The House of Representatives and the Nigerian National Petroleum Company Limited (NNPC Ltd) last week facilitated a deal between petroleum products marketers and airline operators to keep the price of Aviation Turbine Kerosene (ATK), at N500 per litre.
The ATK is popularly known as aviation fuel.
The agreement was reached on Monday at the second day of the investigative hearing of the House of Representatives Adhoc Committee on High Cost of Aviation Fuel which held at the National Assembly Complex, Abuja.
Presenting the highlights of the agreement, the Group Managing Director/Chief Executive Officer GMD/CEO of NNPC, Malam Mele Kyari, stated that both parties were represented.
The petroleum product marketers were represented by the Major Oil Marketers Association of Nigeria (MOMAN) and the Depots and Petroleum Products Marketers Association (DAPPMA).
At the other end, the aviation industry stakeholders were represented by the Airline Operators of Nigeria (AON) and the Nigerian Civil Aviation Authority (NCAA) as both groups agreed to have the pump price of aviation fuel pegged at N500 per litre for the next three days.
“In the next three days, representatives of MOMAN, DAPMAN and Airline Operators of Nigeria would sit down and adopt transparent bases of pricing.
“That as requested by the Association of Airline Operators of Nigeria, they will be granted license by their authority to also import ATK so as to have a way of benchmarking prices.
“They will also have a reference exchange rate for the naira,” Kyari said.
Stakeholders also resolved to engage and agree on a premium which would also be different from client-to-client depending on the volumes they want to buy and the credit limit that each marketer can permit.
This is expected to help establish a transparent basis for pricing, eliminate price discrepancies and would throw up the real market value of the product.
Earlier, the Executive Director Systems, Storage and Retailing Infrastructure of the Nigerian Midstream and Downstream Regulatory Authority (NMDPRA), Mr Ogbogu Ukoha, highlighted some of the factors that sent the price of ATK over the roof.
“One of the major factors influencing the high cost of ATK remains the issue of availability of forex that is, the source from which marketers acquire their Dollars either from the Central Bank of Nigeria (CBN) or the parallel market.
“When that is added to the fact that ATK is deregulated, it becomes a commercial dilemma whereby marketers can’t sell below certain price due to forex barriers and challenges of landing cost.
“However, airline operators insist that they can’t buy products above a particular amount if air fares will remain affordable,” Ukoha said.
Speaking in similar vein, the Secretary of DAPPMA, Mr Olufemi Adebayo, explained that the scarcity of forex was a major issue in rising price ATK.
“If we can buy dollars at N410 or N420, the price will be different. Unfortunately, we cannot.
“What you buy from the street is different from what you get from the banks; and for dollar, the more you want it, the cheaper it’s not.”
On his part, the Chairman of MOMAN, Mr Olumide Adeosun, stated that part of the challenge with the pricing of ATK was the fact that it is the most difficult to handle of all the middle distillates because it required extra licensing to produce.
“There are refineries in Nigeria today that produce ATK but can’t sell the product because it has to be licensed.
“Some of the modular refineries that produce diesel in the country can produce ATK, but these refineries are not certified for such production,” he said.
Adeosun also disclosed that the look-back method of determining the price of ATK in the aviation sector lends itself to abuse by airlines which often want to take advantage of price variations in the market.
“Aviation fuel price index is determined by the previous month’s average.
“Habitually, product buyers want to take advantage of price variations at the market, which sometimes trigger loss.
“You can buy products today when it is expensive and sell at a loss tomorrow, considering how the price index is determined on a look back”.
Speaking on behalf of the AON, Mr Allen Onyema, Vice Chairman and Chairman/CEO of Air Peace, expressed appreciation to the GMD NNPC and the leadership of the House of Representatives for their forthright approach to ATK price hike issue and pledged the commitment of the group to the welfare of Nigerians.
In his closing remarks, the Chairman of the Adhoc Committee and Deputy Speaker of the House of Representative, Rep. Idris Wase, commended the GMD NNPC, Malam Mele Kyari and all the stakeholders for their sacrifices that made the interim agreement possible.
He said the House would continue to provide the needed support to ensure the welfare and security of Nigerians.
Still in the week under review, the NNPC Ltd., confirmed that it remitted the total sum of ₦59.8 billion to the Federation Account from 2010 to 2018.
The Company made the disclosure at an interactive session with the House of Representative’s Committee on Public Accounts.
In a presentation to the lawmakers, NNPC’s Chief Financial Officer (CFO), Mr Umar Ajiya who represented the GMD/CEO Kyari, tendered documents to show that the sum of ₦59.8 billion was remitted after reconciliation with the office of the Accountant General of the Federation and the Revenue Mobilisation and Fiscal Commission.
He explained that prior to the passage of the Petroleum Industry Act (PIA), NNPC was mandated to remit certain streams of revenue to the Federation Account and the Consolidated Revenue Fund, stressing that under the PIA, the Company would only make remittances to the Federation Account.
On the remittances of revenue generated by the NNPC in 2019 and 2020, the CFO explained that payments were still being reconciled with the Accountant General’s Office and the Revenue Mobilisation and Fiscal Commission.
On his part, Chairman of the Committee, Rep. Oluwole Oke said that the lawmakers would study the documents presented by NNPC and get back to the Company on any matter that needed further clarification.
Present at the interactive session were representatives of the Office of the Accountant General of the Federation and the Office of the Auditor General of the Federation respectively.