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Oil marketers say airlines refuse contracts, owe millions

Hope rises for Nigerian airlines as FG assures lessors guarantee on their assets

The Major Oil Marketers Association of Nigeria (MOMAN) has accused domestic airlines of owing marketers millions of naira and failing to sign contracts for the supply of aviation fuel.

The association hinted that it was in talks with the airlines to ensure steady supply of aviation fuel, adding that the engagement followed the House of Representatives’ intervention and the supervision by the Nigerian Midstream and Downstream Petroleum Regulatory Authority.

Clement Isong, executive secretary of MOMAN, confirmed the development in an interview with newsmen on Wednesday in Lagos.

He said, “For the local airlines, there are two challenges. First of all, they don’t like signing binding contracts based on pricing formula. They prefer running from one marketer to another trying to get products at cheaper rates.

“Secondly, many of them owe. They owe millions of naira to the industry, not just marketers alone. When they finish from one marketer, they run to another one.”

According to him, the marketers are demanding that the airlines pay up their debts because the burden on the industry is becoming too much.

He said adopting a pricing formula meant that the marketer must commit to a volume of products that would be supplied to the airline within a specific period.

Isong said, “The pricing formula means that you buy over a period of one month a certain quantity of products and the airline must pick that product.

“So, when they have agreed, you go and buy that volume and you keep it for them, but if they don’t agree, you can’t keep that volume for them.”

He stressed the need for the domestic airlines to change their business model to enable them to get a steady supply of aviation fuel to run their operations.

He noted that Mele Kyari, group managing director of Nigerian National Petroleum Company Ltd, had asked them to do so.

Isong said, “There are international best practices that they need to adhere to in running their businesses. This includes a pricing-based formula committing to volumes and also clearing their outstanding debts to ensure smooth operations in the sector.

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“If they adopt this method, marketers can take the risk of buying products and keeping them in our tank farms, but they need to commit to volume because that is how the business is done.”

The MOMAN executive secretary said he had nothing but respect for the domestic airlines that had over time invested in leasing more modern aircraft to improve the quality of their service to their passengers.

He added that he equally understood the challenges in charging airfares that were reasonable but allow them to meet their obligations to their vendors.

He empathised with all stakeholders, including ordinary Nigerians, struggling with the consequences of the increase in the price of crude oil at the international market.

Isong blamed the hike in the price of crude oil and its derivatives such as aviation fuel, petrol, diesel and kerosene on the back of the ongoing hostilities between Russia and Ukraine.

He said, “We understand their pains, even the Federal Government that is paying a higher cost to subsidise petrol.

“The rise and fall of oil prices is cyclical. We have been here before, and we are hoping that within a short period, international supply of crude oil will adjust to meet demand and prices will come down to more acceptable levels.”

According to Isong, the situation can also abate if marketers are able to get foreign exchange at decent rates instead of sourcing from the parallel market.

He urged the airline operators to clear their debts and adopt a pricing formula for procurement of aviation fuel in line with international best practices.

He said, “There is aviation fuel in the country. However, the product is expensive. Many of us who have contracts with international airlines have to keep stocks for them.

“Now, international airlines pay for their products based on a pricing formula; so, it is predictable. There is no quarrel on the price. It is Platts plus premium.

“The premium is fixed. The Platts, which is a price benchmark service for the oil industry, goes up and down, depending on the international market price.”