KEROSENE BUSINESS

Kerosene also known as dual purpose kerosene (DPK) probably has the highest market demand per liter profit of the three commonly used petroleum products. The other two are petrol also known as PMS (premium motor spirit), diesel also known as AGO (automotive gas oil). It is used in cooking and in other household domestic purposes.

Kerosene is a commodity that is used every day. In fact, people cook every day and 70% of these use kerosene. The people who use kerosene are predominantly average and the poor population. Most of them usually go a distance to get it. One can start this business with 50 liters containers in the neighbourhood. It has been selling every other place. Yours won’t be a failure if you start it today. One problem people have is to make the first step, shame and fund. Our Nigerian people don’t like to start small. But this kind of business doesn’t require much capital and can be done even in any unrented space. By the time you do it for a month you will know what you have been missing. Your stock would have doubled by half. Before you know it, you begin to dream to get a reservoir tank. It’s that lucrative and the product is readily accessible.

People most times know where to get things they use, but if you take it to them, they will still appreciate it. So it is left for you.

Kerosene storage and sales business is one of the easiest and cheapest oil and gas business you can invest in. Kerosene business is a very lucrative business but it is as well volatile. You have to constantly watch the market. Profit can be from N30 to N40 per liter, sometimes you get it from the depot at N130, but on retail it would be about N150 to N250.In a normal situation where there is no scarcity, you can make between N10 to N35 per liter on kerosene. Kerosene business is therefore highly lucrative if done properly.

Start-up

The quantity you are starting off with will depend on your start-up capital. If you are starting with below 10, 000 liters of kerosene, the law excludes you from obligation to obtain a license to venture into the kerosene storage and sales business because it is regarded as a small scale business. Basically to start a kerosene business, some people decide to build storage tanks, this is necessary if you have enough capital. Depending on the size of the tank, it could be between N150, 000 to N200, 000 liters. If you don’t have enough capital as the case may be, you could get drums of 200 liters. They cost about N3, 000 to N4, 500 depending on where you are buying them from. Starting with 1, 000 liters, you need just five drums. In this case you only need to get buckets and measuring cans.

Also, you need to know someone or a petrol station that has constant supply of kerosene. A trader in oil and gas that can supply you regularly and you are in business. You can store up to 10, 000 liters in your residential house.

Profitability

Kerosene is a product that is demanded on daily basis. You can’t lose in kerosene business. You would have observed that the selling price of kerosene varies from time to time and place to place. The forces of demand and supply determine the price of kerosene and the profit potential. The profit potential is usually estimated per liter. Today, kerosene profits range from N10 to N35 per liter or even more depending on availability.

Let’s assume you bought 1, 000 at N140 per liter (price is subject to change reflecting the oil prices at the current time); N140 x 1, 000 liters = N140, 000 plus N5 per liter transport cost on 1, 000 liters which is N5, 000 making a total of N145, 000. This depends on the distance though. You can add N20 on each liter, though depending on the area you are situated. In all, you would have made a profit of N20, 000. Depending on your location, you can sell 1, 000 liters in a day. The profit margin for kerosene is quite mouth-watering. Sometimes, you get more; sometimes, less.

Even though most middle and upper-middle class Nigerians prefer cooking with gas, the need for kerosene cannot be completely eliminated. This is because a number of low-income earners in Nigeria surpass the middle and upper-middle class and for this category of people, cooking with kerosene is much more affordable. A lot of middle class citizens still use kerosene for cooking alongside gas. So, if you are thinking of going into kerosene retail business, demand is certainly not a problem.

Requirements

Some of the things that you would need to start your kerosene business include-:

Certification

You cannot just start kerosene business without proper registration and licensing. You need to register your business with the Department of Petroleum Resources (DPR) and the Petroleum Products Marketing Company (PPMC). Upon registration, you would receive a certificate which would permit you to buy your kerosene in wholesale directly from the NNPC. This makes it possible for you to have access to products cheaply. However, this process takes time and of course, would cost you money.

But if you want the easy way out, you can become an indirect marketer. As an indirect marketer, you would source for your products from registered marketers. Although you would get products at a more expensive rate compared to buying directly from the depot.

Location

You need a strategic location, a residential area with movement of people. In most places, people transport to get the product. Look around in your city and see areas that don’t have such products around. It might not be necessarily where you live. You could find a good area a few kilometers from where you live. Some kerosene marketers own filling stations which they use in selling kerosene alongside other petroleum products but if you cannot afford to build yourself a station, you can just set up a depot in a safe place. I have even seen people set up kerosene mini-depots in front of their homes. However, you must take issues of safety very seriously if you decide to go with this option.

Dispensing Pump

Dispensing pump is necessary for someone who has enough capital. To make it easy for you to sell your product, you should get an automatic dispensing pump. You can easily get them from dealers in major Nigerian cities. However, if you still don’t know where to get one, you can try to ask from people who are already into the business; they can easily point you in the direction where they got theirs. An automatic dispensing pump would make your job really easy as you would be able to easily measure your products and charge your customers correctly. If you are going to start with drums you don’t need dispensers.

Petroleum Tanker

This is only necessary for people who are starting kerosene business on a large scale. If you have registered with PPMC and DPR and want to be buying your products directly from the depot even start supplying other kerosene sub-dealers, you would need a petroleum tanker to move your products around easily.

Generator set

This is also for people who are using the dispenser and selling from a big tank. Generator would be needed to power the dispenser.

The amount you need to start a kerosene business would depend on the scale you wish to operate. With about N200, 000 or less, you can set up a small-scale kerosene business in your neighborhood or somewhere close. But if you want to operate this business on a large scale, you should be ready to spend at least 1 million naira.

Final note

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