HEADLINENEWS.NEWS correspondent reports that this is as Manufacturers Association of Nigeria (MAN) said on Tuesday that the crashing of diesel price by Dangote Refinery will have far-reaching effects in critical sectors like industrial operations, transportation, logistics, and agriculture, contributing to easing the high inflation rate in the country.
Dangote Refinery had on Tuesday announced a crash in the price of Jet A1 to N980 and diesel to N940 per litre.
This reduction by Dangote Petroleum Refinery marks the third major reduction in diesel price in less than three weeks when the product sold at N1,700 to N1,200 and also a further reduction to N1,000 and now N940 per litre.
Presently, Jet A1 is sold at between N1,180 to N1,400 per litre, depending on the airport an airline is buying from and the fuel marketer.
But the airline operators said that the new rate unveiled for Jet A1 by the refinery may not be for the operators, rather for the aviation fuel marketers, saying that the new price was yet to reflect in their buying rate.
Jet A1 is the major component of airline business, gulping about 40 to 45 percent of operating cost.
Capt. Ado Sanusi, the Chief Executive Officer (CEO), Aero Contractors, said that aviation fuel was the major component cost for airline operators.
He explained that in a free economy any drop in the price of the product would reflect in air tickets, but said this may not have immediate effect on the airlines until the aviation fuel marketers exhausted their current stocks.
According to him, as of Tuesday, the product was still being sold to the airlines by the marketers at between N1,180 and N1,300 per litre, depending on the airport an airline is buying from.
He, however, described the reduction of the price of the product as a welcome development.
He said: “If it is true that Dangote Refinery is selling at N980 per litre, it will definitely come to the market in a few days. So, we will still receive the old stocks being sold at old prices before the product hits the market. When it hits the market, there will be some adjustments.
“Naturally, in a free economy, this would translate into the tickets being recalculated to reflect the price of aviation fuel. That is in a natural free market economy. Now, the eco-system we operate in, in this country, there are so many other forces.
“I might not be surprised if the crashing of the price doesn’t directly relate with the price, which we are buying Jet A1. However, I believe everybody will recalculate its prices according to the price of Jet A1, which is the main component in airline business.”
Some of the forces that may not drive down the price of air tickets, according to Sanusi, are foreign exchange and demand and supply.
He expressed that if the passengers are comfortable with the current fares, some of the airlines may not immediately drop the airfares, but believes that on the long run, there would be some reduction in air tickets.
Also, a management staff of a foreign airline who didn’t want his name in print, said that the operators were yet to get an official report from Dangote Refinery on the crash of aviation fuel.
He regretted that the price of the product had consistently increased in recent months despite the drop in exchange rate.
The source explained that airlines operate on direct operating cost (DOC), noting that once the DOC reduces, the price of air tickets would also crash.
He maintained that the recent crash in the exchange rate also reflected in airfares, noting that all the airlines, especially foreign carriers file fare rates with the Nigeria Civil Aviation Authority (NCAA).
“The price of the product is going up daily. There is nowhere the price of aviation fuel is lower than N1,400 per litre. If it doesn’t come to the users, where is the price crashing? I can’t take my aircraft to Dangote Refinery. The fuel has to come to the airport for me to get the product at cheaper rates,” the source said.
Segun Ajayi-Kadir, Director General of Manufacturers Association of Nigeria (MAN), told HEADLINENEWS.NEWS correspondent that MAN is enthused by the commencement of operations by the Dangote Refinery and quite commendably, the difference the company is already making in the Nigerian economic landscape.
He said: “The economic gains being recorded as a result of its operations reinforces our position on the need to support and incentivise domestic production and Nigerian industrialists.
“MAN, therefore, extends hearty congratulations and commends Dangote Industries Limited for fully commencing production and for the remarkable achievement in reducing the price of Automotive Gas Oil (diesel).
“The decision of Dangote Refinery to first crash the price from about N1,750/litre to N1,200/ litre and now to N1,000/litre is an eloquent demonstration of the capacity of local industries to positively impact the fortunes of the national economy.
“The trickle down effect of this singular intervention promises to change the dynamics in the energy cost equation of the country, in the midst of inadequate and rising cost of electricity.
“The reduction will have far-reaching effects in critical sectors like industrial operations, transportation, logistics, and agriculture, contributing to easing the high inflation rate in the country.
“It is evident that domestic production holds the key to our economic recovery. It also underscores our assertion that the government cannot go wrong with incentivising domestic manufacturing and intentionally redressing the binding constraints that limit the actualisation of the potential of the sector”.
Dr. Muda Yusuf, Director/ Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), in chats with HEADLINENEWS.NEWS correspondent, said: “What is unfolding with regards to the Dangote Refinery and the tumbling price of diesel underscores the value and significance of domestic production.
“It also exemplifies the beauty of resource based industrialisation.
“It additionally reflects the nationalistic disposition of indigenous industrialists. This is why we must give them necessary support.
“Evidently, Aliko Dangote has aligned with the commitment of President Tinubu to tackle the current cost of living crisis. There is therefore a dimension of patriotism to the pricing dynamics that we are witnessing.”
Yusuf, who emphasised that there is also a reciprocity angle to this development, said: “The government offered to supply crude to Dangote Refinery in domestic currency which is more favourable than selling in dollars.
“This naturally must have had a positive impact on output cost for the refinery.
“The lesson is that we should support local industries and demonstrate much greater commitment to backward integration.
“This is a more sustainable pathway to industrialisation because incentives to manufacturers should not be perceived as revenue loss because of the enduring impact on development and self-reliance”.
The Nigeria Employers’ Consultative Association (NECA) commended the Dangote Refinery for further crashing the price of diesel.
The Director General of NECA, Adewale Smatt Oyerinde, stated that Dangote Industries remain a true symbol of the resilience and doggedness of Nigerian businesses.
He said: “This singular action has the potential to affect the whole business value and supply chain.
“The crash in the price of diesel and jet fuel will have unimaginable positive impact on the cost of production, job creation and reduce pressure on forex and also increase the opportunity for many businesses to spring up along the value chain.”
Speaking further, the Director General stated that this singular act has further demonstrated and affirmed Dangote Industries as the foremost and dependable ally in nation building.
“The new price is in consonance with the company’s commitment to cushion the effect of economic hardship in Nigeria,” Dangote Group Spokesman, Anthony Chiejina, said.
The 650,000 barrel-a-day Dangote plant is readying two units to enable gasoline output that will transform the fuel market both in Nigeria and the region, according to analysts.
