravitating to wherever the price of aviation fuel is cheaper and that also determines the success or failure of an airport.

CITA said Nigeria presently supplies 500 million litres of aviation fuel per annum but the country has the capacity to supply one billion litres of the product annually if the channel of supply and distribution are smoothened, but the country has failed to refine the product locally.

Speaking during the launch of its partnership with Puma Energy in Lagos, the ‎Managing Director of CITA, Thomas Ogungbangbe said that as the country's passenger traffic is projected to grow by almost 20 percent in 2023, the country would require two billion litres of aviation fuel to meet this demand.

"Jet fuel sector of the economy has grappled with challenges - not devoid of the challenges experienced by the larger economy, a situation that in recent times, led to airlines having to stop-over in other countries for jet fuel supply.

"As soon as the downward slide of crude oil in the world market became a continuum, some market indices became confused, foreign exchange became scarce and expensive, so, jet fuel price was going down in the international market but the local market was steadily going up. Because of this hedging became difficult as futures supply price became lower than present selling price,' he said

He recalled that on November 6, 2014, the Central Bank of Nigeria (CBN) threw Jet fuel out of the RDAS (Retail Dutch Auction System),- exclusion of an essential product that is not produced in Nigeria and urged the federal government to remove all the restrictions that hamper aviation fuel supply in the country.

Speaking in similar vein, the former Executive Secretary of Petroleum Products Pricing Regulatory Agency (PPPRA), Reginald Stanley told THISDAY that not having enough aviation fuel and selling the product at relatively high price is taking away the traffic from Lagos.

He said besides the fact that marketers that ought to supply this product are losing their market, the hospitality industry in Nigeria is also losing potential customers because instead of staying overnight in Nigeria, these airlines fly to Accra, Ghana or another nearby country to spend the night and change crew, thus patronising hotels and other services in those countries. So Nigeria loses forex to these countries.

"Many airlines that are coming into Nigeria and also many cargo planes coming into Nigeria go to neighbouring countries to tank fuel. Apart from this loss of supply, it also affects hospitality business because in staying overnight the flight has to change crew and they stay in hotels to do that. Now many of them go to Accra to do that.

"So we are talking about reliability of supply of aviation fuel and the CITA, Puma Energy partnership can guarantee that. It will change the whole supply chain dynamics. The partnership can adequately supply the product because it has been deregulated and Puma has footprints in 47 countries around the world and operating in 65 airports. It is the company that is fuelling as much as Air Force 1, the presidential fleet of the United States. They also fuel Emirates Airlines so they understand what it means to honour contracts," Stanley said.

The Global Aviation Fuel Manager of PUMA Energy, Seamus Kilgallon warned that although Lagos is second biggest airport in Africa but it may soon lose that position to Cape Town because of high price of aviation fuel.

Kilgallon said Nigeria needs to address the problem in product supply system to prevent occasional scarcity of aviation fuel, which leads to high and arbitrary increase in prices, which is said to be the highest in West and Central Africa, adding that the new partnership between CITA and PUMA promises to bridge these challenges.

He also noted that in addition to high cost of aviation in fuel, the cost of maintaining security for the aircraft and crew is also high; hence international carriers prefer other cities outside Nigeria.

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