Experts: How Jet A1 market proliferation creates black market, raises safety concerns

•   Ndulue calls for NCAA’s vigilance, Aisuebegun advocates competition in jet fuel market

The proliferation of the aviation fuel business in Nigeria could force many suppliers of the commodity to seek alternative businesses, as many of them are said to be competing dangerously amongst themselves, a situation that has affected the quality of Jet A1 in the country.

This was the view of aviation fuel stakeholders who spoke on the sidelines of CITA Energies Colloquium with the theme, “Theme: Aviation Fuel Business in Nigeria – The Scenario and the Metaphor.

The Chief Executive Officer of CITA Energies Limited, Dr Thomas Ogungbangbe, in his industry overview, said, “If we look at it from six companies like 20 years ago, grew to like 9, 10, maybe like 15 years ago. However, today we have over 45 companies competing in the same space. But I think we appreciate the growth that the industry has witnessed in that regard and the availability that it has brought to stabilise the situation.”

The proliferation of marketers and the high cost of fuel, he noted, have created a growing black market for aviation fuel, which poses a significant threat to aviation safety due to the risk of compromised quality and standards.

Ogungbangbe further stated that increased market activity necessitates that the Nigeria Civil Aviation Authority (NCAA) strengthen its regulatory framework to scrutinise the entire supply chain, ensuring quality, security, and the financial health of marketers to prevent dangerous malpractices.

He said, “But of course, it also comes with the issue of so many coming here with different products from different sources that bring about quality issues, which is also something we need to look at. Our industry has grown, but we are groaning because of the issue of availability and outages. We now have quality issues because of too many marketers, which rose from the initial six to 45 companies doing the same business in the same space.”

He noted that the evolution of aviation fuel in Nigeria mirrors the nation’s own journey — from dependency to determination, from challenges to change, adding that the advent of indigenous refineries may redefine the supply chain, but stated that it is their collective vision, collaboration, and integrity that will define the future.

Managing Director, Ndano Energy and a former Managing Director of Arik Air, Mr Chris Ndulue, called for great vigilance by the NCAA to ensure that jet fuel dispensed into aircraft meets the highest safety requirements to ensure that marketers are not compromising on the quality of aviation fuel. We have outnumbered the airlines, and it is very difficult to survive”.

“The NCAA has to look at the financial capability of the marketers, and we are going to get more entrants. The entry barrier is very low. It is easy to jump into the market. We must safeguard safety and quality of jet fuel”, he added.

Air transport specialist and a former Managing Director of the Federal Airports Authority of Nigeria (FAAN), Dr Richard Aisuebeogun, lamented that the aviation fuel market in Nigeria operates within a complex and demanding environment.

Despite being an oil-producing nation, Aisuebeogun said Nigeria remains heavily reliant on imported Jet A-1, stressing that this dependency subjects “Our market to foreign exchange volatility and price fluctuations, weakening both airlines and suppliers.

Giving a comparative cost of the commodity in Nigeria and West Africa, he said jet fuel prices in Nigeria currently range between $0.60 and $0.85 per litre, depending on location.

“In comparison, prices in neighbouring countries are significantly higher — Ghana at $1.25, Liberia at $1.10, and other West African markets above the $1 mark. This is even though these countries generally maintain stronger exchange rates than Nigeria.”

 Nigeria’s pricing structure, he further noted, is determined by the ICE Platts benchmark, plus premiums, logistics, and financing costs, all of which remain relatively high.

While direct government regulation of jet fuel prices may appear desirable, he expressed pessimism that it would likely reintroduce a subsidy regime, which is no longer sustainable in Nigeria’s current fiscal environment.

 “However, trade and competition regulators must ensure that the market remains open and competitive. At present, many marketers are reluctant to import jet fuel due to uncertainty surrounding the operations of the new domestic refinery. This hesitancy is undermining healthy competition. If this trend continues, there is a risk that a single dominant supplier could emerge, potentially leading to price manipulation and market inefficiencies”.

Wole Shadare