How To Become A Nigerian Petroleum Broker
The Nigerian petroleum industry is dominated by old oil companies who have grown accoustomed to no challenges, as a result of this most of their services are shabby and screaming for competitors to break in to the business and inject some new vision and energy.CASE STUDY
As quoted on thisday online
Dateline: 16/11/2004 09:37:08
Femi Otedola...Knight's Son and Zenon Boss
He started real big business just about two and a half years ago with a loan from some banks. Within the first few months of operations he recorded a loss of about N20 million. But that did not quench the fire to succeed. He was determined, so he said. Today he sits atop a flourishing business empire with an annual turn-over of about 11 billion naira, and assets that are worth well over that. At 38, one cannot ask for more. He seems to have achieved everything to last him another life time and one would have expected that he retired early and play golf for the rest of his life. But not Femi. He thirsts for more, to conquer : "I want to have a firm grip on the Lagos market and then expand the scope of my operations." He continued, "I love challanges ..... I will give my competitors a run for their money." Looking simple and unassuming in his white brocade, you can't pick him out from a crowd. He says he prefers it that way, to be seen and not heard. I want to operate quietly in the back ground. Femi Otedola is the son of a former civilian Governor of Lagos State, Chief Michael Otedola, who won election by 'default' under the NRC ticket in the aborted third republic.Interestingly, the name Otedola in Yoruba, means someone who prospers from the default of enemies. Chief Dapo Sarumi and Prof. Femi Agbalajobi were locked in a battle over who got the governorship ticket on the platform Social Democratic Party, SDP. None would step down for the other until a disqualification of both saw the emergence of Yomi Edu. But the SDP was too far gone for any rescue effort and Lagos electorate who had had just about enough did protest voting in favour of an NRC that originally stood no chance. Otedola emerged governor. Today, the younger Otedola has a vessel named Sir Michael, after his father. Tell me, how did you start this business that is so successful?I am someone who loves challenges. I always want to tread where people have not succeeded. About two and a half years ago I was a government contractor. And I used to have people in government who sell diesel to me. But all this changed when General Obasanjo came in. I called someone and ask him where do you get diesel? And he said he buys from a company, Flint Petroleum. I then called Flint Petroleum and they said the price was N40 per litre. Fine, and I paid and waited. Then NEPA was very bad, you know. I was driving on Third Mainland one day and I saw a truck with the inscription Flint on it, so I parked and went to them to ask for my diesel which I had paid for. They just told me they will come in two days time. And two days later, I was coming down the stairs of my house, I now saw the truck in my compound, very old truck, littering my compound with engine oil dropping from its engine. I then called my security men to push the truck outside and lay something on the floor to cover the oil.Then I stood there, looked at the truck for a while and I said to myself; "come on, I can do this business and clean it up". So I started my study, getting information about the business and I discovered that the demand for diesel was a huge one. So I started buying from people that had tanks and they would always frustrate me. I get an LPO from say, Coca Cola, in the morning at may be N18 per litre and by the time I am ready to deliver they will tell me the price had gone up. This continued for some time At a point I said no, "no this can't continue". I knew I just had to look for money and build my tanks and own my trucks. I did a projection and I saw that it was going to cost me about N1.3 billion. I saw a lot of lapses in the business that I knew I was going to capitalise on. I noticed that the major marketers were sleeping. They have been in the business over the years. They have not seen any competition and so they were so relaxed.And I told myself yes, this is it. This is the opening I can tread on. And I prayed to God. I talked to a few banks and I was able to raise the money. And of course a lot of people were saying how can this boy just enter this market, he will not survive. So I started. The first year I recorded a loss of about 15 to 20 million naira. But I was determined to succeed. I now bought good trucks, built the tanks and went to NNPC to get allocation. And within the next 12 months I had taken over the entire market. I had the industry in my hands because of the service we rendered. The people at Coca cola, WAPCO etc could just call me up to say they wanted diesel. We were working 24 hours loading diesel in the trucks and by 9.00 clock in the morning, the diesel is there. We recruited the best hands in transport industry with the co-operation of NUPENG. Of course all the major marketers have been spoon fed over the years by government. They sit down, and government brings the diesel into their tanks at N20.60k credit. But we had to pay our own money. There was a particular time that NNPC held on to my N1 billion for seven months they did not give me the product. But luckily government increased prices and said people could import and I started importing. That is basically the story of Zenon Oil.
What where the frustrations and fears you had initially?
The fears I had was the Nigerian situation which came to play later. People just started writing petitions to the President that Zenon was selling all the diesel in Nigeria, and how come one company was allowed to do that.
How did you manage this?
As long as you play clean, there is really nothing to be afraid of. Just do your business.
You are on top of the business now.....
Yes, I control the market.
What are the inhibiting factors you still encounter in the course of doing business?
For example, we are importing, and landing the product in Nigeria today with the prevailing exchange rate, it is about N20. 50k per litre. And I am having to compete with people who are being spoon fed by the government, delivering diesel to their door-step at N20.50k. The advantage we have is that because of the state of the refineries, NNPC cannot meet the local demand. So people cannot get to buy from NNPC, so they have to come to us. We have to pay millions of naira as cost any way. At the moment, I have hundreds of tanker drivers and workers.
So tell me, what is the volume of your business now?
Well, so far I think I sell about 80 percent of the diesel in Lagos market.
Invariably you are the biggest diesel marketer in the country?
Yes, I am. And it goes without saying. And if I may tell you, we have just acquired a ship, which is the biggest, and we own the biggest oil tank in Nigeria right now.
And your turn over?
I can't tell you that. No, no.
It is important.
Well, if you insist, I think it's about N11 billion.
Have any immediate plans of spreading out or diversifying into other areas?
No, not yet. We are trying to capture the engine oil market now we are ready to give the majors a run for their money. We have started producing the Zenon Engine Oil which is selling like hot cake now.
Do you produce that locally?
Yes, locally. Mobil Oil blends it for us.
Any plans to owning filling stations in the future?
No, no! That we give to the major marketers. There is no point going into that. You can't compete with them on that front. They have been lucky to be there since the 60s. But the diesel is being consumed by the companies that need it for their trucks, Coca cola, WAPCO, Seven Up, Flour Mills, Dangote Group etc. I sell diesel of over a million dollars a month. Over N150 million every month. And of course all the ships, fishing trawlers all consume diesel.
Apart from Lagos where else do you have branches?
We have a liaison office in Abuja. And of course we have the depot in Apapa. Another advantage we have is the efficiency of our delivery. For example I have a system in place whereby I can load a truck in 12 minutes whereas my competitors take about 45 minutes to load a truck. So I have an edge over my competitors.
Tell me why you dump prices?
Talking of dumping of prices, yes I am known for doing that. And why I do that. It is principally to stay afloat in business. I would rather make little margin on high volumes. I have to give the majors a run for their money. Its really time for Nigerians to take over the business. We are investing the money here, nobody is going to take the money abroad. I am dumping prices to send my competitors out of business.
Why haven't you thought of spreading out to Kaduna, Kano, Sokoto etc?
We are waiting for government to privatise the depots. We have interest in one or two depots we are trying to buy when they decide to privatise them. Then we can expand the scope of our operations.
You sound so ambitious, do you plan to explore the West African coast?
No, not for now. Since I control the Lagos market I want to maintain my grip on it. People are coming into the market, I want to maintain a firm hold on it. By and large NNPC is encouraging us, Mr. Obaseki has tried to encourage me in every aspect of the business.
Now tell me about this rumour making the rounds that you are being groomed for the post of Deputy Governor of Lagos state?
No that is not true. I have heard the rumours myself, it is not true. Even if I am interested in politics, I don't see how I will play second fiddle to anybody. Having being this successful setting up an empire, there is really no way I can play second fiddle. If I want to be Governor, I will go for being Governor. I think Governor Tinubu is one of the best Governors this country has ever had, everybody should encourage and support him. I have no plans whatsoever to contest against him.Starting only recently and being so successful, where do you go from here?Well, as soon as I make my mark in the oil industry, I want to expand and employ as many more people as I can. I want to put smiles on people's faces as much as I can. I want to feed more families.And just to tell you this, I strongly believe that this country needs a generational change to move forward. We need it. There is so much poverty in the land. I want in some way to help reduce that.What is your assessment of three years of democracy in the country?The politicians have not learnt any lesson. I seriously think we should look at the constitution and put in a clause that people who have not managed their personal businesses successfully should have no business aspiring to government offices. If you have not run a business successfully, how can you say you want to run government affairs? And until things are put in place so that people don't see government as where they can go and make money, we shall continue to have problems.The current government doesn't seem favourably disposed to young people, do you think the young generation have messed themselves up?No, we haven't. In fact we have done a lot in the midst of all the odds. Today, the biggest industrialists fall in our generation, the most successful newspaper is owned by someone in our generation, the most successful banks are being managed by people from our generation. And I think it's time we tell the older generation to take a break, go and rest and just play the advisory role.
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