Kachikwu, Sirika mull $151m savings from locally refined aviation fuel
Domestic airlines in Africa’s largest economy have grappled with shortages of Jet A1, also known as aviation fuel, as dollar supplies fall short of demand.
Airlines in Nigeria have a daily demand of about 2 million litres of aviation fuel. Stemming from this, BusinessDay gathered that refining the fuel locally could equate to saving as much as $150.75 million (N30 billion), incurred on the back of importation.
Minister of State for Aviation, Senator Hadi Sirika told Airline Operators of Nigeria (AON) recently that deliberations have begun with the Ministry of Petroleum to commit one of the three refineries in the country to Jet A1 refining.
Sirika disclosed that in his meeting with Ibe Kachikwu, Minister of state for petroleum, the latter said the Nigerian National Petroleum Corporation (NNPC) would revert the Port Harcourt Refinery on track before the end of the year to begin to refining Jet A1.
“The minister said with new investments in Kaduna refinery, they would get the refinery back on stream, so that the more they refine, the more the fuel would be available.
“The whole essence of refining it locally is not only to make it available, but to also make it cheaper because the element of importation would be removed,” Sirika said.
Airline operators have continually decried the exorbitant costs that accompany importation of the fuel and its concomitant effect on their profit margins.
“There are too many costs that go with the importation, including demurrage, transportation and storage, which are added to every litre of fuel sold to the airline. Besides, the uncertainty created by the scarcity of the product keeps some passengers away,” an airline operator divulged to BusinessDay, on account of anonymity.
According to the 2016 First Quarter Report released by the Consumer Protection Department of the Nigerian Civil Aviation Authority (NCAA), domestic airlines recorded 8,478 cases of delayed flight between January and March.
The report said that a total number of 15,434 flights were operated by eight domestic airlines during the period under review, while 281 flights were cancelled.
The competitiveness of local airlines has also been suppressed, owing to the fact that while international airlines buy fuel at cheaper rates because of the low price of crude, the locals buy at outrageous prices.
According to the airlines, part of the reasons why air tickets are relatively high in Nigeria is because of the high cost of aviation fuel, as well as charges which the passenger must pay.