Cooking Gas Business in Nigeria: A Complete Guide to Success

The cooking gas business in Nigeria involves the distribution and sale of liquefied petroleum gas (LPG), commonly known as cooking gas, to households, businesses, and industrial users.

LPG is a versatile and clean-burning fuel that is widely used for cooking, heating, and powering certain appliances.

The cooking gas business plays a crucial role in providing an alternative and more environmentally friendly energy source compared to traditional solid fuels (Firewood).

With the scarcity and daily increment in the price of kerosene in Nigeria, the cooking gas business has now become one of the lucrative businesses to venture into in Nigeria because of the high demand for cooking gas.

As I do say;

As lucrative as any business in this world could be, you must understand that the knowledge aspect of that business choice is more important than the capital you've gathered from collective effort or from your life savings.

In this article, I will be showing you how to start a cooking gas business in Nigeria and also how to make good profits monthly.

1. Decide Your Scale of Operation:

The process of determining the scope and extent of your involvement in the cooking gas business involves choosing the specific aspect of the industry where you want to concentrate your efforts.

1. Retail Distribution: If you opt for retail distribution, your primary focus will be on selling cooking gas directly to end-users. This involves establishing retail outlets, commonly known as cooking gas stations, where customers can purchase gas cylinders or refill their existing ones. Retail distribution often involves serving local communities and households.

2. Gas Plant Operation: Operating a gas plant entails setting up a facility where you can store, process, and distribute cooking gas in larger quantities. Gas plants are involved in filling gas cylinders, and they can cater to both individual customers and businesses. This scale allows for more substantial storage and handling capabilities, resulting to substantial investment.

3. Participation in the Entire Supply Chain: Choosing to participate in the entire supply chain signifies a comprehensive involvement in the cooking gas industry. This includes activities such as importing or refining liquefied petroleum gas (LPG), storing it in depots or terminals, and managing the distribution network. This scale requires a more extensive infrastructure and logistical setup, as it covers various stages from importation to retail distribution. This scale involves dealing with regulatory compliance, safety standards, and coordination of the supply chain to local distribution.

The decision on the scale of operation is critical as it shapes your business model, resource requirements, and market reach.

Factors such as available capital, industry expertise, and risk appetite will influence this decision.

2. Capital:

You can start this business with as low as 300,000 Naira on a small scale and in one month you can recoup as high as 150,000 Naira as profit which gives you a 50% return in one month.

Very few businesses can give you a 50% return in one month, which makes it a very profitable business to engage in.

But if you intend to go on a Large scale, by operating a gas plant you will need up to N10,000,000 to N30,000,000 in capital to be able to start this business successfully.

The capital will be spent on:

• Setting Up Your Facility
• Working Equipment
• Purchasing Initial Stock
• Obtaining Licenses
• Covering Operational Expenses

Given the substantial capital requirements, explore various avenues to secure funding for your cooking gas business.

This can be achieved through seeking investment from private investors, applying for business loans from financial institutions, or exploring grants and incentives available for businesses in the energy sector.

3. Location: 

Location is a crucial element in the establishment of your cooking gas business, involving the strategic choice of where to set up your operations.

The decision on location has significant implications for customer accessibility, operational efficiency, and compliance with regulatory requirements.

Here are key considerations when choosing the location for your cooking gas business:

1. Proximity to Residential Areas: Opt for a location that is strategically close to residential areas and communities. This proximity minimizes transportation costs and ensures that your cooking gas services are easily accessible to households. Convenience for customers is a key factor in attracting and retaining business.

2. Accessibility to Transportation Routes: Consider the accessibility of your chosen location to major transportation routes. A well-connected location facilitates the transportation of cooking gas to and from your facility. If you are going to be involved in the supply chain, it ensures a smooth supply chain, timely deliveries, and efficient distribution to your target market.

3. Compliance with Zoning Regulations: Ensure that your chosen location complies with local zoning regulations and land use policies. Different areas have specific regulations regarding the establishment of businesses, especially those dealing with hazardous materials such as liquefied petroleum gas (LPG). Obtain the necessary approvals and permits to operate in the chosen location.

4. Operational Efficiency: Assess the operational efficiency of the location. Consider factors such as the availability of space for storage, ease of setting up necessary infrastructure, and the layout of the facility. A well-designed and organized location contributes to streamlined operations and enhances overall efficiency.

5. Safety Considerations: Prioritize safety considerations when selecting a location. Ensure that the chosen site meets safety standards for handling and storing cooking gas. Adequate space, proper ventilation, and adherence to safety protocols are essential to minimize risks and ensure the well-being of employees and customers.

6. Customer Accessibility: Choose a location that is easily accessible to your target customer base. The more convenient it is for customers to reach your cooking gas station or facility, the higher the likelihood of attracting and retaining customers. Consider factors such as parking availability and ease of entry and exit especially if you are going to be operating a gas plant cooking gas business.

It’s essential to note that this business is not like selling recharge cards under an umbrella. Having a shop (eg a Caravan), especially if you are operating on a small scale is crucial. This provides a secure place to store gas cylinders after closing, avoiding daily transportation to and from your business location.

4. Buying your Gas from the depot:

It is one thing to buy gas and another to sell.

Especially as a retail seller, you must recognize that you are also a customer to direct dealers.

There are several gas depots you can get your refill from and they are very easy to locate due to their obvious gas plants.

And besides, petrol stations are now in the gas depot business. So in case, you are finding it difficult to locate a depot, you can locate a filling station that has a substation for cooking gas to get a refill.

If you opt to set up a gas plant, you must undergo the registration process as a marketer with a refinery before gaining access to LPG for bulk purchases.

5. Knowledge of Operation:

After those whole areas have been touched, having this 5 basic knowledge is important, and without them, it will be difficult starting this cooking gas business. They are:

1. How to Fill gas cylinders
2. How to refill gas cylinders
3. How to transfer gas from one cylinder to another
4. How to take the exact measurement of a gas Cylinder before and after filling it.
5. How to change the cylinder valve

These 5 things can only be gotten through a one-on-one practical. This means you must look for someone to teach you or someone you can work with for at least a month.

A month of training under someone or working for someone is long enough to learn everything about the cooking gas business.

With all this knowledge put together, you are good to start your Liquefied petroleum gas (LPG) business in Nigeria.

There is a golden rule in business that you must always keep in mind;

The only people you can call your customers in business are the returning customers, not the first-time customers.

Two pivotal factors influence customers’ loyalty: honesty and avoiding the label of a greedy businessman.

Upholding these principles not only ensures customer satisfaction but also fosters a loyal customer base in the competitive landscape of the LPG business.

6. Legal Consideration

When it comes to the legal consideration of starting a cooking gas business in Ngeria. Four important legal aspect must be met to avoid being sanctioned by the government.

1. Business Resgistration
2. Tax Compliance
3. Insurance
4. License from the Department of Petroleum Resources (DPR)

Business Registration: To operate your cooking gas business on a large scale, it is crucial to register it with the Corporate Affairs Commission Of Nigeria (CAC). This registration will establish your business as legitimate and prevent any potential issues with government authorities.

Tax Compliance: You must have your Tax Identification Number for tax filling to meet the tax

Insurance: Obtaining insurance for your cooking gas business in Nigeria is not only recommended but mandatory by the government, especially if you are running a gas plant. This is due to the inherent risks involved. Having insurance coverage will provide significant assistance in the event of unexpected situations.

Get your License from the Department of Petroleum Resources (DPR): The Department of Petroleum Resources (DPR) is the regulatory body responsible for overseeing operations in the Petroleum Industry and processing industry applications for leases, licenses, and permits.

Any company intending to operate, participate, or provide technical services in the Oil and Gas Industry in Nigeria is required to obtain the necessary permit from the DPR before starting business activities.

The prerequisites for obtaining a DPR License are:

• Certificate of Incorporation
• Tax Clearance Certificate (TCC)
• Evidence of payment of the Nigeria Social Insurance Trust Fund (NSITF)
• You’ll need a police report
• List of equipment/facility
• State land documentation
• Physical planning permit.

How profitable is the cooking gas business in Nigeria

The cooking gas business is profitable in Nigeria as you can make as high as N300,000 monthly within your first three months of starting this business as a retailer.

But like any business, there are factors to consider that can influence its profitability. It’s crucial to be aware that unexpected events can occasionally throw a wrench in your profit-making machine.

Imagine a scenario where there’s a sneaky leakage of gas or an unfortunate hosepipe busts, causing some wastage. In such cases, you might break even or experience a minor loss. It’s just a part of the game.

But fear not! With proper safety measures in place and vigilant management, these hiccups can be minimized, ensuring that your cooking gas refilling business remains a profitable venture.

Calculation of the Profitability of a cooking gas business on a small scale

There are different Kg of gas cylinders you can start with, in this business. They range from; 50kg, 25kg, 20kg, 12.5kg, 10kg, etc.

Let’s assume you choose to start with 12.5kg (which obviously is the most popular kg), each time you fill this cylinder you can make as much as 500 Naira when you sell it to consumers as a refill.

If that 500 Naira is maintained for ten days, that is 5k for you.

But we both know you are going to refill more than one 12.5kg cylinder in a day.

The price to fill a 12.5kg at the depot varies a lot but let use 3,500. So let’s say you fill at 3,500 and you sell at 4,000niara to consumers, this gets you 500 Naira as profit.

This means if ten persons come to get gas (refill their gas cylinder) from you in a day, it gives you 5,000naira as profit.

So the monthly profit will be 5,000 x30 = 150,000niara

If your location is right, you can expect as high as, 20 to 30 people a day.

A filled cooking gas cylinder of 12.5kg is expected to last for at most a month. That is if the person barely cooks. But if it is someone who cooks a lot, it is expected to last for a minimum of 2 weeks.

Meaning, the probability of customers coming back that same month for another refill is high. That also implies that you will be making more than 150k monthly.

Note: Due to the consistent fluctuations of Gas prices in Nigeria, the quotation I used in my calculation might be wrong at the time you are reading this article. But your profit is always sure to N500 and above per every 12.5kg refill no matter the gas price.

Equipment used in Cooking Gas Business in Nigeria

Here are some key equipments used in the cooking gas business:

1. LPG Storage Tanks: Large storage tanks are essential for storing bulk quantities of liquefied petroleum gas (LPG). These tanks can be installed at depots, terminals, or gas plants. The size of the storage tanks depends on the scale of operation and storage capacity requirements.
2. LPG Cylinders: Gas cylinders are used for the retail distribution of cooking gas to end-users. These cylinders come in different sizes to meet the diverse needs of households and businesses. They are filled at gas plants or retail outlets and are a critical component of the retail side of the business.
3. LPG Trucks or Bobtails: Specialized trucks or bobtails are used to transport bulk quantities of LPG from depots or gas plants to retail outlets. These vehicles are equipped with safety features and mechanisms to facilitate the safe transportation of gas.
4. LPG Dispensers: At retail outlets, LPG dispensers are used to fill gas cylinders for customers. These dispensers are equipped with safety features to control the flow of gas and ensure accurate filling. They often include meters to measure the volume of gas dispensed.
5. Safety Equipment: Various safety equipment is crucial in the cooking gas business to prevent accidents and ensure the well-being of personnel. This includes safety valves, pressure relief valves, emergency shutdown systems, fire suppression systems, and safety signage.
6. Filling Equipment: Gas filling equipment is used at gas plants and retail outlets to transfer LPG from storage tanks to gas cylinders. This includes pumps, hoses, and filling nozzles designed for safe and efficient gas transfer.
7. Weighing Scales: Accurate weighing scales are used during the filling process to measure and control the amount of gas dispensed into cylinders. This ensures that customers receive the correct quantity of gas and helps with inventory management.
8. Gas Leak Detectors: Gas leak detectors are installed at various points in the supply chain to detect and alert personnel to the presence of gas leaks. Early detection is crucial for preventing accidents and ensuring the safety of both employees and customers.
9. Forklifts and Handling Equipment: Forklifts and other handling equipment are used for the movement of gas cylinders within storage facilities and retail outlets. These equipment facilitate efficient storage and transportation of cylinders.
10. Computerized Systems: Computerized systems are used for inventory management, billing, and record-keeping. These systems help businesses track gas stock levels, monitor sales, and manage customer accounts.
11. Safety Gear and Personal Protective Equipment (PPE): Personnel involved in various stages of the cooking gas business, from transportation to retail, use safety gear such as gloves, safety goggles, helmets, and other PPE to protect themselves during operations.

The risk involved in the Cooking Gas business

Operating a cooking gas business in Nigeria, like any business venture, comes with its share of risks. Understanding and mitigating these risks is crucial for the success and sustainability of the business.

Here are the common risks associated with the cooking gas business in Nigeria:

1. Safety Risks: Handling and storing liquefied petroleum gas (LPG) involves inherent safety risks. Accidents such as leaks, fires, or explosions can occur if proper safety measures are not strictly adhered to. Ensuring compliance with safety standards, implementing rigorous training for staff, and investing in safety equipment are essential risk mitigation strategies.
2. Regulatory and Compliance Risks: The cooking gas industry is subject to strict regulations and compliance standards imposed by government agencies, such as the Department of Petroleum Resources (DPR). Failure to comply with these regulations can result in penalties, fines, or even the suspension of business operations. Staying informed about regulatory changes and maintaining strict adherence is crucial.
3. Supply Chain Risks: The supply chain for cooking gas involves various elements, including procurement, transportation, and storage. Disruptions in the supply chain, whether due to logistical issues, geopolitical events, or supplier-related challenges, can impact the availability of gas. Diversifying suppliers and maintaining contingency plans help mitigate supply chain risks.
4. Market Price Volatility: The prices of LPG in the global market can be subject to volatility, influenced by factors such as geopolitical events, changes in demand, or fluctuations in oil prices. Sudden price increases affect profit margins and impact the affordability of cooking gas for consumers. Developing strategies to manage price fluctuations is essential for financial stability.
5. Environmental and Community Relations Risks: The cooking gas business, if not managed responsibly, can pose environmental risks. Gas leaks or improper disposal of waste materials can harm the environment and negatively impact community relations. Implementing environmentally friendly practices, engaging with local communities, and addressing any environmental concerns promptly are important risk mitigation measures.
6. Competition Risks: The cooking gas market in Nigeria is competitive, with various players vying for market share. Intense competition can affect pricing strategies and profit margins. Differentiating your business through value-added services, quality assurance, and strong customer relationships can help mitigate the impact of competition.
7. Economic Risks: The economic landscape in Nigeria, including factors like inflation, currency fluctuations, and economic downturns, impacts the purchasing power of consumers. Economic risks affect consumer demand for cooking gas, and businesses need to be adaptable and resilient to navigate these challenges.
8. Operational Risks: Day-to-day operations carry risks such as equipment malfunctions, employee errors, and technology failures. Developing robust operational processes, conducting regular maintenance checks, and investing in employee training will help minimize operational risks.
9. Security Risks: Security concerns, including theft or vandalism of equipment and facilities, can pose risks to the cooking gas business. Implementing security measures, such as surveillance systems and secure storage facilities, is crucial for protecting assets.

Understanding and actively managing these risks is integral to the success of a cooking gas business in Nigeria.

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Conclusion

By following these steps, you can establish a cooking gas business in Nigeria that is not only legally compliant but also well-positioned for sustainable growth.

Prioritize safety, maintain regulatory compliance, and stay attuned to industry developments to ensure the success and longevity of your cooking gas venture.

I hope you have benefited from this article: “Cooking Gas Business in Nigeria”?

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