The blame game between Nigerian airlines and the Major Oil Marketers Association of Nigeria (MOMAN), a cartel of fuel marketers, is so enigmatic that no one knows who is telling the truth.
The airlines claimed that MOMAN in its lust for mammon has pushed the pump price of aviation fuel to N700 per litre.
Consequently, fuel now constitutes 95 per cent of the cost of operating a flight. The standard rule in the industry globally is that aviation fuel accounts for 40 per cent of the cost of operating a flight, but Nigeria in its obsession for negative firsts has pushed it to 95 per cent. The airlines said they could only survive if the cost of a one-hour flight is sky-rocketed to N120, 000 per seat.
In a country where land transportation has become a big risk due to battalions of kidnappers strewn across the land, such an escalation in airfare would ground many and reduce the essential service to the exclusive preserve of the super rich.
The airlines protested the price hike with a threat to withdraw their services on Monday, May 9 except the federal government prevailed on MOMAN members to shun their obsession with mammon and place national interest ahead of selfish gains. An odd combination of last minute mode swing on the part of some airlines and the federal government offer to intervene in the crisis halted the dangerous strike.
MOMAN shot back with claims that the pump price of aviation fuel ranged between N480 and N550 per liter depending on where one makes the purchase. No one knows why airlines would claim to be buying aviation fuel at an atrocious pump price of N700 per litre when the actual price was almost N200 below what was flaunted as the truth.
The actual truth is that one of the warring factions is telling a lie. Given some fuel marketers’ propensity for unbridled fraud, many are inclined to believe the airlines’ claim that the cost of aviation fuel actually shot up to N700 per litre.
Since 2011 when fuel marketers swindled the federal government by collecting N2.3 trillion as subsidy on petrol that never landed the shores of Nigeria, millions of Nigerians no longer trust them.
There is no reason why someone should sell kerosene (that is what aviation fuel is) at N700 per liter when crude oil price is below $110 per barrel. As of the time the airlines and MOMAN were trading blames, the pump price of aviation fuel was 61 cent per litre in the U.S.
What could be deciphered from that price range is that MOMAN would be getting aviation fuel in Europe at anything from 55 cent (N319) per liter at wholesale price. Everything from haulage to cost of storage cannot push the ex-depot price of a litre of the product above N480. That should put the pump price of the product at anything below N530 per liter. But the men of mammon would not accept the modest profit margin that would allow consumers to run their business with minimum distraction. They opted for profiteering as a short cut to wealth and asked the airlines to pass the burden to air travelers.
MOMAN has eventually stampeded the federal government into the senseless decision to momentarily add aviation fuel to its massively exaggerated cost of petrol subsidy. Government has grudgingly offered to sell aviation fuel to airlines at a subsidised price of N480 per litre. The largesse would last for three months.
Many believe that the decision is ill-informed and ill-timed because Nigeria spends 93 per cent of its dwindling revenue on debt service. The federal government lives on borrowed money. JP Morgan, a leading American investment bank, contends that Nigerian government lacks fiscal prudence. That is the truth.
The decision to subsidise aviation fuel shifts the responsibility for its supply exclusively to the Nigerian National Petroleum Corporation (NNPC) Ltd. No one in the federal government knows precisely how many litres of aviation fuel are consumed daily by the airlines.
As it is the case with petrol, NNPC will triple the consumption figure and deduct the cost at source from Nigeria’s faltering revenue from crude oil exports. JP Morgan claims that crude oil export revenue remitted by NNPC into the federation account in February and March 2022 was perilously low because of the high cost of petrol subsidy.
The bank has dropped Nigeria from its emerging market index list. The situation will simply be worsened by adding aviation fuel subsidy to an unwieldy financial burden.
The federal government could have tackled the crisis imposed on the airlines by MOMAN by ensuring that MOMAN gets foreign exchange for aviation fuel imports directly from the official window of the Central Bank of Nigeria (CBN).
That would reduce the landing cost of the product by at least N160 per litre. No one in the airlines would complain if the cost of fuel drops by N160 per litre. To forestall forex round-tripping by marketers, government should pay the exporting refineries directly.
Besides assuring MOMAN of forex at official window rate of N415 to the dollar, government should set a profit margin for the importers based on the verified landing cost. That is by no means a way of returning to price control. No responsible government allows operators to exploit consumers through profiteering.
Now that the damage has been done by opting for a stampeded decision to subsidise aviation fuel, government should first order a forensic audit of daily fuel consumption by the airlines to ascertain the range of subsidy to be funded from public treasury. Anything short of that would amount to giving NNPC a blank cheque to fill in any figure.
The decision to subsidise aviation fuel even temporarily is ill-informed. If anything should be subsidised under current circumstances it is cooking gas. At the current rate of N8, 000 per 12.5kg, cooking gas, an essential commodity that benefits more people than aviation fuel, is outrageously expensive.
The high cost has depleted the modest gains made by the government in persuading Nigerians to abandon kerosene and firewood and cook with clean fuel that will reduce asthmatic attacks.
With cooking gas priced beyond the reach of millions, many have returned to the bush to hack down woods for cooking fuel. That would simply quicken the journey of the Sahara Desert to the Atlantic Ocean as de-forestation worsens.
The federal government should take a second look at the decision to subsidise aviation fuel with a view to transferring the funds from it to the reduction in the price of cooking gas. It will benefit more Nigerians and tame the menace of climate change.
