Nigeria's jet fuel conundrum: Scarcity at home, abundance abroad

Nigeria has become Europe's top supplier of jet fuel, surpassing the United States. The 650,000 barrel-per-day Dangote Refinery outside Lagos has become an essential source of fuel for the African continent, following supply disruptions caused by the Iran war. Europe relies on imports of approximately 700,000 barrels per day to meet aviation demands, as Iran's Strait of Hormuz has been closed since earlier this year.

In April, the International Energy Agency expressed concern that Europe might only have six weeks of jet fuel supplies left. In response, four Italian airports introduced temporary restrictions on jet fuel use, limiting short-haul journeys to 2,000 liters per aircraft.

While Nigeria produces a record amount of jet fuel, equivalent to around 24 million liters daily, domestic airlines struggle to keep up with the surge in prices and market demands. Nigeria operates a fully deregulated downstream market where Dangote prices its products based on international parity, not preferential domestic rates. Consequently, fuel flows to where it pays the most, which currently is Europe, not Lagos.

Nigerian players learn that production capacity alone doesn't guarantee affordability at home. Regional airlines compete with international buyers who typically place larger orders, often without middlemen. Domestic airlines are economically less competitive in accessing the refinery's products, as if they were "halfway across the world."

Local aviation operators have accumulated over 60 billion Naira ($45 million; €38 million) in debt to sustain operations due to the surge in prices. Flight cancellations and delays further contribute to passenger dissatisfaction. Jet fuel prices have fallen to around 1,600 Naira per liter, compared to about 900 Naira before the Iran war.