Business

NIGERIA: Making Profitable Investment in LPG Gas Bottling

 Gas cylinderThe price of kerosene is rising every day, to the extent that it has gone beyond the reach of poor homes in the country. At the same time the price of cooking gas is decreasing. The implication is that many homes have shifted from kerosene to LPG cooking gas.
With this trend the demand has increased tremendously and calls for more investment in this area. This investment profile examines on how to make a profitable investment in the LPG Bottling and Marketing business.

Introduction
Nigeria has so many investment opportunities in various sectors, gas and oil manufacturing, financial estates etc. The gas and oil sector as well as other sectors are expanding and investment opportunities open up on daily basis.
For our economy to grow new productive industries must be established. This will generate employment provide raw materials for our industries; generate physical development and above all self-sufficiency.
The Liquefied Petroleum Gas (LPG) offers a tremendous investment opportunity within the petrochemical industry. The LPG is an industry specifically developed to cater for the nation’s industrial and domestic gas requirements. LPG is needed in almost every aspect of economic activity. For instance, it is highly demanded by the automotive industry, manufacturing plants and electricity generation via thermal energy.
At the domestic level, most households, particularly the middle and upper classes of the society now depend on gas for cooking purposes. Hotels, catering outfits, restaurants and bakers all demand the LPG as an alternative source of energy since the firewood and kerosene stove are fast becoming obsolete.
Following the unprecedented demand for LPG in Nigeria and attendant scarcity of the product which has resulted in sharp and arbitrary price increases, the distribution of gas products has been deregulated. Consequently, private individuals and firms can now set up LPG plants. Government has made this product available.
Before now, a 12.5kg cylinder now sold for N3,000 and N4,000 and this range is considered high and un-affordable for many Nigerians. Today the price has come down to between N2,000 and N2, 500 which is considered moderate and affordable.

Sources of Raw Materials
The required raw material for this project will be sourced 100 per cent locally as a by-product of petroleum refining activities. Thus, our refineries at Warri, Port-Harcourt and Kaduna will supply the raw material.
Apart from the refineries, many independent marketers import bulk of LPG Cooking gas to ensure regular supply to small and medium scale gas bottling and marketing companies. Prospective investors can now establish small and medium gas filling (bottling) and marketing businesses.

Project Location
The project should be located in any part of the country. The site should be accessible but isolated from residential buildings. Existing infrastructures such as good roads, nearness to the market and experienced manpower should equally be considered.

Equipment and Machine
The required facilities include storage tanks, filling shed, containers, cylinders, and pump/compressor. There should also be a workshop for servicing cylinders. Machinery and equipment include gas storage tanks complete with fittings, filling heads and scales, chain conveyor, piping and valves as well as fire-fighting equipment. Details will be given to prospective investors.

Labour Requirement
Labour requirement will include a plant manager, engineer, marketing manager, accountant, supervisors, operators, drivers and messengers etc. all employees should be trained on fire prevention and safety measures.
Bold warnings against the use of naked fire should be erected at strategic places. All the details including source of machinery and equipment, licensing procedure, plant layout, labour and management, filling operations, safety bankable feasibility report for prospective promoters are available on request from the writer.

Capacity of the Plant
The proposed plant will have a capacity for filling 500 cylinders of 12.5kg each day. Operating at 75 per cent capacity for 280 days per annum, a total of 105,000 cylinders will be filled and sold at a conservative market prevailing. The capacity could be decreased or increased depending on the desire of the promoters.
Project Take off Cost
For the actual cost of establishing the project, there should be a comprehensive feasibility studies, putting into consideration the proposed location of the project by the promoters.
Based on our analysis the promoters can generate a turnover of over N126 million in the first year.
Viability analysis of the project indicates that the initial capital outlay will be recouped within the first year of business. The reason is not farfetched. Gas is now consumed in large quantities by Nigerians, particularly those residing in the urban areas of the country.
Apart from the short payback period, the NPV, IRR and profitability index all point to the immense financial benefits which will be derived by any serious investor who takes advantage of this investment opportunity offered by the gas industry.

Implementation Process
To go into this project, there is need to carry out a comprehensive feasibility studies and draws a very realistic business plan. After this the financing arrangement will be concluded. There are opportunities for one to borrow from some specified financial institutions that will be given to prospective investors on request.
The writer will assist in conducting a comprehensive and bankable feasibility studies reports; procurement and installation of all the required machines & equipment, test running and training of the staff.

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