Petrol Stations in Nigeria are very critical to the
national economy. They are the main energy sources for powering automobiles,
generating sets and other locomotive engines in the country. Due to their
strategic role in ensuring that transportation services run smoothly, they also
aid commerce and facilitate communication services. Without them, the Nigerian economy
would collapse. Think back to the fuel scarcity period when economic activities
are suddenly grounded because of long queues of vehicles around fueling
stations everywhere.
In this sample business plan, I am assuming the
filling station will only dispense petrol and sell other packaged products such
as engine oil, grease etc and will also generate revenue from rent charged to
tenants (tyre service centers, mechanic workshops etc). You can also start a
petrol station without your own tanker, but that means you will have to rent
one to supply your station. It is however better to own your tank because you
can also make money from it by renting it out to other stations that may need
it.
The petrol station business is relatively stable and
sustainable long term business when located in the right place where adequate
sales can be guaranteed. It is not suitable for people looking for quick
returns on their investments within 5 years but for people looking at 10 or
more years. It is capital intensive and
Market Overview
of Petrol Stations in Nigeria
Petrol/Filling stations (or fueling stations) are
part of the downstream subsector of the Nigerian Petroleum Industry providing;
petrol, diesel, kerosene, engine oil, lubricants to name a few. But the main
product sold is petrol for which local daily demand is over 40 million liters.
Diesel is also sold but mainly in wholesale with distributors supplying homes, factories,
churches, other private corporate establishments, shopping malls, schools,
government offices and large transporters.
·
Diesel consumption in Nigeria as at 2016 was worth
over 1 trillion naira but usually by commercial customers
·
Petrol which has the highest sale attracted over 3
trillion naira in sales
·
There are over 30,000 petrol stations in Nigeria
·
The largest regional markets for petroleum
retailing are Lagos, Rivers, Kano and FCT
|
In addition to this, many petrol stations also
retail cooking gas, household consumables and groceries. There are different
categories of petrol stations in Nigeria depending on what they are retailing such
as;
- Standalone fuel dispenser pump (usually found in semi-urban towns
- Mini fuel station (less than 6 dispenser fuel pumps) found in many towns
- Standard fuel station (6 to 20 pumps)
- Mega filling station (more than 20 pumps)
They are usually sited along busy roads, busy
streets, close to very popular landmarks and in commercial settlements with
high vehicular traffic.
The Nigerian petroleum downstream sector grew by
10.8% in 2016 despite the challenges in the industry among which are unstable
products supply, uncertainty over price due removal of subsidy on nearly 90%
average of imported products consumed locally.
Opportunities for Filling Station Business in Nigeria
From over
20 opportunities identified, these are just a few;
- Petrol, kerosene and diesel remain the most affordable, available and viable energy sources for a larger number of individuals, families and businesses in Nigeria
- Technology to develop alternative sources of energy is either too expensive or primitive at best
- Nigeria’s population is growing fast with ever rising need for people to move, work and do business putting pressure on petroleum suppliers
- Higher opportunity costs in the face of petrol scarcity implies that petroleum products are extremely important to the national economy hence there is a guaranteed market
- Urbanization is increasingly broadening the daily demand for various petrol products
Other Related Sample Business Plans
- Supermarket Business Plan
- Pharmacy Retail Store Sample Business Plan
- Hair and Beauty Salon
- The Furniture Making and Showroom Business Plan
Some Challenges of Running a Filling Station in Nigeria
Among 25
identified challenges owners of filling stations in Nigeria would likely face,
the following is just a shortlist;
- Unstable Foreign exchange rates
- Low production levels from existing refineries
- Corruption among petroleum downstream regulators
- Inconsistent government policies
- Huge capital investments required for set up
- Difficulty in accessing finance for expansion
- Low profit margins
- High cost of maintenance
- Removal of fuel subsidy
- Industrial actions from trade unions
Many of
these challenges have negative impact on sales, profit and growth opportunities
for operators.
The Future of Petrol Stations in Nigeria
With the
effect of fossil fuel consumption on global warming, pollution and the need to
conserve resources, many organisations are working out plans to reduce or
eradicate altogether fossil fuel based vehicles in favour or more efficient and
environmentally friendly sources. Already there are cars that run on hydrogen
fuel gotten from water, ethanol, solar powered cars and Volvo has already made
plans to start mass producing cars that don’t use petrol or diesel from 2019.
Globally, demand for environmentally friendly cars such as Tesla have been
seeing steady growth year on year.
Add the
fact that fossil fuels are finite and will one day dry up, the future of this
market is uncertain beyond 50 years from 2017 which means that we may not have
profitable filling stations by 2067 or they would have been replaced by more
environmentally viable service stations. Then there is the rapid global
population growth which will only lead to higher energy needs, again reducing
the available crude oil reserves further.
There is
also shale oil which has been touted as possible replacement for crude oil and
it is in even more abundant supply, but the problem is the technology for
exploiting it is too much for now.
What are the Startup Requirements for a Standard Petrol
Station in Nigeria?
- Petroleum Stock – 4,800,000
- 6 Fuel Dispenser Pumps (plus cost of installation) - 6,600,000
- 1 Generating Set – 12,000,000
- 1 NO of 33,000 liter Fuel Tanker – 35,000,000
- Other stock (Lubricants, engine oil etc) – 300,000
- Building Construction Cost – 80,000,000
- Others – 6,700,000
- Total – 130,400,000
Basic Financial Summary and Projections
Based on
average daily sales of 21,000 liters of petrol @ 145 naira per liter for 360
days in a year and sale of other products plus rent income from tenants and (other
indices not indicated), first year sales projection for a standard filling
station could look like this;
- Total Fuel Sales – N1,096,000,000
- Other revenue – N38,641,000
- Total Revenue – N1,134,841,000
- Cost of sales – N1,089,447,360
- Gross Profit – 45,393,640
- Operating Expenses – 34,045,230
- Net Profit before Tax - 11,348,410
- Taxation – 3,404,523
- Net Profit after Tax – 7,943,887
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