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Airlines Decry Low Passenger Traffic, High Cost of Fuel

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Airlines in Nigeria
  • Airlines Decry Low Passenger Traffic, High Cost of Fuel

Some domestic airlines in Nigeria have decried “continuous decline in passenger traffic’’ and increasing cost of aviation fuel also known as Jet A1.

Speaking with the News Agency of Nigeria (NAN) on Wednesday in Abuja, Mr Abdullahi Saroke, Deputy Station Manager, Azman Air, said that many airlines were currently not having good in the business.

Saroke said that the price of fuel had increased by 100 per cent while the patronage had decreased by 30 per cent in recent time.

He added that the airlines that usually had its seats fully occupied in flight were now struggling to have up to 75 per cent of their seats booked and boarded.

According to him, it has not been easy for most airlines to cope with this situation occasioned by the current recession, including scarcity of dollar and high cost of fuel.

“As at January/ February, we were buying fuel at the rate of N115 and N120 per litre but as it stands today, a litre is sold at N220 in Lagos and N230 in Abuja.

“In places like far North such as Yola and Maiduguri, it sold at N250 per litre if you are able to get it.

“This has made it extremely difficult for the airlines to cope but for now, we will continue to manage the situation and fly because you cannot park the aircraft on ground.

“This is because in airline business it is only when you take off and land that you make money.

“What we simply do in Azman is to cancel some flights or try to reduce those frequencies, especially for Mondays and Tuesdays out of Abuja because those are low traffic days.

“So we try to see how we can merge flights to remain afloat to be able to break even,’’ Saroke said.

He said that the situation was also part of the reasons for the suspension of flight by Aero Contractor and the temporal shut down of operation by First Nation airline in September.

He added that if the situation lingered further, it could lead to loss of jobs in the industry, stressing that no airline would continue to pay salaries if they were not making profit.

According to the manager, no airline can continue to manage its entire work force for too long if the situation persists as they may look for a way to cut cost which may affect jobs in the long run.

He urged the Federal Government to take urgent steps towards addressing the challenges confronting airlines in the country, especially the domestic ones.

Sareko explained that the increase in the cost of ticket by the airlines did not commensurate with cost of operation, saying that the increment was about 30 per cent.

He said that the airlines feared a situation where too much increment in the cost of ticket could drive the bulk of passengers back to road transport.

“The lowest ticket before in any airline was N15, 000 and N16, 000 but now the lowest anyone can get is N22, 000 and N23, 000 if you book ahead.

Also, a staff of a charter flight operator in Abuja, Mr Yahaya Atabo, told NAN that air transport in Nigeria was facing a tough challenge owing to the current economic challenges.

Atabo said that airlines incurred more cost by the day without flying as result of poor patronage.

He explained that many of their clients now preferred to travel by commercial flights to save cost instead of travelling by charter flight.

NAN reports that the nation’s aviation sector has been facing challenges which range from scarcity of foreign currency to fuel scarcity and the cost of the fuel.

International airlines had recently decried difficulty in operating profitably in Nigeria due to their inability to repatriate their funds.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Climb as Markets Eye Potential US Rate Cuts in September

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Oil prices rose during the Asian trading session today on speculation that the U.S. Federal Reserve may begin cutting interest rates as soon as September.

Brent crude oil, against which Nigerian oil is priced, increased by 32 cents to $82.95 a barrel, while U.S. West Texas Intermediate crude oil climbed 34 cents to $80.47.

The anticipation of rate cuts stems from recent U.S. inflation and labor market data indicating a trend towards disinflation and balanced employment, according to ANZ Research.

The Federal Reserve is set to review its policy on July 30-31, with expectations of holding rates steady but providing clues for potential cuts in September.

The potential rate cuts could stimulate economic activity, increasing demand for oil. This optimism has been partially offset by recent concerns over China’s slower-than-expected economic growth, which could dampen global oil demand.

President Joe Biden’s announcement to not seek re-election and endorse Vice President Kamala Harris had minimal impact on oil markets.

Analysts suggest that U.S. presidential influence on oil production is limited, although a potential Trump presidency could boost oil demand due to his stance against electric vehicles.

In response to economic challenges, China surprised markets by lowering key policy and lending rates. While these measures aim to bolster the economy, analysts remain cautious about their immediate impact on oil demand.

With OPEC+ production cuts continuing to support prices, the focus remains on the U.S. Federal Reserve’s next moves.

Any decision to cut rates could further influence oil prices in the coming months, highlighting the interconnectedness of global economic policies and energy markets.

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Crude Oil

Dangote Refinery Clash Threatens Nigeria’s Oil Sector Stability

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Crude oil

Nigeria’s oil and gas sector is facing a new challenge as a dispute between Dangote Industries Limited and the Nigerian Midstream and Downstream Petroleum Regulatory Agency (NMDPRA) intensifies.

The disagreement centers on claims by NMDPRA that diesel from the Dangote Refinery contains high sulfur levels, making it inferior to imported products.

The $20 billion Dangote Refinery, located near Lagos, has the potential to process half of Nigeria’s daily oil output, promising to reduce dependency on foreign fuel imports and create thousands of jobs.

However, the recent accusations have cast a shadow over what should be a significant achievement for Africa’s largest economy.

Industry experts warn that the ongoing conflict could deter future investments in Nigeria’s oil sector.

“Regulatory uncertainty is a major disincentive for investors,” said Luqman Agboola, head of energy at Sofidia Capital. “Any factor affecting foreign investment impacts the entire value chain, risking potential energy deals.”

The regulatory body, led by Farouk Ahmed, maintains that Nigeria cannot rely solely on the Dangote facility to meet its petroleum needs, emphasizing the need for diverse sources.

This position has stirred controversy, with critics accusing the agency of attempting to undermine a vital national asset.

Amidst these tensions, energy analyst Charles Ogbeide described the agency’s comments as reckless, noting that the refinery is still in its commissioning stages and is working to optimize its sulfur output.

In response, Dangote Industries has called for fair assessments of its products, asserting that their diesel meets African standards.

The refinery’s leadership argues that certain factions may have ulterior motives, aiming to stifle progress through misinformation.

As the dispute continues, the broader implications for Nigeria’s oil sector remain uncertain. The outcome will likely influence not only domestic production but also the country’s standing in the global energy market.

Observers hope for a resolution that supports both industrial growth and regulatory integrity, ensuring stability in a sector crucial to Nigeria’s economy.

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Crude Oil

Nigeria Pumps 236.2 Million Barrels in First Half of 2024

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markets energies crude oil

Nigeria pumped 236.2 million barrels of crude oil in the first half of 2024, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

This figure represents an increase from the 219.5 million barrels produced during the same period in 2023.

In January, Nigeria produced 44.2 million barrels of crude oil while February saw a slight dip to 38.3 million barrels, with March following closely at 38.1 million barrels.

April and May production stood at 38.4 million barrels and 38.8 million barrels, respectively. June’s output remained consistent at 38.3 million barrels, demonstrating a stable production trend.

Despite the overall increase compared to 2023, the 2024 production figures still fall short of the 302.42 million barrels produced in the same period in 2020.

This ongoing fluctuation underscores the challenges facing Nigeria’s oil sector, which has experienced varying production levels over recent years.

On a daily basis, Nigeria’s crude oil production showed some variability. In January, the average daily production peaked at 1.43 million barrels per day (mbpd), the highest within the six-month period.

February’s production dropped to 1.32 mbpd, with a further decrease to 1.23 mbpd in March. April saw a modest increase to 1.28 mbpd, which then fell again to 1.25 mbpd in May. June ended on a positive note with a slight rise to 1.28 mbpd.

The fluctuations in daily production rates have prompted government and industry leaders to address underlying issues.

Mele Kyari, Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPC), has highlighted the detrimental effects of oil theft and vandalism on Nigeria’s production capabilities.

Kyari emphasized that addressing these security challenges is critical to boosting production and attracting investment.

Kyari also noted recent efforts to combat illegal activities, including the removal of over 5,800 illegal connections from pipelines and dismantling more than 6,000 illegal refineries.

He expressed confidence that these measures, combined with ongoing policy reforms, would support Nigeria’s goal of increasing daily production to two million barrels.

The Nigerian government remains focused on stabilizing and enhancing oil production. With recent efforts showing promising results, there is cautious optimism that Nigeria will achieve its production targets.

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