How To Start A Cooking Gas Distribution Business in Nigeria
Establishing a cooking gas plant or cooking gas station is one of the smartest entrepreneurial moves you can make.
Moreover, the demand for cooking gas has grown since a lot of homes have switched from more traditional means of cooking such as the use of firewood and kerosene oil to using cooking gas (also known as Liquefied Petroleum Gas LPG ) for cooking and other domestics purposes.
In addition, the start-up capital required to successfully start a cooking gas distribution business is not as expensive as many potential investors have been made to believe.
Nonetheless, a startup cost of at least 5.5 million Naira might still be needed to get this business up and running.
A large-scale establishment can cost as high as 30 million Naira.
If this capital exceeds your budget, then you can check out other less expensive business ideas like commercial cleaning business, laundry business, farming business, bread bakery business and barbing salon business or learn how to raise capital for your business.
You can also consider starting a computer business center in your vicinity.
Still, the startup cost is nothing compared to the huge profitability in the cooking gas business.
You can recoup your investment in a year if your station is sited in a residential area with an affinity for using cooking gas.
For those who are wary of the risk of fire accidents, it is important to state that provided the safety measures are strictly adhered to, it is quite rare for a gas station to be engulfed in flames.
So, let us dive into the details:
How to establish a lucrative cooking gas distribution company
1) Conduct a detailed research:
You are probably here to do just this. But take an extra step by walking into the nearest gas retail station and see how things are done. You want to pay particular attention to:
- How cooking gas is measured
- The storage capacities of various tanks
- The startup cost based on the gas storage capacity of the plant
- The common challenges cooking gas retailers face
- Safety measures
- The factors that affect the market price of cooking gas
- How to hire the right hands to monitor or manage the business, if you so wish.
2) Write a cooking gas business plan:
Your business plan will give you insight into the business feasibility, start-up cost, day-to-day costs, marketing cost & strategy and other important factors.
Your business plan doesn’t have to be 20 pages long. It is majorly to ensure that you don’t miss out on certain important details.
3) Make a budget for your new business:
Your budget is an essential component of your cooking gas supply business plan but it is equally important that we elaborate more on it.
Your budget plan should definitely include real estate (location) costs, legal & licensing costs, Insurance and permits cost, the cost of equipment and gas, construction costs, salaries and employee costs, as well as day-to-day expenses.
According to a gas distribution construction company (Olawuwo Ony Engineering Ventures):
For a 10,000 liters mini plant, cost is as follows:
(i) Machinery and Equipment (excluding electricity & water)
(a) 10,000 litres gas storage tank. N4.3m
(b) Pump, piping and fitting, controls N2.2m
Filling systems and safety equipment.
(ii) Civil Works – Tank base, pump and filling bay N850,000
Excluding: Fencing, offices etc.
(iii) Installation and Commissioning N1,500,000
(i) Land -About 120ft x 60ft.
(ii) Building Cost Is Variable
(iii) Power Supply
(iv) Water Supply
This sums up to a total of about 9,000,000 for a 10,000 litres mini plant. Meanwhile, the cost is reduced to about N7million for a 5,000 litres tank and 25,000,000 for a 50,000 litres gas plant.
As expected, you will be required to acquire an appropriate business license from designated government agencies including town planning, fire service, local government, Department of Petroleum Resources (DPR), etc.
All these will cost between N1,000,000 to N2,500,000 depending on size and location.
You will need the following permits:
1. Police Report
2. Fire Planning Approval
3. Town Planning Permit
4. State Land and Physical Planning Permit
5. Department of Petroleum Resources License
You need the following documents to process both the State L&P and DPR permits:
1. Environmental Impact Assessment reports
2. Mechanical Drawing document
3. Architectural Drawing
4. Structural Drawing
5. Electrical Drawing
5) Choose an appropriate location:
Can you think of an area in need of a gas station?
This is very important because customers will want a location that is along a major route to work and convenient in terms of traffic patterns.
Scavenge for a location where there is a lot of growth, such as around major cities in Nigeria.
Moreover, as new neighborhoods and business districts crop up, there will be more demand for new gas stations. Consider local and state regulations about the building and location of gas stations.
Also, consider local and state regulations about the building and siting of gas stations/ gas plants before settling for a preferred location.
6) Insure your business:
Gas is a highly inflammable product.
So, in addition to maintaining a high safety standard, it is also important to get insurance cover in case of fire accidents.
Research what types of insurance and permits you will need to operate a gas station. You will need to make sure you are not personally financially liable for damages. You may need to consult an attorney to draw up legal contracts.
And finally, start and run your business. Best of luck.