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How To Start A Lucrative Diesel Supply
Business In Nigeria
Diesel is a fuel that is commonly used in diesel engines. Its
scientific name is diesel fuel, and it is a type of fuel made
from crude oil. It is known for its high energy density and is
commonly used as fuel for trucks, buses, and other heavy-duty
vehicles. In Nigeria and Africa, diesel is a crucial source of
energy for industries, businesses, and households, making the
diesel supply business an essential industry in the region.
Types Of Diesel In Nigeria and Africa
Diesel fuel is a type of fuel derived from crude oil and is
commonly used in diesel engines as a source of power. There are
different types of diesel fuel that are used for diesel supplies
in Nigeria and Africa, including:
Low-sulfur diesel (LSD), Biodiesel, Synthetic diesel, Marine
diesel,
The type of diesel fuel
used for diesel supplies in Nigeria and Africa depends on the
specific application and the regulations governing diesel fuel
in that region.
Diesel is widely used to power commercial vehicles such as
trucks, buses, and generators. The demand for these vehicles
increases during the festive periods when there is a high volume
of movement and commercial activities. For instance, in Nigeria,
the festive period from December to January sees an upsurge in
transportation and logistics activities, leading to an increase
in diesel demand.
Additionally, the demand for diesel also rises during periods of
power shortages or outages. Many businesses and individuals rely
on diesel generators as backup power sources, especially in
areas where access to electricity is limited. This increases the
demand for diesel during such periods.
There are two ways the diesel supply business in Nigeria works:
1). Diesel Supplies To Tank Farms:
Tank farms usually need a regular supply of diesel or AGO
(Automated Gas Oil). Depending on what they’re storing, they
could also need a constant supply of DPK, and PMS.
The profit margins that businesses who supply to tank farms
usually make from their supplies are usually about 5 to 10 Naira
per liter, and the tank farms make a profit of that range too.
While it may seem little, tank farm supplies usually run into
millions of liters, and 5 million liters at a profit margin of 5
Naira is about 25 million Naira.
2). Diesel Supplies To Organisations:
Most organizations like private and government hospitals,
manufacturing companies, and more, usually need a constant
supply of diesel in Nigeria to run their operations. They mostly
can’t pay upfront, and so, get organisations who are into the
supply of diesel or AGO to register as one of their regular
diesel suppliers.
People who supply to them purchase the diesel from the depots,
mark up their profits at about 10% to 25% of the market value,
and use petrol tankers to supply them to their clients.
Businesses who operate on this level could tend to make more
money than those who supply to tank farms, only if they have a
very wide client list collectively ordering hundreds of
thousands or millions of litres of diesel monthly.
How Can You Start A Diesel Supply Business In Nigeria Even If
You Have No Money?
The larger players who have a lot of money to venture into the
diesel supply business in Nigeria easily make millions or
billions of Naira monthly. But when you have no money to start a
diesel supply business in Nigeria, becoming a broker is the best
route to go.
A diesel broker is someone who sources organizations and
businesses in need of diesel supplies at an affordable price and
links them up with diesel suppliers who can deliver.
Usually when they do this, they tend to add their own mark-ups
on the price with the company handling the supply, such that if
they have an order for 100,000 litres of diesel to be supplied,
they could get a quote from the diesel supplier, mark up the
amount per litre by 2 Naira, and execute the contract, thereby
making 200,000 Naira for themselves.
If they get a tank farm supply of say 10,000 Metric tons, which
is about 11,299,435 liters, a profit margin of 1 Naira on every
liter will make the broker 11,299,435 Naira profit. Depending on
the tank farm purchasing, you may have a markup of 1 to 3 Naira.
Including the fact that tank farms usually order anywhere from
10,000 Metric Tons of diesel to 50,000 Metric Tons of diesel, to
a whole lot more.
The best part of the diesel supply business is that diesel
brokers don’t have to own an office. All you need is to be able
to build valuable links between both the buyers and the sellers,
and follow up on every supply.
How Do You Protect Your Interests In A Diesel Supply Transaction
Now, if you added a personal commission for yourself before
submitting the final quote to the diesel buyer, you’d need to
have two separate agreements with the diesel supplier, called a
Non-Circumvention/Non-Disclosure Agreement (NCNDA) and a Master
Fee Protection Agreement (MFPA).
The NCNDA and MFPA will protect you from any form of
circumvention by the diesel buyer and diesel seller. If for
instance after the first supply, the diesel supplier decides to
circumvent you and go straight to the diesel buyer to sign a
one-year diesel supply contract, this agreement will ensure you
continue to get paid your commissions no matter what.
Profit potential for Diesel Supply Business
Just like every good business, there is money to be made in
Diesel supply and profit is always there. We are going to base
our calculation per litres per truck. You can get 33,000 litres
of Diesel from major distributors and NNPC at N2.5 at the unit
cost of N1,200 per litres.
A truck of 33,000 liters of Diesel to retailers like Filling
Stations supplied at unit cost of N1,200 will give you a profit
margin of N10. In that case, you will be generating profit of
33,000 x N10 = N330,000 from each supply. That is the lowest
profit you can make – profit for 33,000 litres are sometimes up
to a million naira.
When you multiply that to how many trucks you are able to supply
in a month, you will find out you are in money. The secret to
success in diesel supply business in marketing. Expand your
horizon, talk to as many companies and individuals as you
possibly can. The more you supply, the more profit you make.
In all, a medium scale Diesel supplier that puts everything
properly in place makes between 3-5 million naira monthly after
expenses. Isn’t that great? 5million naira monthly is a good
business by all standard, so go ahead and give it a go!
Get training guide on how to start a lucrative Diesel Supply
Business in Nigeria, Our comprehensive report is meticulously
crafted to provide you with a deep understanding of the diesel
supply business, its market dynamics, and the profitable
opportunities it presents in Nigeria . Backed by extensive
research and analysis, our report covers all aspects, including
market trends, competition, financial projections, risk
assessment, and more. With our business plan and feasibility report, you will gain a clear roadmap to success, backed by reliable data and insights. It will serve as a powerful tool to attract investors, lenders, and stakeholders who are eager to support your venture. Our report will showcase your business acumen, market knowledge, and strategic thinking, positioning you as a competent and credible entrepreneur in the industry.
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