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Aviation Fuel: Domestic Airlines Risk Shutting Down Over Rising Price Of Jet A1

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Indications have emerged revealing that some domestic airlines may cease operations over the rising price of aviation fuel, otherwise known as Jet A1.

Given that there has been a sustained increase in the price of aviation fuel over the last two years, airlines have been forced to enhance their operations by raising ticket prices.

In less than eight months, specifically between July 2023 and February 2024, the product’s swinging price saw local carriers struggle with 109 per cent price increment.

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The 12 scheduled airlines in the country, including Air Peace, Aero Contractors, Arik Air, Max Air, Azman, Dana Air, Ibom Air, Green Africa, Overland, Rano Air, ValueJet and United Nigeria Airlines, UNA, had made efforts to stay in business, even as the price of jet fuel surged from N629 to N1,316.

READ ALSO: PHOTOS: Residents Loot Rice From Kebbi Govt’s Palliatives Warehouse

With the situation no longer sustainable, some airlines are looking at discontinuing operations, Vanguard has gathered.

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Fluctuations

Although efforts to get the price of jet fuel as of press time failed, Chief Operating Officer of Ibom Air, Mr George Uriesi, told Vanguard that it was fluctuating between N1,300 and N1,500.

Uriesi said: “It is a massive challenge because fuel is the major cost. In two years, it has gone from about N200 to N1,500. No matter how prudent an airline is, it cannot absorb that kind of increase in the major cost input. The increase is so massive that it is difficult to attack by raising fares. We think that we have reached the plateau in terms of using fares to absorb all these inflationary issues – the value of naira and increase in price of fuel, which are the two most important components for a domestic airline.

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Reached the zenith

“I think we have reached the zenith of how much we can charge higher for people to travel without stopping them from buying tickets. What I can say right now is that the recent strengthening of the Naira was just like an oxygen mask for the domestic airlines because it had reached the point where it was no longer sustainable. I don’t think any other group of airlines in the world faces the challenges that Nigerian airlines face.”

READ ALSO: Police Arrest Man For Allegedly Stabbing Elder Brother To Death In Bauchi

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Refining

Managing Director of Aero Contractors, Captain Ado Sanusi, in a chat with Vanguard, also warned that if the country does not start refining Jet A1, the situation might worsen.

He said: “Cost has been skyrocketing and from the normal 35 to 40 per cent of airlines’ cost, it has now jumped to close to 80 per cent. And in some cases, 90 to 95 per cent. It means when tickets are sold, 90 per cent of the ticket goes to buying Jet A1. It’s a direct relationship. When the price increases, cost increases.

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“Airlines increase the prices of their tickets and transfer the cost to the customer. Until we start refining jet fuel in the country, we will depend on imports. While we are depending on import, we are looking at the cost with a naira to dollar exchange rate. I don’t know whether Dangote and Port Harcourt refineries are equipped to refine Jet A1, but even if they are, it would take a little bit of time before we feel the impact.”

Cartel

While calling on Federal Government to make importation of jet fuel transparent, Sanusi said: “If the federal government can make the importation as transparent as possible, I think it will give the airlines a picture of what the price will be. If the price can be published by the Department of Petroleum Resources, DPR, we will know the price and that there is no cartel fixing the price. If they do that, I think it would stabilize the price because right now, some airlines are struggling and some will continue to struggle until they struggle no more and then give up.”

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Naira Appreciates Massively Against US Dollar In The Black Market, Highest In 15 Months

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The naira appreciated massively against the United States dollar at the parallel foreign exchange market.

Abubakar Alhasan, a Bureau De Change operator in Wuse Zone, Abuja, told DAILY POST that the Naira strengthened significantly to N1,490 per dollar on Wednesday, up from N1,520 on Tuesday.

We buy at N1480 and sell at N1490 on Wednesday due to lower FX demand,” Alhasan confirmed to newsmen.

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READ ALSO:Naira Appreciates Against Dollar As External Reserves Swell

This means that the Naira gained N30 against the dollar on a day-to-day basis.

The last time they were exchanged at this level in the black market was in June 2024.

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Meanwhile, at the official market, it dropped marginally by N1.19 to N1,488.56 per dollar on Wednesday, down from N1,487.37, according to data from the Central Bank of Nigeria.

READ ALSO:Naira Appreciates At Official Market

Analysing the trend at both markets, the difference between official and parallel markets has shrunk to 1.44.

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Recall that on Tuesday, the Naira appreciated across official and parallel foreign exchange markets upon an interest rate cut by the apex bank by 50 basis points to 27 per cent.

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Why We Rejected Govt’s Plan To Sell Assets – PENGASSAN President

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The President of the Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, Festus Osifo, has revealed the reasons oil unions rejected the government’s plan to sell assets.

Osifo said that the plan will be injurious to the Nigerian economy in the long run.

He made this statement on Wednesday, while responding to questions in an interview on ‘Prime Time’, a programme on Arise Television.

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READ ALSO:NUPENG Accuses Dangote Of Breaching Agreement, Says Nationwide Strike Inevitable

“What informed our position in this is that as PENGASSAN and NUPENG, we represent the workforce of the oil and gas industry in Nigeria.

“So it’s our responsibility first to our members to ensure that their jobs are protected and to ensure that their welfare is enhanced.

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“Secondly, our members live in a country called Nigeria. Nigeria must survive and strive before our members will be able to survive.

READ ALSO:‘We Like Greek Gifts,’ Nigerians Blast NUPENG Over Dangote’s Fuel Price Reduction

So we feel the move to go in this direction will not just affect the plights of our members but is injurious to Nigeria’s economy in the long run.

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“The oil unions’ rejection of this plan is to protect Nigeria’s economy and the welfare of its members.

“This decision will certainly boomerang, revenue will plummet, and it will lead to a lot of other issues,” Osifo said.

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Okonjo-Iweala Reveals How Nigeria Can Dominate AfCFTA

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The Director-General of the World Trade Organisation, WTO, Ngozi Okonjo-Iweala, says Nigeria has what it takes to lead Africa’s new era of trade if it tackles high logistics costs, develops efficient payment systems, and invests in value addition.

Okonjo-Iweala, who was speaking on the sidelines of the WTO Public Forum in Geneva, Switzerland, said Nigeria and other African economies must speed up the implementation of the African Continental Free Trade Area, AfCFTA, and build stronger infrastructure to unlock billions of dollars in opportunities in manufacturing, services, and digital trade.

The AfCFTA is a great step, but Africa trades only about 15–20 percent within itself — far below the European Union, EU’s 60 percent. We (Nigeria) need to speed up implementation so Africans trade more with each other.

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READ ALSO:U.S, China Tariff War Could Slash Trade By 80%, Okonjo-Iweala Warns

Take Lesotho: it exports around $200 million worth of textiles (jeans, etc.) to the U.S. — about 10 percent of its GDP — while Africa imports $7 billion of similar goods. Why not absorb Lesotho’s products within Africa? To unlock intra-African trade, we (Nigeria) need efficient payment systems (Afreximbank and others are working on this), better infrastructure and lower trade costs. It shouldn’t take longer to ship goods from Cape Town to Lagos than from China to Lagos.

“With critical minerals, energy, and new supply chains, plus opportunities in services and digital trade, there’s huge potential — if we invest in connectivity and implementation,” she said.

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The former Nigeria’s Minister of Finance also cautioned that negative narratives about global commerce risk overshadowing recent successes achieved through multilateral cooperation.

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