How to start up kerosene business in Nigeria

                   

Kerosene is so popular that it is found across the country in both urban and rural areas.

Kerosene serves a lot of purposes in household even more than its common purpose of powering kerosene stoves for cooking and kerosene lanterns for lighting up the house during the dark.

Because it is used in virtually every home in Nigeria, kerosene is one of the fastest selling petroleum products in the country. And the story is the same in most other developing countries with erratic power supply.

In many third-world countries, kerosene (DPK or Dual Purpose Kerosene) is used extensively in both rural and urban areas for domestic purposes such as cooking, lighting kerosene-powered lanterns, and burning refuse. This explains why it fetches huge profits for oil and gas entrepreneurs in Nigeria and beyond.

Kerosene supply is a very lucrative business that can make you a millionaire within a couple of months; provided you run the business in Nigeria or in another country with similarly huge demand for the commodity. In fact, some entrepreneurs in these countries revealed that they realized all of their capital after the first 2 to 3 sales! Yes, the business is that lucrative.

3 Reasons why you should start a Kerosene retail business

Firstly, Nigeria (and other countries where kerosene is in huge demand) lacks stable electric power supply. And this explains why most people depend heavily on kerosene for cooking and other domestic purposes.

Secondly, Nigeria has a large population, comprising majorly of low income earners who buy kerosene because they simply cannot afford costlier energy sources. So, the market for kerosene in Nigeria (and many other countries in Africa) is very large.

Thirdly, the profit margin for kerosene is quite mouth-watering. You could buy the commodity at the rate of N50 ($0.3) per liter and sell at N100+ ($0.6) per liter. That’s 100% profit! Sometimes, you get more; sometimes, less.

Here are some of the things you need to get you started as soon as you can.

1. Register with the appropriate body or agency
Before you can start kerosene retail business, you will need to register with the specific regulatory body for kerosene sellers in your state or country. This body will then issue you a license and let you know the rules and regulations that bind selling kerosene.

Examples of such bodies are NUPENG (National  Union of Petroleum and Gas Workers), DPR (Department of Petroleum Resources), and the Kerosene Retailers Association. To obtain the necessary licenses, you need a tax clearance, VAT certificate, a sponsor and your certificate of incorporation.

In Nigeria, the regulatory body for kerosene requires that your surface tank must be placed at no less than 200 meters from that of another kerosene dealer. This is to avoid stiff competition. Also, the body requires that surface tanks be painted blue and taped with white lines in the middle. This is to indicate that the tanks are used for storing kerosene and not another commodity.

2. Research Your Business Location
Since the sale will be from the surface tank, you will need a business place or location where you can put your tank.

Any place where there is reasonable population of people is ideal for the business. It could just be in front of your resident or the nearest major road side. If it is in front of your resident, you wouldn’t need to spend extra money for the rent.

In which ever way, you may just budget N30,000 at most for that. In some cases, you may even get it for free depending on who you know.

3. Construction Your Surface Tank
The Welders will construct a very good surface tank for you. Look for a very good welder that is not far from the proposed business location to ease the cost of transporting the tank. Construct 10,000 litres volume tank but let them make it 10,500 litres to be able to accommodate all your Kerosene.

You can do 15,000 litres if you want. It wouldn’t cost you more than N100,000. Make sure it is properly welded to avoid leakage. Coat the inside and outside against rust, the welder will do that as well.

4. Ensure To Arrange with suppliers
While most of the kerosene sales in Nigeria are controlled by independent marketers of petroleum products, the Nigeria National Petroleum Corporation (NNPC) also controls up to 40% of kerosene sales in the country. This means that as a Nigerian marketer, supplier or retailer have two options to source your kerosene from.

You can either buy from the NNPC mega-stations sprinkled all over Nigeria or from any of the independent marketers. If you are not based in Nigeria, you may need to find out how kerosene is supplied in your country.

A good knowledge of market strategies suited to the location of your business is also a must have. Some people recommend a form of mentorship or internship for a brief period before a newbie launches his business. So he can study the market survey and adequately develop ideas that will help to build his own business successfully.

5. Get Your License Ready
If you are retailing below 10,000 liters of kerosene, the law exempts you from any form of licensing. However, when you are retailing above 10,000 liters, you are required to get some form of license as you business is no longer referred to as a small scale business.

6. Look For A Good Measuring Units
You need a form of measuring unit in order to sell your product. Find the acceptable unit of measurement in your location and stick to it, ensure that your measures are accurate and that you do not engage in sharp practices that may deprive your clients of the true value of their money. In some locations, kerosene is sold per liter, while some sell using bottles as their standard measure and offering units such as full bottle, half bottle and so on.

It has been predicted that you can make an average of between N10 and N25 on each liter of Kerosene you sell and even more during periods of scarcity. In December 2016, there was scarcity of kerosene across the nation; it was so for as high as N250 per liter and retailers resold at about N300 per liter.

7. Source For Your Kerosene
Independent Marketers controls more than 60% of Kerosene sales, while NNPC controls maybe 40% of the sales through the Pipeline and Product Marketing Company, a subsidiary of NNPC. You can buy directly from the source. I am seeking for additional information how you can get it from there and will update here very soon.

8. Launch Your Business
You can design a signboard or placard and position it near your tank. This will make people aware that you are selling kerosene. To attract customers, you may need to offer attractive discounts or bonuses at first. However, I want to point out that most kerosene retailers in Nigeria don’t advertise. Why? The reason is because there is always a steady supply of customers.

END NOTE
As with every other business, the sale of kerosene has its own risks and challenges, however, you are assured of a great investment if you put hardwork, devotion and dedication into your business, developing strategies that put you ahead of your competitors in the business.

WISHING YOU SUCCESS IN ADVANCE