By Adewale Sanyaolu

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The sudden shift by Nigerians from the use of dirty fuel such as kerosene, firewood and charcoal to a cleaner and more environmentally friendly source of energy, which is the Liquefied Petroleum Gas (LPG) popularly called cooking gas, may have opened a new vista of investment opportunities for Nigerian entrepreneurs.
Though Nigeria still ranks lowest in per capita usage of LPG with 1.1 kilogramme consumption rate behind South Africa, Morocco and Ghana, the intervention of the Nigerian Liquefied Natural Gas (NLNG) Limited has somewhat helped Nigerians to embrace the use of LPG. Prior to the intervention of NLNG in the domestic  gas market, the use of LPG was exclusively for the rich because the price was out of the reach of the common man as LPG was majorly imported with annual consumption rate of 70,000 metric tonnes per annum.
The coming on stream of NLNG broke that monopoly and afforded a lot of Nigerians to begin the use of LPG as against the kerosene and other unconventional sources of energy.
The incursion of NLNG into the domestic gas market equally created massive investment opportunities for local players to key into the LPG value chain business.
Nigeria, according to statistics from the Nigeria Liquefied Petroleum Gas Association (NLPGA), currently consumes 385,000 metric tonnes of LPG per annum, up from the 2013 consumption of 250,000. This is even considered too low when compared with Ghana, Senegal, Cameroon and Kenya’s utilisation.
Despite the massive investment opportunities that abound in this sector, one area that is still largely untapped is investment in LPG plant. While other areas of the value chain such as the retail arm, gas accessories and parts, investment in LPG is at its lowest ebb.
This development can be said to be partly responsible for the high cost of cooking gas because there are only few players in this sub-sector of the LPG arm of business, with the few operators smiling to the banks on a daily basis as a result of huge returns on investment.
Establishing LPG plant
Cooking gas business is very profitable and you don’t have to break the bank before you can start. With N1,500,000, you will get your business set up and ready to go with almost everything necessary in place. And this is a big business that anyone who is into it can be proud of.
But beyond the financial requirement needed to establish an LPG plant, there are statutory regulatory guidelines that must be met before license can be issued. These standards are prescribed by the oil and gas industry regulator – Department of Petroleum Resources (DPR).
Application procedure
According to documents made available to Daily Sun by NLPGA, prospective investors shall, in accordance with Part VI, Section 87, Sub-section (2) of the Petroleum Regulation 1967, petroleum gas plant or installation shall not be constructed or modified without approval granted by DPR.
Accordingly, all applications for approval to construct/modify an LPG plant or installation shall be addressed to the Director of Petroleum Resources, giving full details of the proposals. Each application shall be accompanied by three copies of the following:
Detailed approved plans drawings showing the existing or proposed buildings on the site and the relative distances to the roadways and adjoining properties, alongside    piping and instrumentation diagram of the gas filling plant and sectional design drawings of the storage tanks shall equally be provided.
The NLPGA document stipulates that a certificate signed by the Chief Federal/State Fire Officer or an officer authorised by him in that behalf, that he is satisfied with the proposed arrangements for the prevention of fire; letter from the appropriate town planning authority authorising siting of the LPG filling plant at the proposed arrangements for the prevention of fire and an evidence that the company is duly incorporated by the Federal Ministry of Trade to deal in petroleum products.
Other requirements include current three-year tax clearance certificate, codes, standards and specifications adopted in the design of the tanks, non-destructive examination report or pressure test report of the LPG storage (pressure) tank and an application fee of N10,000 in bank draft drawn in favour of the Federal Government of Nigeria, DPR payable on submission.
Risks in LPG business
According to Darlinton Omeh, an investment analyst, every business has its peculiar setback and the biggest risk in cooking gas business is fire explosion, which is very common due to the high inflammable nature of liquefied natural gas. That isn’t much problem though since it can easily be mitigated or even avoided.
‘‘To be able to curtail this, you need to be alert at all times to detect when there is leakage in those cylinders as leakage is one of the major causes of fire and explosion. You also need to buy good fire extinguisher that can be very handy in time of minor fire outbreak,’’ he said.
Another risk in the business is government regulation. Should government decide to increase the price of LPG today, some consumers may find it difficult to take and have to go back to using kerosene or firewood. If that happens, you lose some customers and your sales will drop.
However, government is always trying to reduce the price of cooking gas to encourage its usage and discourage deforestation.
Other opportunities
Another opportunity inherent in the cooking gas value chain is the sale of cylinders and accessories, which can be managed alongside the gas plant, offering a one-stop service for customers.
Omeh, in a recent online publication titled, ‘‘Investment Opportunities in LPG’’ said, ‘‘let’s take the 12.5kg cylinder as a case study; the average profit you make from 12.5kg cylinder of cooking gas is N500. You buy for unit cost of N2,500 or less and sell for N3,000 or higher. If you sell 10 cylinders in a day at the average profit margin of N500, you will be making N5,000 daily. In a month, you will be making N150,000.
“This is relatively the lowest profit you can make in cooking gas business if you are in respectable position where you get good patronage. Most people make much more than what I calculated here. So, it’s not in any way by exaggeration.
“For a business you started with N300,000, N150,000 profit is a super profit by all standards. Imagine if you invest more resources and take it higher, your profit will be much more mouth watering. Gas companies, both the suppliers and retailers are making good money in the business,’’ he said. It is good news that more Nigerians are beginning to use cooking gas for various domestic cooking purposes. That will help decrease the problems of deforestation and help conserve the nation’s natural forests and prevent potential disasters inherent in desert encroachment such as erosion.
Apart from the environmental benefits, the increased number of people, especially in urban areas, who are using cooking gas has created good business opportunity for smart entrepreneurs who can now trade on cooking gas and cooking gas equipment to make good profits.
Cooking gas business is very profitable and you don’t have to break the bank before you can start. With N300,000, you will get your business set up and ready to go with almost everything necessary in place. And this is a big business that anyone who is into it can be proud of.
Gas cylinders
How exactly can one start cooking gas business in Nigeria? Before we go into the details, let us first take a look into the profit potential in this business as well as the risks involved.
How profitable is cooking gas business in Nigeria?
Let’s take the 12.5kg cylinder as a case study; the average profit you make from 12.5kg cylinder of cooking gas is N500. You buy for unit cost of N2,500 or less and sell for N3,000 or higher. If you sell 10 cylinders in a day at the average profit margin of N500, you will be making N5,000 daily. In a month, you will be making N5,000×30 = N150,000.
This is relatively the lowest profit you can make in cooking gas business if you are in a highbrow locality where you get good patronage. Most people make much more than what I calculated here. So, it’s not in any way by exaggeration.
For a business you started with N300,000, N150,000 profit is a super profit by all standards. Imagine if you invest more resources and take it higher, your profit will be much more mouth watering. Gas companies, both the suppliers and retailers, are making good money in the business. You can become one of them today if you act now!
The potential risks in cooking gas business
Every business has it’s peculiar setback and the biggest risk in cooking gas business is fire explosion, which is very common due to the high inflammable nature of liquified natural gas. That isn’t much problem since it can easily be mitigated or even avoided.
To be able to curtail this, you need to be alert at all times to detect when there is leakage in those cylinders as leakage is one of the major causes of fire and explosion. You also need to buy good fire extinguisher that can be very handy in time of minor fire outbreak.
Another risk in the business is government regulation. Should government decide to increase the price of LPG, some consumers may find it difficult to take and have to go back to using kerosene or firewood. If that happens, you lose some customers and your sales will drop.
However, government is always trying to reduce the price of cooking gas to encourage the usage and discourage deforestation.
Now that you are aware of the risks in the business and you think it is what you can handle, how do you get to start this business and what are the things you need to have or put in place? Let’s proceed to answer these questions –
What you need to start cooking gas business
Startup capital: According experts (people who are already in the business), you can start conveniently with N300,000 and be able to buy more than 20 cylinders, get a shop and buy the initial products. The cost of shop in this regard depends on the location. If you decide to locate your business in a highbrow area, you will spend much more money to get a shop but the cost will be well worth it.Get training: You must get attached to any experienced retailer or even depots for about six months to learn the important rudiments. You need to learn how to refill the cylinder, how to transfer, how to change valve and everything necessary you must know about the business. You equally need to know where and how to buy cylinders.