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Aviation Fuel Scarcity: Why We Give Priority To Foreign Airlines— Marketers

Aviation fuel marketers in the country have given insight into why they give priority to foreign airlines as against local airlines, saying since the foreign airlines pay for Jet A1 in dollars, most marketers quickly sell to them to get dollars to import more.”

According to the marketers, airlines get aviation fuel commonly known as Jet A1 according to the existing business relationship.

Meanwhile, checks revealed that aviation fuel sells at the same International price of 1.026 dollars per litre in Nigeria’s neighbouring countries such as Ghana, Guinea, Cote D’ivoire, Liberia, Libya and Togo.

The difference in local prices of the product in each of these countries is determined by the exchange rate of each country’s currency to the dollar.

With the current exchange rate of the naira at more than N500 to the dollar in the parallel market, it is not surprising that Jet A1 sells more than N500.

Speaking with Vanguard, the Executive Secretary of Major Oil Marketers, Mr Clement Isong, said “It is not true that marketers are selling aviation fuel to foreign airlines at N400 per litre. Marketers need scarce dollars to import aviation fuel. Accessing forex through the banks is not easy. And since the foreign airlines pay for Jet A1 in dollars, most marketers quickly sell to them to get dollars to import more.

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“The only source of supply of aviation fuel to the country currently is through importation. Jet A1 is brought in through the ports and trucked by road to the various airports across the country.

“Different airlines have different payment histories. Some airlines make payments on time. But there are some who have a history of owing; the airlines who pay up on time on their credit is likely to receive favourable terms from their suppliers against airlines who owe.

“Some airlines will do better than others because they are efficiently run and airlines not managed well will struggle. Marketers importing this product are not hoarding aviation fuel, they want to sell but remember 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 difficulty in accessing foreign exchange.

Isong said, “The problem is two-pronged; forex is expensive in Nigeria and the oil price in the international market is high. Even if you had the money to pay, if you are a supplier and have someone to pay in advance and give you cash to pay and you have another that requires credit, you’d give to the person who has the cash to pay in advance.

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“For example, if you pay in advance, you’re better off than people who take credit, this is how business works everywhere and in international trade that is what happens.

“You now have a choice; you can buy on credit which makes the commodity more expensive or you can pay cash advance which brings the price down. So what traders who bring in the product do is, need the cash to pay for supply in advance or get better payment terms to get lower prices and so that is reflected on the customers.

“Also remember, payment is not made in naira, it is dollarized and it is impacted on your ability to access forex at a reasonable exchange rate. Not everyone can access forex cheap.”

Source: Vanguard

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