How to Start an Engine Oil (Lubricant) Supply Business and Make Money in Nigeria

If you want to know how to start an engine oil (lubricant) supply business and make money in Nigeria, then this article is for you!

One of the thriving business opportunities within Nigeria is the supply of engine oil lubricants owing to the ever-expanding nature of the automobile industry in the country and the perpetual need for good quality lubricants.

In case you are willing to learn how to start an engine oil (lubricant) supply business and make money in Nigeria, this detail-oriented article will disburden all your concerns regarding starting an oil supply business profitably and successfully.

Also See: The Secrets Of Hydrogen Peroxide Production and Supply Business In Nigeria

What Is Engine Oil?

Engine Oil which is also called motor oil is used as a lubricant in internal combustion engines to decrease the friction and the wear between the moving parts. It serves these purposes:

• Lubrication: Reduce relative motion (friction) and contact between engine parts, such as the piston and rings with the cylinder wall, to reduce the wearing process.
• Cooling: Assist in removing heat coming from the engine.
• Cleaning: Remove the wastes and foreign material from the surfaces of the engine.
• Sealing: Junctures between two hardware parts are usually filled with certain elements to prevent liquid or gas from leaking.
• Protection. Prevent rust or corrosion of metallic surfaces.

Types of Engine Oil

1. Mineral oil: Mineral oil, which is obtained from crude oil, is the most fundamental type of engine oil. It is also the most common type. Older engines that do not require high-performance oils can use it because it is suited for them.
2. Synthetic oil: Synthetic oil is a type of engine oil that has been chemically developed and designed to provide improved performance under harsh situations. Synthetic oil is also known as synthetic motor oil. High-performance automobiles, engines that work in high-temperature conditions, and more recent engines are all good candidates for this product.
3. Semi-synthetic oil: This is a mixture of mineral oil and synthetic oil, and it is referred to as semi-synthetic oil. It offers superior performance in comparison to mineral oil and is more cost-effective than synthetic oil of the same quality.
4. High-Mileage Oil: Typically used on vehicles that have surpassed 75,000 miles and contain leak sealants.
5. Diesel Oil: Oil type designed for diesel engines with higher viscosity and additives for diesel fuel density.
6. Racing Oil: There are various oil types designed for very high-revving engines with minimalistic cooling systems.

A Market Study of Engine Oil (Lubricant) Supply Business in Nigeria

Understanding in great detail the engine oil market in Nigeria is very important before going into the details of how to start an engine oil (lubricant) supply business and make money in Nigeria.

Market Size and Growth: According to estimates from Mordor Intelligence, the size of the Nigeria Automotive Engine Oils Market will be 170.93 Million Litres in 2024.

It is anticipated that this market will reach 177.98 Million Litres by 2026, expanding at a compound annual growth rate (CAGR) of 2.04% over the period of forecasting (2024-2026).

Engine Oil Consumption by Vehicle Types

Commercial Vehicles:  The Nigerian commercial vehicle sector has the largest engine oil consumption due to the fact that the country has 3.8 million commercial vehicles, the majority of which are old commercial cars that require frequent repairs.

Motorcycles: As a result of a significant recovery in low-cost motorcycle sales and increased travel rates, it is anticipated that Nigeria will experience the most rapid increase in demand for motorcycle engine oil.

Nigeria Automotive Engine Oils Market Trends

Engine oils in terms of products consumed contributed more than 74% to the total lubricants within the automobile industry in Nigeria in the year 2020.

Between the years 2015 and 2019, the consumption of motor oil grew by a compound annual growth rate of 0.5%. The increasing number of active vehicles in the country was the major driver of this trend.

As a result of the COVID-19 outbreak in the year 2020, there was a significant decrease in operational activity of vehicles which caused a fall of 6.3% in engine oil consumed in the country.

In terms of engine oil consumption, it is anticipated that the motorcycles category will experience the largest growth rate of 3.4% between 2021 and 2026, followed by the CV segment with a growth rate of 2.1%.

Benefits of Engine Oil (Lubricant) Supply Business in Nigeria

High demand: Nigeria has experienced an increase in the number of private and commercial vehicles in recent years thus there is high engine oil demand, making it a very profitable business to get into.

Income diversification: Starting an engine oil supply business in Nigeria makes it possible for entrepreneurs to venture into other lines of income generation.

Job creation: With oil being in demand, it means that employment opportunities are going to be created in the motor oil supply business from the distribution part to final retailing which will help augment the economy hence solving problems of unemployment.

Local content: Investment in the engine oil supplying business in Nigeria promotes local lubrication oil manufacturing thus reducing importation.

Partnership opportunities: Engaging in engine oil supply business creates a platform for collaborations and synergies with the manufacturers, suppliers and distributors which enhance the growth and expansion of the business.

Brand visibility: Events can be sponsored, or products and brand value can be increased through advertising and promotion of engine oil supply business through social media and other marketing tools.

Long-term investment: The engine oil supply business is long term in nature and guarantees steady revenue over time.

Local support: The business of engine oil supply supports the local community by funding local businesses and projects.

Market stability: Because engine oil is used in different industries, the engine oil supply business is quite stable.

Flexibility: The business of engine oil supply is flexible because an entrepreneur can do the business on small scale or on a large scale depending on the resources available and the aims of the business.

Key Players Engine Oil (Lubricant) Supply Business

There are many key players especially Mobil, Total, and Oando who are already established in the Nigerian engine oil market. Nonetheless, there is also the potential of more players coming in to offer differentiated products or serve less competitive areas of the market.

Business Opportunities in the Engine Oil (Lubricant) Supply Business in Nigeria

Lubricant blending: As part of the engine oil supply chain, this segment allows the entrepreneurial class to participate in lubricant blending or formulating – mixing different ingredients to deliver lubricants of desired quality for various uses.

Distribution: This segment also offers entrepreneurs opportunities to deal in lubricants by supplying these products to retailers, garages, and other businesses or companies requiring motor oil and lubricants.

Retail sales: This segment also permits entrepreneurs to sell lubrication oil directly to consumers via retail shops.

Import and export: This segment also allows the shareholders of the business to import and export lubricants to other countries.

Franchise opportunities: The engine oil supply business allows the business opportunities to individuals whereby they depend on others to avail emulsion franchise stores enhancing the brand.

Online sales: This segment also allows selling lubricants over the internet thus widening the market and increasing sales.

Lubricant recycling: As part of the engine oil supply business, this segment permits the recycling of waste lubricants, earning extra revenues while helping to preserve the environment.

Bulk purchase and supply: The engine oil supply business creates an avenue for entrepreneurs to buy lubricants in bulk and distribute them to retail, garages and other businesses.

Private labeling: The engine oil supply business creates an opportunity that allows entrepreneurs to offer private labeling services to companies so that they can market their name and products.

Lubricant additives: The engine oil supply business creates a product opportunity for entrepreneurs to manufacture as well as sell lubricant additives which enhance the performance and quality of various lubricants.

Challenges and Solutions

Starting up the engine oil supply business has its challenges. Here are some possible challenging areas and means of addressing them:

Market Competition

Challenge: The Engine oil supply sub-sector of the oil and gas industry market in Nigeria is very cutthroat, with several old and new players.

Solution: Employing brand positioning that is geared towards quality, green products.

Looking for gaps in the competition’s service, e.g. motorcycle or marine oil lubricants.

Regulatory Hurdles

Challenge: This industry is governed by some agency of government, which makes it cumbersome to adhere to the norms set and the laws created regarding imports.

Solution: Develop a good working relationship with SON and other regulatory bodies for a better understanding of the standards.

Use plan management to make sure all necessary submissions are done.

Keep abreast of any new developments in the regulations to avoid sanctions and limitations.

Supply Chain Management

Challenge: Ensuring there is a regular supply of oil as per the demand forecasts presented can prove to be a headache. It will be especially a challenge in a country like Nigeria where the supply chain is quite intricate.

Solution: Strengthen partnerships with local and foreign suppliers.

Put resources into good inventory control systems that control stock levels and make forecasting stock requirements easier.

Evaluate strategic warehouse placement to cut down on cost and time taken in transportation.

Economic Factors and Oil Prices

Challenge: The global market for oil has an impact on internal market prices and demand for engine oil hence fairing the economy is difficult

Solution: Adopt the use of price fluctuation strategies.

Brand Awareness and Customer Trust

Challenge: Entering an overcrowded oil engine market with a reputation is something oftentimes worth fighting for.

Solution: Promote your products through marketing and advertising and let the customers see how good and how reliable your products are.

Seek favorable recommendation and recognition from marketing professionals and industrial institutions to substantiate your product quality.

Starting Your Engine Oil Supply Business in Eight Easy Steps

Step 1: Carry Out Market Research

Conducting market research is one of the prerequisites for starting any business.

It is important to understand the target audience and the reasons why they would or would not buy your product.

Determine what parts of the market are not being served, and how your goods can essentially serve your customers’ needs.

Step 2: Create a Business Plan

A good business plan will assist you not only in raising funds for the business but also will act as your guide in running the business. Examples of components that would be included in the business plan are;

• Executive Summary: This is a guide to the purpose and aims of the business concept
• Market Analysis: There is information regarding share of the market, target, and competition status.
• Marketing Strategy: Means of acquiring and retaining the customers.
• Operational Plan: Supply chain, production, and distribution plans.
• Financial Plan: Budget estimates for sales, expenses, and net income generation.

Step 3: Register Your Business

You will also register the company with the Corporate Affairs Commission (CAC) and acquire further licenses where necessary.

Comply with all requirements of the law to your locality to prevent any form of legal clashes in the future.

Step 4: Secure Funding

According to the size of your business, you need capital.  Look for finance options like personal savings, taking a loan from a bank or cooperatives. You may also get other investors involved to finance the business to become partners in it.

Step 5: Source Quality Products

Developing robust relationships with reliable suppliers and manufacturers of engine oils and lubricants is fundamental. If necessary, consider the option of importing from reputable foreign manufacturers.

Step 6: Set Up Distribution Channels

Create a good distribution system that will enable your products to reach customers effectively. It can include making arrangements with retail stores, auto garages, and online selling of the products directly to the consumers.

Step 7: Implement Marketing Strategies

To create awareness of the product and to get customers, money should be put in marketing strategies.

Ensure that you are advertising through the internet on social networks, emails, as well as through the use of resources like SEO.

Step 8: Provide Excellent Customer Service

Customer satisfaction is the basic foundation for customer retention. Always reply to customers promptly by providing them with the services they need and solving their queries if they have any.

Step 9: Monitor and Adapt

You should continuously keep track of how your business is performing against its competitors and market patterns. Be ready to change with regard to your strategies and handling of any competition that might be coming your way.

How To Produce & Package Engine Oil In Nigeria?

You can make a profitable business by producing, packaging, and distributing engine oil in Nigeria.

To get started, here are some points to keep in mind.

Raw Materials: You will have to look for reasonably affordable and good base oils and chemicals to constitute the engine oil. These can be sourced from reputable dealers.

Purchase of Equipment: Acquire the necessary equipment for blending and packing the engine oil as appropriate. This comprises tanks, filling, mixing, and packing machines.

How to Make the Engine Oil?

Think about the type and amount of engine oil you are going to produce and proceed to do a formulation.

In order to address this, attention and some level of research and development may have to be done to ensure that the end product is of the required quality.

Making the engine oil involves blending of all the chemicals with the base oils.

For a desirable end product to come out, the appropriate proportions should be followed.

• Packaging: The engine oil should be poured into appropriate containers after the mixing process is over. These may include bottles, cans, or drums depending on the target market.
• Quality Control: To ensure that the engine oil conforms to the requirements of the industry and the consumers, quality control of the engine oil should be done on a regular basis.
• Distribution: Establish a distribution channel where your customers will buy your engine oil from. This can mean distributing yourself or working with already established distributors.

By adhering to these strategies, one can manufacture and package quality engine oil to be sold in the Nigerian markets.

How much to start an engine oil business?

The initial capital that is necessary to start an engine oil business in Nigeria can vary based on the size and scale of the business.

Let’s go through the estimated costs of starting an engine oil business in Nigeria.

Retailing on a Small Scale

• The first stock of engine oil, which is between 100 and 200 litres, is estimated to be between ₦200,000 and ₦400,000.
• Equipment and storage facility: ₦50,000 to ₦100,000
• Advertising and marketing costs: ₦50,000 to ₦100,000,

Medium-Sized (Wholesale) Business

• The initial stock of engine oil, which ranges from 1,000 to 2,000 litres, is estimated to be between ₦2,000,000 and ₦4,000,000,
• Equipment and storage facility: ₦100,000 to ₦200,000
• The cost of marketing and promotion:  ₦50,000 to ₦100,000,

Large Scale (Distributor)

• Initial stock of engine oil (5,000-10,000 liters): ₦5,000,000 – ₦10,000,000 Storage facility (ownership or long-term lease): ₦500,000 – ₦1,000,000
• Marketing and advertising: ₦200,000 – ₦500,000

Additional Costs

Business registration and licenses: ₦50,000 – ₦200,

Staffing and training: ₦200,000 – ₦500,000

Vehicle and transportation costs (for distribution): ₦500,000 – ₦1,000,000

You will need to create a detailed business plan and adjust these estimates based on your specific circumstances to ensure a successful engine oil business in Nigeria.

Note: These estimates may vary depending on factors such as location, supplier prices, and market conditions.

Marketing and Sales Strategies

The marketing and sales techniques adopted in your engine oil supply business need to be effective for the success of this business. Therefore here are some measures that you should consider to ensure that the sales of your products increase:

Build a Strong Online Presence

Go the extra mile and design a proper business website and promote it by performing SEO to help ensure high traffic from search engines.

Create accounts on various social media platforms such as Facebook, Instagram and LinkedIn and market your business there to your followers.

Leverage Content Marketing

Let your blog feature regularly updated articles on the topics of engine oils and vehicle services. For example, include phrases like “buy best engine oil in Nigeria” and “selecting the right lubricant for your car” to capture the attention of internet users.

Offer Promotions and Discounts

Promotions and discounts are highly effective in acquiring new customers and repeat sales.

Long-term customers can be rewarded by loyalty programs and referrals can also be influenced.

Collaborate with Influencers

Use influencers and credible automobile personnel to promote your services and products. The role of influencers is to amplify your voice in the industry powers.

Attend Industry Events

Look for opportunities to support potential clients and partners in trade fairs, auto shows, and conferences. Use these activities to market your services and products as well as their benefits.

FAQs – How to Start an Engine Oil (Lubricant) Supply Business and Make Money in Nigeria

How profitable is lubricant business in Nigeria?

In Nigeria, the lubricant business can be profitable, but only if you plan carefully, sell your products strategically, and put quality and customer service first. Businesses can do well in this changing market if they deal with the problems and take advantage of the chances.

How to start a lubricant business?

• Step 1: Carry Out Market Research
• Step 2: Create a Business Plan
• Step 3: Register Your Business
• Step 4: Secure Funding
• Step 5: Source Quality Products
• Step 6: Set Up Distribution Channels
• Step 7: Implement Marketing Strategies
• Step 8: Provide Excellent Customer Service
• Step 9: Monitor and Adapt

Conclusion: How to Start an Engine Oil (Lubricant) Supply Business and Make Money in Nigeria

Starting an engine oil supply business in Nigeria requires careful planning, execution, and continuous management strategies. If you understand the market, meet business requirements, source high-quality products, and implement effective marketing and sales strategies, you can tap into this lucrative market and generate significant profits.

Knowing how to start an engine oil (lubricant) supply business and make money in Nigeria requires that you follow all the strategies and tips outlined in this article, but do not forget that patience, consistency, and hard work are the keys to success in every business.