Nigeria: How Oil Marketers're Ripping Us Off, Say Airline Operators

11 May 2022

Airline Operators of Nigeria, AON, has given a graphic picture of how major oil marketers are shortchanging them with the cost of aviation fuel, also known as Jet-A!.

It will be recalled that the operators had two months ago, on heels of the astronomical prices of aviation fuel, given a 3-day notice after which they would suspend flight operations in the country, if the price of the product was not reviewed down from N700 per litre.

But the House of Representatives via a motion intervened in the matter and later met with stakeholders in the sector, including the Group Managing Director GMD of the Nigerian National Petroleum Company, NNPC, where a truce was eventually reached to sell the fuel at N500 per litre for the period.

An agreement was also reached that the operators would be given licences by NNPC to import the fuel directly, especially as the marketers refused to disclose how much they were souring the product, despite pressures from speaker of the House of Representatives, Femi Gbajabiamila, and members of the Committee on Aviation.

The speaker wanted to know from the independent markers where and how they sourced their products, with a view to ensuring the airlines were not being ripped off but this didn't work out.

Consequently, frustrated members of the committee and other stakeholders at the meeting, including unions in the industry, agreed on the N500 per litre price, which was to be a temporary price structure until the actual cost of the product was ascertained.

But two months after, the airline operators last week issued a notice of another flight suspension to which the House leadership again intervened. They had threatened to shut down operations, pending when government addressed the issue of skyrocketting aviation fuel price from N700 per litre.

This, of course, did not endure as marketers soon returned to the old price of N700 per litre and in some cases, Between N750 and N800 per litre. The probe of the marketers by the lawmakers was contingent on the protest of the domestic carriers who felt they were being ripped off by the marketers.

Reading the resolutions of the meeting that lasted for about four hours on Monday, Gbajabiamila urged the operators to begin the process of getting their own license to import the product.

He said: "That we move the language of suspension to canceled. That the issues of shut down has been canceled, based on this meeting.

"NNPC and airline operators have both agreed that in the interim of three months, marketers of choice that you are comfortable with and that you know their mark up will not drive you out of business, would be supplied with jet fuel. We talked about N550 or something like that.

"The third resolution is that at the mid to long term, in fact right now, you will begin the process of application for your own license to be able to import your own jet fuel. To assist you in your business.

"Also tie to the benevolence of the CBN governor that six million litres are available now at N480. You will get allocation for the next three months through the companies you have nominated.

"In the process of application for license, midstream should as much as possible grant waivers that would not touch on the security and safety of the process. Committee chairmen on aviation and downstream should follow up."

Earlier in his remarks, the speaker said their intervention was necessary to stop the economy from bleeding.

"We are at the precipice today in Nigeria. It is a crucial moment for us. There is a crisis at hand. Shut down of airline operations has the potential of shutting down this government. We cannot sit here as stakeholders and fold our arms and watch this happen. We need to address this matter once and for all," he said.

Appearing before the special committee, led by the speaker of the House of Representatives, Femi Gbajabiamila on Monday, the Vice President of AON, Mr. Allen Onyema, who is also chairman of Air Peace, however, said that they were denied the delivery of 25,000 metric tons of fuel approved by President Muhammadu Buhari which was to be sold to them at the landing cost but accused the NNPC and some marketers of ripping them off.

Consequently, he said they were asked to nominate 10 marketers they could trust to enable them handle the transactions.

Onyeama told the committee of how his association was invited by the Nigeria Midstream and Downstream Regulatory Authority, NMDRA, to notify them of the President's gesture.

He also said that while he alerted the NNPC GMD, Mele Kyari, informing him of the President's gesture and their selected marketers, the response he got was not friendly.

"We were invited by the Midstream and Downstream Authority and we were told that the President approved 25,000 metric tonnes for us as a palliative to help us. We were very grateful to the president.

"It was not free. We were happy. We were told to nominate marketers that would market this product for us. We were told to have a meeting with these marketers. We called all the marketers, we held meeting with them.

"We decided the logistics, so they would take their logistical costs and everything and at the end of the day that fuel was getting to them, they told us at N335, so we put everything together and it would be getting to less than N400 for the cost and we said even if they sell to us at N450, it would be okay.

"We were told that a week later that the consignment would be arriving Nigeria but the next thing we heard from the marketers was that they had already been given the consignment that we were all jostling for. So we waited, thinking that they would sell as agreed. They never did.

"I actually called the MD of NNPC in the presence of our members. We wanted to hear from him. He answered that there was no way they would leave us to get the product directly, that it was dangerous.

"But I said no, that the marketers you are going to give are the same marketers that would handle it for us. He said he did not want any crash or anybody adulterating it. I said how could they adulterate it because they are the same marketers.

"We are not taking it on our own. Long and short of the story is that this product was not given to us and we noticed that it continued rising and rising," he said.

Also speaking at the forum, President of the Association, Abdulmanaf Yunusa, who's also the Chairman of Azman Air, corroborated the allegation, saying NNPC denied them the allocation approved by the president.

But Kyari, who put up a stout defence for the marketers, said his refusal was hinged on safety issues, stressing that releasing aviation fuel directly to operators, or even marketers was risky.

"Mr speaker sir, it is more complex than they say. Somebody must handle aviation fuel. We cannot surrender the safety of Nigerians to just anyone. It is not every marketing company that can handle ATK, including the chairman's company. 'We cannot give him. He has marketing company. We cannot give ATK to handle. That is why they have to bring the people that we can deal with," he said.

In his presentation, NNPC GMD, Mele Kyari, said it was difficult to have a fixed price of the product, saying "we agreed that we make the marketers sell the product to them at N500 for three days pending the day they would sit down and agree on this pricing formula. "I confirm that between us the and the downstream authority they had sat down and engaged and agreed on a pricing structure.

"Needless to say there is no fixed price. This is a deregulated product. So you cannot hold unto any price and indeed what you have seen in the media is N700 reference point. It cannot be a reference point. It depends on the market condition. It can higher than N700 depending on the market. This markets shifts. As we speak it is closely related to the price of crude oil.

"There is no way the oil matters, I am speaking for them now, if you own me N1 billion. I would not give you credit. No one would do this. There are limits to credits. It is an understanding customers

"It is our role to ensure we intervene. We did. We brought in products so that we can dampen the price. In March and April, we brought in cargo and made it available to the entire industry at N460. there is a build up to that price. When the customer takes marine N435, he has to transport, he has to charter vessel, bring it to his depot, to his furl station and transport it. So there cannot be two same price in Lagos and Maiduguri.

"We cannot fix price. We cannot ask for N500. we cannot say it must be below N600 or N700. That is why we insisted they go and have a formula that is transparent that each one of us can see.

"The only way we can have fixed price is if we put subsidy on. You can say it can sell for N500 in any circumstance, then somebody has paid for that difference. I am not sure this is what we are doing.

"There is an FX constraint. There is limit to what the CBN can provide. We are constrained because we are not able to produce dollar because of teh dearth of oil in the Nigera Delta. This is then reality. So we do not have. That means customers must source for FX from alternative sources", he said.

Similarly, the CBN governor, Emefiele who responded to the an earlier concern of the operators of not accessing foreign exchange, said there was one to sell, adding that it was only when the NNPC exported products that it could get foreign exchange.

"The availability of FX is very important and the issue of constraint from FX arising from issues bordering on theft in the Niger Delta is a big issue. It is when NNPC is able to export that dollars can come in.

"We do not have FX to sell. It would be difficult for us to grant any concession. It means we would be taking a hit or we would be providing some sort of subsidy for the industry," he said.

It will be recalled that on March 14, 2022, when the first meeting of the stakeholders held with the deputy speaker of the House, Ahmed Idris Wase, presiding, he had lashed out at the

Chief Executive, Nigerian Midstream and Downstream Regulatory Authority, NDMPRA, Ahmed Farouk represented by an Executive Director, Ogbogu Ukoha who said the prices of fuel had been discounted.

Wase had asked the regulatory body the current price of the product and why it was so exorbitant but was referred to the marketers who, however, sidestepped the questions and could not give specific answers.

Wase had said: "As far as I'm concerned, the basic issues that we left to come back today have not been addressed. First is on the agreement, your resolution, that's is the basis to proceed on any meeting and I read out what we resolved the other day and that's why I'm asking you the questions.

" I specifically asked the other person when he said they sell at a loss. I said what was the unit cost at that time that you were selling at loss, so we will now know. And I said here, you are just using semantics and language.

"Here, I am after facts. We are on fact-finding, we are not on language here and I want to insist that please let's be serious.

"Like I did mention to him, the House can go further, if you want us to go on expanded investigation, we will do that. As far as I'm concerned, I am not willing to compromise what is in the interest of our own country.

"You are supposed to regulate their (oil marketers) activities, are you just giving the licence? What are the minimum requirements; what is expected of that company that you are authorizing them to bring in this product?

" Is it that they have the opportunity and then the leverage to tell you whatever rate they want and it has to stand? No, I don't think so".

In their remarks at the meeting, the oil marketers, represented by Olumide Adeosun, thanked the House for their intervention.

"We are grateful for your intervention. The last thing any marketer wants is to create a saturation where the general public has to pay far beyond what they can afford for any product.

"The resolution that we reached today is one that is attainable and we look forward to working with our colleagues in the aviation sector so that we can have an efficient sector for Nigerians", he said.

However, the marketers were absent at Monday meeting.

The deputy speaker had remarked that they ought be handy to give some explanations to some issues, expressing displeasure with the GMD for speaking on their behalf.

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