Nigeria: The Unplanned Economy (Part 18)

By Ikenga Chronicles January 14, 2018

Nigeria: The Unplanned Economy (Part 18)

— Baron Roy

Aviation: Killing it softly (2)

Aviation Turbine Kerosene (ATK) is the fuel for most aircraft. It is popularly known as Jet A1 Fuel in the market. There’s nothing special about this fuel really; it is a highly refined form of the DPK (Dual Purpose Kerosene) which is the simple Kerosene for cooking. The impurities (aromatics) of the domestic Kerosene are “removed” and cleaned to get the Jet A1 Fuel. The impurities in the domestic are responsible for the characteristic odour of Kerosene; once that is removed, what you get is the Jet Fuel. No big deal, ugh?

So if Nigeria could produce regular domestic Kerosene, then producing the Jet A1 Fuel ought not be a headache,and it was not!

Up till 1985, the country produced Jet A1 Fuel from Kerosene with ease. The country serviced the domestic market and exported the balance to the airports in the subregion. There was sufficient Jet A1 Fuel. Along came centralization and parochial interests from the Federal Government and those that pull the strin. A conspiracy was brewed and the refineries were ORDERED to stop the production of Jet A1 Fuel! This was in 1985!

By 1986, we had totally ceased producing the Jet A1 Fuel. Licenses were given to importers, to import the fuel and service the Aviation Industry. Of course, most of the licenses were given to certain Alhajis and the deterioration of the ATK producing plants commenced in earnest!

Of course, the ATK plants have a technical value chain with the rest of the refineries; the deterioration of the refineries was triggered by this singular madness, but I digress.

So massive importation of Jet A1 Fuel commenced. Nigeria imports massively from the US and Ivory Coast,not because we do not have the capacity to produce, but just so some goons could make money! An obnoxious decision taken by the comedians in government in 1985!

The Jet A1 Fuel requirement per day is 2.4 million litres. At 200 Naira per litre, we expend an equivalent of 480 million Naira per day on importing Jet A1 Fuel! 480 million Naira outside the economy on a daily basis due to a silly decision taken by someone at the federal level! Oh! Jet A1 Fuel is 110 Naira per litre in Ghana!

So what gives? The Airline Operators either depend on the importers for their fueling needs, or fly to Ghana, Ivory Coast or Cameroun to fuel, then come back to Nigeria to pick passengers! Just imagine the national embarrassment? The increased cost of operations? The inefficiency? And all those costs are transferred to the flying passenger! What are the implications of this embarrassing model?

1. The Nigerian Aviation sector is far less competitive.

2. The cost of flying is astronomically higher.

3. The profit margins of the airlines are reduced.

4. Flight scheduling is distorted.

5. Multiple handling charges due to flying to different countries to get fuel.

6. More flying hours for flight crew for the same frequency.

…and so much more.

With these, it is far cheaper to fly from Ghana than from Nigeria; for the same distance. With the inefficiency, Accra is fast becoming an aviation hub at the detriment of Nigeria! But that isn’t the worst.

With the massive importation of Jet A1 Fuel (alongside other fuels), Niger Republic and Cameroun expanded their refining capacities just to supply to Nigeria! And the importers are delirious with happiness even as we export our economy, employment, profits, efficiency and national pride! We are a study in the international comedy of the absurd!

As the airlines were still groaning under the impossible importation regime, the new federal administration came with a most curious and illiterate FOREX control! The value of the Naira plunged by 150%– from 170 naira per dollar to as much as 500 Naira per dollar! And aviation fuel is paid for in dollars!

The airlines simply could not cope. In June 2016, Delta Airlines of the USA called it quits in disgust. Other operators struggled while confused. How on earth would any operator cope under that regime? Return tickets to Houston & New York from Lagos shot-up from 350k to 1million. Several foreign engagements were cancelled by many travellers! The Nigerian Aviation Sector was in its death throes.

Passenger volume plunged to less than 10 million. The self-created Baron Index is the ratio of annual passenger volume to the total population. It is a measure of the total traffic activity of the aviation industry. It ranges from 0 to 1.0. For Dubai, it is above 1.0. For the US, it is 0.5 and 0.44 for China. The index plunged to 0.018 for Nigeria. The low Baron Index indicates lower traffic activities, and of course, reduced sectoral income. And reduced contribution to the economy!

From the foregoing, it is obvious that other economies benefitted from the Nigerian Aviation, and not Nigeria! We inadvertently enriched other economies and impoverished ours. We make life difficult for the operators and for our own citizens. Just by the centralization of stupidity, we expose ourselves to international ridicule,and inexorably, we destroyed one of the most important sectors of the economy.

And there is a Ministry of Aviation, right? Hilarious!

Welcome to 2018, folks.

(To be continued)