How To Establish A Petrol Filling Station Business In Nigeria – A Comprehensive Guide

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Petroleum is an important source of energy in the world. Every aspect of human’s daily life activities is somehow influenced by the use of petroleum. Transportation, defense, technology, industrialization, commerce, research and development and many other facets of human activities are directly or indirectly linked with the use of petroleum or its sub-products. It provides fuel for transportation, power generation (electricity), heat and lighting, lubricants for machinery and raw materials for Petro-chemical industries.

Nigeria is one of the largest Petroleum (oil) producing country in the world and have deposits across the southern regions of Nigeria which consists of both tapped and untapped resources. Beginning from the exploration to exportation and to the marketing of products, money is involved. Nigeria, with a population of over 180 million people, is among the largest consumers of oil products in Africa with over 50 million liters consumed daily. This is due to the pool of Industries, vehicles, machines, numerous power generating set and households that use the Products. This heavy consumption has created a lucrative opportunity for wealthy Nigerians to invest in petrol station business.

Petrol station is an outlet or depot that procure refined petroleum products (Premium Motor Spirit (PMS), also called petrol; Automated Gas Oil (AGO) known as diesel; kerosene; household gas and Lubricant) in bulk, stores it, and resell by use of pumps to customers. Gas station in Nigeria is also called petrol station or filling station. The demand for refined petroleum products is very high as with little promotion or commercials, sales is guaranteed provided the location is favorable. There are big dealers in the market like AP, Mobil, Texaco, MRS, Total, Oando, Conoil yet the supply isn’t enough to meet the growing demand, this makes entry into the market favorable.

Two ways of running a petrol station

There are two ways of running a petrol station business in Nigeria. It can be as dependent and independent (also known as autonomous) marketers. Each of them has its distinct merits and demerits.  A proper understanding of the two categories and their peculiarities is needed before starting the business.

1. Autonomous gas station or independent oil marketer –  is a filling station that is run under the business name or brand as desired by the owner of the filling station and runs independently, thereby creating a niche for the business with the desired brand. This filling station gets its oil directly from Nigerian National Petroleum Corporation, having purchase representative at the petroleum product marketing company (PPMC).

Logistics would be employed to ensure that petroleum products are delivered to the filling station promptly and appropriately. This can be done by using in-house logistics system or out- sourcing a logistics company on a one time agreement or periodic service.
The business owner is in charge of drafting out and developing the business policy and trade terms.  However, establishing the business brand and expanding the horizon depends solely on management (or owner) advertising and commercials scheme. This type of business is not easy to establish as it involves lots of logistics, capital and promotions.

2. Dependent oil marketer –  this is a filing station that holds the product of another marketer (usually a bigger brand, like AP, Mobil oil, Total, Oando etc.). The station serve as a sales point for the product of the major marketer. It markets under its own business name, facilities and premises for an already established major oil business using Franchise.
This type of business does not need lot of effort and experience to establish since the business is set up on the strength of a bigger brand (major marketer) in the industry and there is the benefits of using the logistics of the marketer to deliver services. There is also the benefit of transfer of customers of the bigger brand that reside or ply the routes around the area of the business establishment to the filling station.
Payment, at an agreed rate, would be made into the account of the major marketer supplying the product and on whose brand the business is being run.

However, this may impair, to an extent, the opportunity of establishing the business own brand as the bigger marketer brand may not allow the growth of the smaller brand. The business is also influenced by the marketer’s policies and terms. Another disadvantage is that a bit of the business gain is also going to the major marketer as the price of lifting from these major marketer is higher than the NNPC depot (because the major marketer already added their profit to it) thereby reducing the business profit margin.

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Both types of petrol station business however, need a comprehensive and analytical knowledge to run it successfully.

What You Need To Establish A Petrol Filling Station

1. Research and Feasibility study: Research must first be conducted concerning the funding of the station, as oil business is a capital intensive business. This research should put into account all funds needed for the setup, facilities, product and catering for the business. The current capital and the financial outlay in the short and long terms should be addressed in setting up the business in tandem with the feasibility study. Decision should be made for choice of either to set up as either autonomous or dependent marketer.
Research should also be done on the location intended for the Petrol station. This is very important as it will help in decision making and form part of the business documentation. The criteria to look out for in selecting a Location are accessibility, nearness to major roads or highway, space to accommodate the business.
Research should also be done on the various regulations that bind the setting up and running of fuel station in Nigeria, this however should extend to the permits and the requirements for the various associations in the business.

2. Land acquisition and other requirements: Land acquisition is a vital part of the location study. For a setup of two petrol pumps, one diesel pump, one kerosene pump (which is by the way the smallest the IPMAN regulation allows in Nigeria), two plot is required. Price of land however ranges depending on the location and processing of the properties papers for the land.

The business need to be insured not only because it is a requirement but because it is a very risky business. This is so because all product are highly inflammable and they need to be insured against fire insurance. The truck is also prone to hijack and because the business involve the movement of large amount of cash which is also prone to theft, the business need to be insured against theft; and other insurance deemed fit and affordable.The services of a petrol station engineering company would be required for the facilities building based on the size of the business.

The building must take the following into consideration.

– Building: The Building is dependent on the station size and what the owner would want to be in the station; Restaurant, Supermarket, and Car Wash etc. It’s a requirement to have bay in the filling station premises. It’s an administrative prerequisite to fence the three sides of the filling station, leaving just the pathway opened for entry and exit. In case the station is on a T-Junction, only two sides of the building would be fenced as the other two sides opened for entry and exit.

– Pumps Shelter: This is the shade constructed over petrol station pumps as it protect the pumps and the petrol attendants from the weather conditions.

-Storage tanks: The storage tank is sunk underground. Storage tanks measurements vary depending on the size (between 35,000 liters and 65,000 liters) and the land space. The business will need at least three underground storage tanks, one for each product (petrol, kerosene and diesel). Usually, petrol storage tank is very big to have a large stock because it sells fast.

-Flooring: The floor of the petrol station must be flat and the flooring should be made of firm concrete to accommodate the huge pressure that the diverse number of vehicles and people coming in and out of the filling station will exert on it.

– Standby Generator (25kva to 60kva):  A standby generator is needed to complement the main source of power for a steady power supply to power the fuel pumps, lighting and other needs in the fuel station.

– Pumps: The Electronic fuel pumps should be used instead of the analogue pumps which are outdated. The Electronic pumps gives the freedom of advance technology as most come with a ‘dispense pre-set module’, Point of Sales (PoS) slot, and other accessories. The filling station would require at least four (4) pumps to dispense fuel i.e. two for petrol, one diesel and one for kerosene. This number, however, can be as many as possible depending on the scale of business.

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3. Legalizing the business: The Business must be registered with the corporate affairs commission of Nigeria as it is a requirement for obtaining the certificate of incorporation which will be needed to obtain the license of operating a filling station along with the tax clearance.
Licenses, approval and permit to run the business must be obtained from these bodies:
Department of Petroleum Resources (DPR)
Petroleum Products Price Regulatory Agency (PPPRA)
Pipelines and Products Marketing Company (PPMC)
Nigerian National Petroleum Corporation (NNPC)
Procedure and conditions for granting license and approvals for the construction and operation of a petrol station.

a. Application procedures:
Application for approval to construct a filling service station for retailing Petroleum produces shall be submitted to the Department of Petroleum Resources, DPR (http://dpr.gov.ng/) giving details of the proposals and any information that may be relevant to the project. In addition, the following documents should be submitted along with the application
i. Three (3) copies of approved plan showing the building existing or proposed on the site and the relation of the site to the roadways and adjoining property;
ii. A certificate signed by signed by the Chief Federal/ State Fire Officer, or by an officer authorized in that behalf, that the arrangement proposed for the prevention of fire at the site are satisfactory;
iii. A certification by the Area/Town Planning Authority for the construction of a Petrol Filling Station on the proposed site;
iv. A certificate signed by the divisional police Officer or a superior police officer in-charge of the police motor traffic that he is satisfied that the site and layout of the proposed filling station do not constitute an unnecessary traffic hazard.
v. Evidence that company applying is duly registered as a limited liability company by the appropriate Federal Ministry/Corporate Affairs Commission to deal in petroleum products as follows:
1. Certificate of Incorporation.
2. Certified True Copy of Memorandum & Article of Association.
vi Tax receipt and/or tax clearance certificate for the preceding 3years.

b. Approval to construct:
After the above listed document must have been submitted, inspection of the site will then be carried out.
“APPROVAL TO CONSTRUCT” will be granted by the Operation Controller/Manager (Department of
Petroleum Resources), if the proposed sites fulfill the conditions stipulated in the relevant sections of the
“Petroleum Regulations”.

c. Licensing procedure:
After the completion of the construction works, an application for a Storage and Sale License must be made to the Department of Petroleum Resources (DPR). Such a license is granted after the station has been inspected and certified as being satisfactory by official of the DPR.
The following facilities must be provided at the petrol station before it could be considered for licensing:
i.Air compressor and air gauge in good working conditions
ii.Provision of water (pipe-borne /well-treated borehole)
iii.Power/Electricity Generator
iv.Well-stocked first aid box
v.Refuse container/waste basket(s)
vi.Safety equipment or facilities
vii.Toilet facilities and conveniences

d. Independent marketing/sponsorship:
All application for storage / sale licenses may be channeled through a sponsor company i.e. An oil marketing company with which the applicant has concluded product supply arrangements. Sponsor companies may be any of the following: NATIONAL, UNIPETROL, TOTAL, MOBIL, AFRICAN PETROLEUM (AP), ELF, AGIP, TEXACO, OR any of the existing independent Oil Marketing Companies. PETROLEUM PRODUCT MARKETING COMPANY (PPMC)/(NNPC) would enter into Petroleum Product Supply Agreement with a DPR Storage & Sale Licensee who intends to operate as an independent Marketer.

e. Pump attendants:
All filling stations’ pump attendants must be very well trained and possess valid certificates of competence obtained from an organization recognized by the Dept. of Petroleum Resources (DPR).
After the licenses and permits have been obtained, the business will join these petroleum associations as they help protect corporate interest concerning petroleum sale issues.
Independent Petroleum Marketers Association of Nigeria (IPMAN)
National Union of Petroleum and Gas Workers (NUPENG).

Staff requirement for a petrol station

Four categories of workforce are needed to run the business successfully. The staff number depends on establishment level and hours of work. Usually most of the staff will work on a shifting.

– Manager: The manager is the highest in rank in the filling station. He handles the managerial functions in filling station. He is the superior with the responsibility of the whole operation of the petrol filling station and must be vast in running the oil business. All other employee reports to him while he report directly to the owner.

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– Supervisor: The Supervisor is the line manager to the rest of the workforce as to ensure the smooth operation of the filling station. The Supervisor ensures everyone and everything including the facilities are in order.  He sees to it that everyone is up to his task and report back to the manager. He performs other basic supervisory duties.

– Cashier/Accountant: The Cashier/Accountant handles the financial computations of the business. This person sees into the movement of the cash submitted by the attendants, keeps the records of the cash transactions and process cash for the use in the filling station by approved authority. The Cashier/Accountant will report to the manager and submit periodic financial statement and reports.

– Attendants: The attendants are in charge of dispensing and selling to customers. The total number of attendants to employ depend on the number of pumps. It is advised to employ at least one or more petrol attendants for each pump for shifting to reduce the risk of fatigue and burnout.

– Security: The filling station needs security guards to secure the business assets, cash and maintain order on the premises of the filling station. It is advisable to move cash in bits for safe keeping and not leave plenty of cash within the petrol station for security purpose.

Standard practices in petrol station business

1. Fuel pumps should accurately dispense and display volume and price.
2. Always make available alternative sources of power to operate products pumps and adequately illuminate of the station.
3. Display of current Storage and Sales License in the station’s office at all times.
4. Availability of DPR inspections log book in the station at all times.
5. Unrestricted access to DPR officials to carry out statutory functions in the station

Safety precautions for a petrol station

1. Functional firefighting gadgets must be kept handy and at ready.
2. A station manager/supervisor must always be at the station.
3. Pump attendants must be trained and dressed in appropriate safety gear.
4. Ensure that vehicle engines are switched off before fueling.
5. Strategic and conspicuous display of warning signs on “NO SMOKING and NO USE OF CELLPHONES” within the station.
6. Stations should always maintain good housekeeping.
7. Tanker trucks are earthed before starting (and throughout) products discharge.
8. A copy of every waybill for products on sale shall have to be available at the station at all times.
9. Products in tanker trucks to be discharged into storage tanks shall have to be allowed to settle for at least two (2) hours while in the station before the discharge.

Conclusion

Petrol filling station business is a high yielding business as the return on capital is so high that profit are in millions of naira monthly, if properly managed. Sales are made irrespective of the prevailing product price.
However, attention must be given to the overhead cost of running the filling station, the salaries of employees, cost of purchasing, transporting and storage (insurance) of the petroleum products while planning and setting up the fuel station to ensure profit maximization.

About The Writer : This was written by Ijalana Funsho,  content contributor at MyAfribusiness.com. He is a graduate of Agricultural Economics, an HR practitioner and a project manager.

Note:
You can write for www.myafribusiness.com Learn how you can WRITE FOR US.

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