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Oleum eyes substantial chunk of ECOWAS lubricant market
14.06.19


Q: What is your overall view of the lubricant market in Nigeria?

A: The lubricant market in Nigeria has evolved over the years having experienced a steady and healthy growth but not without its challenges. Initially, it was a market largely dominated by the international oil companies (IOCs) such as Total, National Oil, Agip and the African Petroleum, but the divestments in the downstream sector of the petroleum industry  paved the way for local players to make inroads into the Nigerian lubricants market.

 

Another factor that is responsible for the increased importation of lubricants into the market especially from Asia and Europe are the low barriers to entry which has then put a lot of pressure on local manufacturers. As we speak, there are over 46 licensed manufacturers operating in Nigeria, some of whom are not known; and with over 50 lubricant brands to choose from, the Nigerian customer is at risk of buying adulterated or substandard products as he/she is not able to guarantee the quality of the products that have been packaged.

 

Despite these challenges, the industry has much potential. The industry is expected to distribute annually about 400 million litres of lubricants.  Of course, not all of these are certified, as large volume are straight base oils that you often see on our roadsides.  

 

Q: How are these issues of adulteration and counterfeiting being addressed?

A: What OVH Energy did in 2015 to address this particular issue was that it embarked on a project which ensured it changed the look and feel of its packaging completely. This allowed us to achieve two goals - to improve on the quality of the product and to address the issue of counterfeiting and adulteration. From the design phase, we made sure we included in-built security features that make it impossible for anyone to adulterate the product. Also, our bottles have a tracking feature that can flag any form of product tampering. We track our delivery chain because we have registered distributors, so it is easy to follow the movement of our bottles and it has helped us to curtail adulteration so far.

 

Q: What is your expansion programme for the product like?

A: This year alone we have installed two product filling lines in our Apapa Lubricant Plant from Adelphi Masterfill which is the first-of-its-kind in Africa, to support the drive to meet local demand and opportunity to export to the ECOWAS region. This investment essentially reinforces our commitment to making our products available to consumers in other markets and to support our growth plans.

 

 

Q: So would it be right to say your company is working towards increasing your market share in West African sub region?

A: Definitely. Taking a share of the market is something we are very big on. Our strategy was very clear following the launch of our new product packaging.  It was to reposition and grow our market share and we have seen steady growth in the last two years. The opportunity to export to West Africa sub-region is there and we are tapping into it. We already have a subsidiary in Togo that markets our lubricants brand in that region and we are leveraging on this existing expertise to reach consumers in countries along the ECOWAS corridor and we intend to go as far as Niger and Chad.

 

 

Q: Any reward for your loyal customers?

A: Just to show our customers that we appreciate them, we have in the last two years made it a point of duty to always reward them.  Last year, we ran a 4-for-4 promo campaign for 3 months where we partnered with Coca-Cola and customers enjoyed their favorite non-alcoholic beverage with lubricants purchased at our outlets. This year we are taking it a notch higher.  We have started the Oleum ‘Awoof Scratch & Win promo’ where every buyer is a winner. This promo runs till end of September and there will be many prizes for the winners at the end of the promo when the raffle draw takes place.

 

Q: Your market share?

A: If you look among the major marketers, we used to have seven per cent share. This was in 2016. But in the last two years, we have grown to about nine per cent.

 

Q: What is the worth of the Nigerian lubricant market?

A: There is hardly any verifiable data published to this effect, but if we are to estimate by the volume sold annually and the average cost of a litre of lubricant which is about 400 million liters and N550/ litre respectively, then we could say that the industry is worth about N220 billion.

 

Q: Do you see the potential for the country growing more than 400 million litres?

A: I don’t see that potential right now but if the industries work at optimum capacity, then we can begin to think along that line. Many of the factories in the country are at their sub-optimal performance. Some of them are as low as 30 per cent capacity utilization.  As they improve their output and more industries come on stream, then we can begin to notice movement in the numbers. If you look at the gross domestic product (GDP) of the country, you will see that agriculture is the greatest contributor but not much of lubricants is used in the sector because our mechanized farming level is still very low.

 

Also, if there is more movement of finished farm products and improved road network, more produce can be harvested and moved to the cities for sale. The more the movement, the more engine oils will then be consumed by both machinery and passenger vehicles. Even then, some analysts have posited that the industry is expected to grow by three per cent annually based on the yearly estimated number of vehicles imported into the country.

 

Q: What is the contribution of lubricant to your company’s bottom line?

A: Lubricants have always been complementary to our fuels retailing business, but that focus has shifted. With the downstream sector experiencing thinning margins, liquefied petroleum gas (LPG) and lubricant businesses are basically the only source of reasonable margins. Today our lubricants fetch us the highest margins on a per litre basis.

 

 

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