There is an indication that more Nigerian airlines may close shop as the current economic downturn has hampered airlines operations.
Industry experts have expressed concern that the forex scarcity is taking a huge toll on the aviation sector because virtually everything done in the airline business requires foreign exchange, except the purchase of aviation fuel.
Investigation has revealed that already Nigerian airlines have lost over 45 percent of their passenger traffic while the value of their ticket has also nosedived.
An operator on Wednesday explained why the air transport sector is fairing badly under the present economic morass. He expressed doubt about the possibility of the airlines to survive, if the recession continues in the next six months.
“I doubt whether Nigerian airlines will survive the next six months if naira does not gain value and continues to lose against the dollar. Practically, let us look at the popular aircraft many Nigerian airlines use: Boeing B737. Average number of seats on that aircraft is 120 and if the fare for Lagos to Abuja flight is N25, 000 the airline will generate N3million for every flight.
“At the exchange rate of N400 for $1 dollar that N3million will be $7, 500. But 18 months ago, naira was exchanging N165 for $1 and the value of the same N3million $18, 750. Then during that period aviation fuel was costing N110 per litre and today it costs N220 per litre and the fuel volume for that one hour flight from Lagos to Abuja is 3000, including endurance fuel.
“About 18 months ago 3000 litres of fuel would cost N330, 000, but at the present price, it costs N660, 000. You have to note that airfares have not changed. It is just around that N25, 000. So the fuel price increased by 100 per cent while the value of the dollar has increased by over 200 percent.”
He also noted that as the value of naira has plunged, airlines still pay their expatriate workforce in dollars and these include pilots, engineers and others that are providing technical services and some Nigerian pilots that insist they be paid in dollars.
“So you can see that we spend more money in naira for far less number of dollars and this means that it is only for $7, 500 that a flight leaves Lagos to Abuja and vice versa,” he said.
The operator also disclosed that when an airline leases aircraft, the average calculation is that the airline will pay the lessor about $12, 500 per hour of the aircraft operation and, according to him, the amount could come down to $12,500 when the airline is making a bulk lease of the aircraft of over 200 hours.
So what this means is that while the Nigerian airline earns $7500 per one hour flight, it pays the lessor $12, 500 for one hour and incurs a loss of $5000 in each flight.
“This shows clearly that these airlines will not survive if the recession period is prolonged. So pilots, engineers, aircraft maintenance, insurance, spare parts and training are paid in dollars. This is a sector that is dollarized. So how can anybody survive this? This is simply a matter of postponing the evil day,’ the operator said.
In addition to the above, the airline pays for landing and parking, enroute and navigation charges to the Nigeria Airspace Management Agency (NAMA) and other miscellaneous expenses.
In a recent interview with the Minister of State for Aviation, Senator Hadi Sirika, he promised that government would facilitate the establishment of aircraft maintenance facility in Nigeria and also a leasing company so that Nigerian airlines could lease aircraft at cheaper cost and also maintain their aircraft locally. The cost of maintenance for C-Check begins from $600, 000 to over $1 million.
Oil Slips With Energy Prices in Europe Halts Record Rally
Oil dipped toward $72 a barrel in New York after prices of energy commodities in Europe halted a record-breaking run.
West Texas Intermediate futures fell 0.6%, having reached the highest intraday level since early August on Wednesday. A rally in European gas and power prices to unprecedented levels was set to end as industries were starting to curb consumption. The surge in energy rates could temporarily boost diesel demand by as much as 2 million barrels a day as consumers switch fuels, according to Citigroup Inc.
Still, the bullish signals for oil are continuing to increase. U.S. crude inventories dropped by more than 6 million barrels last week to a two-year low, according to government figures, as coronavirus vaccination programs permit economies to reopen. Chevron Corp. Chief Executive Officer Mike Wirth warned that the world is facing high energy prices for the foreseeable future.
The investor optimism is showing up in key oil time spreads widening. Trading of bullish Brent options also surged to a two-month high on Wednesday.
Prices have been pushed higher in recent days “by supply outages combined with expectations of switching from gas to oil in the power sector,” said Helge Andre Martinsen, a senior oil market analyst at DNB Bank ASA. “We still believe in softer prices toward year-end and early next year as curtailed production returns and OPEC+ continues to increase production.”
Strong prices for gas, liquefied natural gas and oil are expected to last “for a while” as producers resist the urge to drill again, Chevron’s Wirth told Bloomberg News. Norway’s Equinor ASA said Thursday it also expects European gas prices to remain high over winter.
Fuel Scarcity: Petrol Sells N220 Per Litre in Nsukka
Premium Motor Spirit, otherwise called petrol, now sells for between N200 and N220 per liter at the independent marketers’ service stations in Nsukka, Enugu State.
The News Agency of Nigeria is reporting the hike in the price against the official pump price of N162 per liter.
It said it started about a fortnight ago due to the scarcity of the commodity in the town and its environs.
Some residents of the town expressed deep worry over the development in separate interviews with NAN on Wednesday.
A civil servant, Stephen Ozioko, said the situation had further compounded the economic difficulties in the area.
Ozioko said many private car owners had been compelled to park their vehicles at home and move around in public transport.
He said: “Since the scarcity started, I decided to park my car and take public transport to the office and back home. N220 per liter is exorbitant and I cannot afford it considering my salary as a civil servant. I shall continue to use public transport until the situation returns to normal.”
A building material dealer, Timothy Ngwu, said the development had also led to an increase in transport fare in the area.
Ngwu said: “Some people now trek from Nsukka Old Park to Odenigbo Roundabout because of the 100 percent hike in fares from N50 to N100 by tricycle.
“Before now, transport fare from Nsukka to Enugu was N500, but transporters now charge between N800 and N1000.”
Also, a commuter bus driver, Victor Ogbonna, described the scarcity and hike in the price of petrol as “unfortunate and an ugly development”.
Ogbonna added: “Today, only a few filling stations are selling the commodity in Nsukka town, while others are shut.”
He alleged that some filling stations, which claimed to be out-of-stock, were selling to black marketers at night.
He said: “This is why black marketers have sprung up everywhere in the town, selling the commodity for about N300 per liter.”
NAN reports that virtually all the major marketers in the area have stopped the sale of petrol, claiming to be out-of-stock.
The people called on the government to urgently intervene in order to bring the situation under control and also put an end to its harsh economic effects on the messes.
DPR Targets N3.2T Revenue by Year-End
Nigeria’s Department of Petroleum Resources (DPR) will hit the N3.2 trillion revenue target by December 2021, according to its Director/ Chief Executive Officer, Mr Sarki Auwalu.
Auwalu made the disclosure when he led a delegation of the DPR management team to the Executive Secretary of Petroleum Technology Development Fund (PTDF), Mr Bello Gusau, in Abuja on Wednesday.
He said that 70 percent of the revenue projection had already been met. “Last year, we exceed our revenue budget. We were given N1.5 trillion but we were able to generate N2.7trillion.
“This year, our revenue budget was N3.2 trillion. By the end of August 2021, we have generated up to 70 per cent.
“So, we with September, October, November and December, it is only the 30 per cent that we will work over,’’ he said
He noted that the government took advantage of fiscal terms within the old and new legislation, thereby creating a level of increased signature bonuses.
“We reorganise the work programme that is normally being done in the DPR to key into the new operational structure as we see it in the bill, now an act.
“That programme is being handled by the planning and strategic business unit as against what we use to have because the entire work programme is supposed to show not only technical but also commercial and viability of oil fields and to guarantee the return on investment for investors.
“We have also created an economic value and benchmarking unit to key into the new fiscal provisions of the PIA,’’ he said.
Commenting on capacity, Auwalu said the country stands at the advantage of exporting skills to emerging oil and gas countries across Africa with proper implementation of the newly passed Petroleum Industry Act.
This, he said, the DPR was ready to partner with the Fund to continue to build capacity in the oil and gas sector
He noted that the Federal Government was determined to create leeway that would encourage investors and drastically improve the nation’s petroleum industry.
He further noted that no fewer than 300 legal battles in the oil and gas industry in Nigeria, which had been stalled for the past 20 years in courts, had been resolved through alternative dispute resolution.
According to Auwalu, the DPR is strategising well to ensure effective implementation of the PIA.
Responding, Gusau commended the DPR for enabling the industry and enhancing business activities in the oil and gas sector.
He said that DPR remained the head of the oil and gas industry in Nigeria adding that the Fund was grateful to benefit from the wealth of ideas from DPR.
“The last time we visited, we had a good discussion and issues raised are being implemented like tracking the inflow of funds in signature bonus accounts.
“We extended the meeting and involved ministry of Finance, Accountant General office and even the Central Bank of Nigeria (CBN).
“Sitting at field development plans and attending significant meetings, helped us to know where and what the industry is trying to do and it also helps to inform our decisions in training and capacity plans,’’ he said
He urged the DPR to continue on its effort to ensure an efficient and productive petroleum industry in Nigeria
He assured collaboration with all as the head of the implementation committee of the Petroleum Industry Act. (NAN)
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