By Dickson Omobola & Matilda Ikediobi
Stakeholders in the country’s aviation sector have lamented the cost of aviation fuel, otherwise known as Jet-A1, saying it has increased the operating costs of airlines and forced passengers to pay higher airfares.
The experts revealed that between the end of 2023 and March 2024, the price of jet fuel increased from below N900 per litre to about N1500 per litre, saying such a sharp rise was disruptive to the airline business.
They spoke at the Gateway Colloquium organised by CITA Energies, in partnership with the League of Airports and Aviation Correspondence, LAAC, themed: ‘Aviation Fuel Business: The Scenario and the Metaphor,’ held in Lagos.
Speaking at the event, Ibom Air’s Regional Manager of Lagos and West Africa, Mr Martin Abhulimen, advocated for the adoption of fuel price hedging, adding that the approach could help stabilise costs if jet fuel marketers were willing to lead the initiative.
Abhulimen said: “We (airlines) have infrastructure problems. Then we have a bigger problem, which is, the spike in the price of jet fuel. At the end of 2023, price rose from below N900 per litre to about N1500 per litre around March 2024. That is very disruptive to an airline’s business.
“That kind of cost cannot be passed to the passenger. Not fully, even if at all, it would be passed. The airlines struggled, at that time, and required serious financial discipline. Infrastructure and the spike in aviation fuel costs are a major challenge.
“We are unable to mitigate this because, in Nigeria, hedging prices cannot work. Because of volatility, no filler would allow hedging. Hedging means I can come to a filler and say for instance, by July 2026, I want to pay N1,200 for your fuel. If he works it out, and then agrees, then a contract would be signed to ensure that no matter what happens to fuel, operators can keep paying a fixed price for future fuel purchases.
“But that does not work in Nigeria because of exposure to forex and the international oil market. But it does work in other climes. In the absence of ability to hedge price, collaboration would have been a practical option. With Dangote Refinery now, it is possible. This (hedging) is something I believe that marketers can champion to reduce the impact of a spike in fuel price.”
Meanwhile, founding Chairman/Chief Executive Officer of defunct domestic carrier, ADC Airlines, Captain Augustine Okon, also lamented that fuel was consuming nearly half of airlines’ operating costs, while passengers were complaining about rising fares.
Okon said: “Airlines tell me they are flying with one eye on the sky and the other on the fuel gauge. Fuel now takes up nearly half of their operating cost. Prices swing wildly because they are pegged to the dollar, yet revenues are earned in Naira.
“One airline executive told me recently, ‘Captain, every time the naira coughs, our engines sneeze.’ Their sentiment is one of frustration mixed with resilience. They crave stability, predictable pricing and reliable supply.
“Fuel marketers, on their part, feel misunderstood. They say margins are thin, forex is scarce, logistics are costly and debts from airlines pile up. Yet, behind their complaints lies optimism. They believe the arrival of local refining, finally, will change the weather pattern.
“There is also the voice of the public, the passenger who pays for all our inefficiencies. To them, high ticket prices, delays and cancellations are the visible symptoms of an invisible ailment, fuel costs.
“If you stopped ten passengers at Lagos Airport today and asked what they think of aviation fuel, most would shrug and say, ‘all we know is that flight prices keep going up’.”
He, however, said breakthrough would come when policy was aligned with patriotism, adding that Jet A-1 supply be anchored to local refining capacity, not to imported benchmarks.
He said: “First, adopt transparent pricing indices tied to local cost realities. Second, create a Joint Aviation Fuel Board that would bring airlines, Nigerian National Petroleum Corporation, NNPC, Nigerian Civil Aviation Authority, NCAA, and marketers to the same cockpit. Third, modernise airport fuel storage and pipelines through PPP models.”
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