Nigeria: Scarcity – Why We Prioritize Foreign Airlines – Aviation Fuel Distributors
The country’s aviation fuel traders have explained why they prioritize foreign airlines over local airlines, saying that since foreign airlines pay for the Jet A1 in dollars, most traders sell to them quickly to get dollars to import more.
According to marketers, airlines get aviation fuel commonly known as Jet A1 based on the existing business relationship.
Meanwhile, Vanguard’s checks revealed that aviation fuel sells for the same international price of $1.026 per liter in Nigeria’s neighboring countries such as Ghana, Guinea, Ivory Coast, Liberia, Libya and Togo.
The difference in the local prices of the product in each of these countries is determined by the exchange rate of the currency of each country against the dollar.
With the current naira exchange rate at over 500 naira to the dollar in the parallel market, it is no surprise that Jet A1 is selling over 500 naira.
Speaking to Vanguard, Major Oil Marketers Executive Secretary Mr Clement Isong said: “It is not true that marketers are selling aviation fuel to foreign airlines at 400 naira per litre. Marketers need a few dollars to import aviation fuel. And since foreign airlines pay for the Jet A1 in dollars, most traders sell to them quickly to get dollars to import more.
“The country’s only source of aviation fuel supply is currently imports. The Jet A1 is shipped through ports and trucked to various airports across the country.
“Different airlines have different payment histories. Some airlines make payments on time. But there are some with histories of debt; airlines that pay on time on their credit are likely to receive favorable terms from their suppliers against the airlines that owe.
“Some airlines will do better than others because they are run efficiently and poorly run airlines will struggle. The marketers who import this product are not hoarding aviation fuel, they want to sell but don’t ‘remember that the sale is not complete until the money is collected.
He also attributed the current high cost of aviation fuel to the high cost of crude in the international market and the difficulty in accessing foreign currency.
Isong said: “The problem is twofold; forex is expensive in Nigeria and the price of oil in the international market is high. Even if you had the money to pay, if you are a supplier and you have someone ‘one to pay in advance and give you have money to pay and you have another that needs credit, you would give to the person who has money to pay in advance.
“For example, if you pay in advance, you are better off than people who take credit, that’s how business works everywhere and in international trade, that’s what happens.
“You now have a choice: you can buy on credit, which makes the product more expensive, or you can pay a cash advance, which lowers the price. So what the merchants who bring the product do, c is that they need money to pay for supply up front or get better payment terms to get lower prices and that trickles down to customers.
“Also remember that payment is not made in naira, it is dollarized and this impacts your ability to access forex at a reasonable exchange rate. Not everyone can access forex at low price.”