Fresh tension is brewing in Nigeria’s aviation industry over the extension of the Federal Government’s naira-for-crude initiative to aviation fuel, with major Jet A1 marketers warning that the policy could trigger a serious operational and financial crisis across the sector within weeks.
President Bola Ahmed Tinubu introduced the naira-for-crude policy in October 2024 as part of efforts to stabilise the local currency, reduce pressure on foreign exchange demand, and encourage domestic refining. But its extension to Jet A1 pricing appears to have failed on arrival because aviation fuel remains a globally traded commodity benchmarked in United States dollars.
The concerns were raised by Dr. Thomas Ogungbangbe, founder and Chief Executive Officer of CITA Energies Ltd, one of Nigeria’s leading aviation fuel suppliers, during an interview with Daily Independent, where he warned that the policy, if not urgently reviewed, could destabilise the aviation fuel supply chain and spark another round of confrontation between airlines and fuel marketers.
Tinubu’s naira-for-crude policy, introduced amid Nigeria’s worsening foreign exchange crisis and rising petroleum import costs, was designed to allow local refineries, including Dangote Petroleum Refinery, purchase crude oil from the Nigerian National Petroleum Company Limited (NNPCL) in naira instead of dollars.
Under the arrangement, local refineries would refine petroleum products domestically and sell products such as Premium Motor Spirit (PMS) in naira to Nigerian consumers, thereby reducing dollar demand in the downstream petroleum sector and helping to stabilise pump prices.
The policy was initially welcomed by many analysts as a strategic move to deepen local refining capacity and reduce dependence on imported fuel. However, the aviation sector now fears that extending the arrangement to Jet A1 without considering the international pricing structure governing aviation fuel may worsen existing pressures on airlines and marketers.
Speaking on the development, Ogungbangbe said the market had largely rejected the naira-denominated pricing framework for Jet A1 because aviation fuel pricing globally is tied to international benchmarks and formula pricing systems.
“Yes, it’s currently being sold in naira but it’s not appreciated,” he said. “Because it’s a global commodity that is priced anywhere. I’m not sure anybody complained about selling Jet fuel in dollar because it’s dollarised and there’s formula pricing.”
He described the policy as “a major disservice” to the aviation industry, insisting that the current framework heavily favours the refinery at the expense of marketers and airlines.
“So taking it to naira now is a major disservice which is not appreciated,” he stated. “If they are going to do naira, whatever, then they should make it either-or. That is, if you want to buy in naira, fine. If you want to buy it in dollar, fine.”
According to him, marketers are currently unable to align the refinery’s naira pricing with their existing contractual obligations to international airlines whose agreements are benchmarked against global Platts pricing indices and denominated in dollars.
He claimed that the discrepancy between global pricing benchmarks and Dangote Refinery’s naira-based pricing structure could lead to massive financial losses for fuel suppliers.
“If we do dollars out today, you are going to be buying at $15.64 but Dangote is selling at $17.50,” he alleged. “So it’s just engaging everybody like J.R.”
Ogungbangbe warned that the industry may witness another major uproar in the coming month if authorities fail to review the policy direction.
“Returning to naira is a major disservice to the industry, which will cause another uproar very soon. That’s probably what you can expect next month,” he said. “Most of the people making policy lack knowledge of what the market is all about. When you put a square peg in a round hole, that’s what you get.”
He further accused policymakers of failing to understand the operational dynamics of the aviation fuel market.
“That’s why we keep doing dilly-dally. The people taking decisions are people that do not understand the dynamics of the markets.”
The CITA Energies boss proposed a dual-pricing structure that would allow marketers to buy Jet A1 either in naira or dollars depending on the nature of their transactions and customer obligations.
“They can sell in naira for those who cannot access dollars, but they should also allow dollar pricing and formula pricing,” he said. “Leaving Dangote to be announcing refinery price is against the international norm on Jet fuel. You can do that for PMS or AGO.”
He insisted that the present arrangement was unsustainable and tilted entirely in favour of the refinery.
“We are not satisfied with the policy, and people are starting to be more agitated. Be expecting that there’s going to be a major showdown next month because he’s just ripping off everybody and nobody’s making profits.”
Explaining the potential financial impact, he stated that marketers fixing forward prices in dollars were now exposed to severe exchange and pricing losses under the current regime.
“For example, now I’m going to be selling next month, buying at $17.50 and I will be selling at 15-something. I’ll be losing N200 per litre. “So if I sell 10 million litres in a month, I’ll be losing N2 billion.”
He added that many marketers might soon stop lifting products entirely if the pricing imbalance persists.
“Instead of selling, we only declare that there is no product. Meanwhile, there is product and he will say ‘I have product’. So how do I buy when you have leveraged my price? The lever is tilted. Everything is in his favour.”
The growing disagreement has now culminated in a formal letter written by CITA Energies Ltd to Dangote Refinery requesting the immediate introduction of a dual-pricing mechanism for Jet A1 purchases.
In the letter addressed to President of Dangote Group, Aliko Dangote, the company argued that restricting aviation fuel transactions to naira pricing was creating “a mismatch” within its commercial structure.
The letter partly reads: “A significant portion of our clients are international airlines whose contracts, pricing benchmarks, and payment obligations are denominated in USD, with monthly pricing differentials aligned to global market indices.
“Restricting our purchases solely to naira pricing creates a mismatch in our commercial framework and limits our ability to efficiently service these clients.”
The company also argued that allowing transactions in dollars for international operations would help marketers manage foreign exchange exposure and maintain seamless service delivery.
“While the naira pricing option remains suitable for our local clients, it does not provide the required flexibility for our international portfolio”.
“As such, having the option to transact in USD at the gantry will allow us to better align with our contractual obligations, manage FX exposure, and sustain operational efficiency across all locations.”
The latest controversy comes against the backdrop of a prolonged crisis in the aviation fuel market that has repeatedly threatened airline operations in Nigeria.
Only a few weeks ago, the Airline Operators of Nigeria threatened to shut down flight operations nationwide over the rising cost and scarcity of Jet A1.
At the height of the dispute, operators accused fuel marketers of arbitrary pricing and exploitative practices, warning that many domestic carriers were struggling to sustain routes and frequencies amid soaring operational costs.
The situation became so tense that the Minister of Aviation and Aerospace Development, Festus Keyamo, was compelled to intervene in order to prevent a total disruption of flight operations.
As indicated, the current disagreement over naira pricing may reignite tensions between airlines, marketers and suppliers.
Ogungbangbe, however, maintained that Jet A1 pricing challenges are not unique to Nigeria, noting that aviation fuel remains one of the biggest threats to airline survival globally.
“Jet fuel is a global commodity that is uniformly priced worldwide and it affects airlines in the world the same way,” he said.
He praised the resilience of Nigerian airlines despite mounting pressures and cited recent collapses and distress faced by foreign carriers linked partly to fuel costs and global operational challenges.
According to him, airlines such as Spirit Airlines, Royal Air Philippines, Tailwind Air, Eastern Airways, PLAY Airlines, Braathens Aviation, Ravn Alaska and Ascend Airways had all experienced severe financial distress within the past year, while Nigeria’s Rano Air also battled operational difficulties.
On possible policy solutions, Ogungbangbe urged the Federal Government to eliminate refinery premium charges tied to Platts pricing, remove multiple levies imposed on Jet A1, and return the product fully to free-market importation.
He specifically called for the removal of the N2.50 per litre FAAN surcharge, the 0.5 percent NMDPRA levy, 0.5 percent NCDMB charge and 0.5 percent CIT tax imposed on aviation fuel.
He also reiterated that subsidy removal did not trigger the present crisis because Jet A1 had already been deregulated since 2001 under former President Olusegun Obasanjo.
“Subsidy removal never affected Jet fuel pricing or availability as Jet fuel has been deregulated since 2001,” he said.
As pressure mounts, unless regulators urgently address the widening gap between global aviation fuel pricing mechanisms and Nigeria’s domestic policy framework, the country may soon witness another major confrontation capable of disrupting airline operations, worsening airfares and deepening instability within the aviation sector.