CITA Energies, an indigenous aviation fuel (Jet A1) solutions company, has called for a review of the pricing of the commodity as supplied by the Dangote Petroleum Refinery.
The Chairman of CITA, Dr Thomas Ogungbangbe, made the call at a ceremony to mark the company’s 20 years of operation, on Friday night in Lagos.
Ogungbangbe said that additional costs of aviation fuel and financing constraints were putting pressure on airlines and other businesses.
He said that although local refining had improved availability of Jet A1, pricing disparities and additional financial requirements imposed on buyers had continued to affect the cost of supplying the product.
He said that the pricing structure would need to be reviewed to ensure that local supply would translate into more competitive prices for fuel marketers and airlines.
According to him, aviation fuel marketers operate under a global pricing framework, while pricing arrangements for locally- refined products create differences that complicate procurement and sales.
“We are priced on the global formula pricing, and the contracts are signed using the average of prices published daily during the preceding month,” he said.
He said that while marketers might be selling fuel in October based on September’s average benchmark, Dangote Petroleum Refinery’s pricing was based on a different structure.
The chairman said the difference created uncertainty for marketers, who could find themselves selling fuel without knowing the final price at which the product had been purchased.
He identified an additional premium introduced by the refinery in March during the unrest in some parts of the Middle-East, as a factor contributing to the pricing.
According to him, marketers will pass additional costs to customers to remain in business, thereby increasing the financial burden on airlines.
He appealed to the refinery to reconsider the premium, saying that its removal could improve pricing alignment and ease pressure on the aviation industry.
The chairman also raised concerns about the refinery’s requirement that 25 per cent of a financial instrument submitted by a buyer should be placed under lien, saying the arrangement increased financing costs.
He said the arrangement increased operating costs, which ultimately affected the price paid by customers.
The chairman, however, acknowledged that local refining had brought significant benefits to the aviation industry, particularly by improving the availability of aviation fuel.
He described the Dangote Petroleum Refinery’s entry into Jet A1 production as a major development, noting that Nigeria had previously relied on imported aviation fuel because its earlier refineries did not produce the product.
“With Dangote, the issue of scarcity is already eradicated; availability is assured but the challenge is in the pricing,” he said.
He added that some marketers might consider importing fuel when they could obtain more favourable pricing under the global formula.
The chairman said the Federal Government and industry stakeholders would need to match the benefits of local refining and product availability with competitive pricing to lower operating costs across the aviation value chain.
Ogungbangbe said that players in the aviation fuel ecosystem were finding it difficult to sustain profitability amid its rising costs and passing of additional expenses to customers.
“Before now, I could say it was profitable, but I cannot say for sure about profitability now,” he said.
He described the company’s financial experience over the past two years as difficult.
According to him, some companies in the aviation fuel business have had to decline business opportunities when the cost of supplying fuel could result in losses.
He noted that businesses had to balance customer commitments with the need to avoid losses that could undermine their operations.
On policy stability and the company’s business sustainability, Ogungbangbe said that businesses would need a predictable policy environment to plan investments, manage costs and remain competitive.
He said the technical nature of aviation fuel business and the need to maintain international quality standards placed additional demands on operators.
He noted that aviation fuel handling and into-plane fuelling were largely dominated by international oil companies three decades ago.
He said CITA Energies had helped demonstrate that indigenous companies could successfully operate in the technically demanding segment of the aviation industry.
He added that the company had trained thousands of people and expanded its operations over the years.
The chairman attributed the company’s survival and growth to perseverance, continuous adaptation and commitment of its workforce.
He said the company’s experience underscored the importance of policies encouraging local businesses, supporting investments and enabling indigenous operators to compete effectively.
He urged stakeholders to address the structural and pricing challenges confronting aviation fuel market to ensure that gains from domestic refining would translate into a more sustainable aviation industry.
He praised President Bola Tinubu, the Minister of Aviation and Aerospace Development, Mr Festus Keyamo (SAN), and the Nigeria Civil Aviation Authority, among others, for ensuring a healthy aviation business environment for local companies to thrive.
The News Agency of Nigeria (NAN) reports that the company recognised outstanding staff members with awards and cash gifts at at the event.
