Competing in Nigeria’s lubricants sectorNovember 12, 2021
Collins Opara, CEO of Vegasirius, talks to The Energy Year about strategies the company has adopted to make itself a space in Nigeria’s lubricants sector and projections on the near-term future of this sector. Vegasirius markets lubricants and fuels and provides marine logistics and engineering services.
What strategies has Vegasirius adopted to make itself a space in the lubricants sector?
Vegasirius was born in 2012. At the time, Nigeria’s economy was growing and there were plenty of opportunities for fueling, logistics and lubrication services. Our first inroads into the business were made in the area of fuel technology. We had the technical capacity and business development capabilities so we acquired all the necessary permits and licences, carrying out our first fueling contract for Etisalat sites in Benin, Edo State.
Despite this, our initial focus was lubrication services. We connected with some lubricants companies in Eastern Europe and picked a company from Ukraine which had a good-quality product: Yuko. We brought the product bottled in 1-litre or 4-litre containers and sell it in the Nigerian market. We also started custom blending our own product only for the industrial grades. We have resellers from several states including Nnewi in Anambra State, which is one of the country’s manufacturing hubs, and Lagos, which is a major auto market.
Our strategy was a bottom-up approach: to start by getting the users and technicians to like the product, and from there create a pull effect. Then we targeted distributors who had already heard of the product from their clients. This was the strategy we took to successfully get into the market.
On top of this, we have adopted a customer-centric approach by which we tailor and offer products depending on a client’s needs. Depending on what warranties they have for their machines, we give them the proper API and SAE class performance products, advising them on the better product. We’ve also tried to monitor whether our advice is useful to them. This has helped us keep customers, especially in hard times like the current period when the need for lubricants has dropped.
What projections can you offer on the near-term future of Nigeria’s lubricants sector?
The lubricants sector will be driven by production, manufacturing and logistics activities, among others. Regarding the automobile industry, there is a growing trend where people are starting to use public transport in place of their private vehicles. This may lead to a 10-15% drop in demand for lubricants. At the same time, we see more of the businesses getting into the retail market, including finished or treated lubricants products.
However, the market is still here and the potential in the lubricants sector is huge. As of 2018, the Nigerian Bureau of Statistics recorded around 11.8 million registered vehicles in Nigeria, and this number has since increased. That means that, only for the auto sector, base oil requirements for lubricants will hit around 50 million litres per month. If we contrast this with the amounts of base oil we currently import – 20 million litres per month – we see a huge gap in base oil production which has to be bridged. This represents a major opportunity.
In addition, the industrial sector will grow, and with it the demand for industrial lubricants. However, it will take some time, until well after 2022-2023. In any case, most of the industrial businesses, like the marine and EPC players, are supplied by international companies. These companies appear to be specifying a brand of lubricant in their warranty – Shell, Castrol, Chevron, Total, or Agip – which is a protectionist/market assurance type strategy.
What type of lubricants and fuel solutions can you provide to clients across the value chain?
As an example, Egbin Power invited us to do a survey of their equipment. They have about 3,700 different units in the power plant that need lubrication. We checked some of the units and identified plenty of areas for improvement. This is to say that they require better fuelling solutions. Their fuel is gas, but there are also cheaper fuels to run that plant using waste to generate the fire to build the steam.
Another example is in the trucking logistics sector. For instance, BHN Logistics, which has more than 300 trucks. They think diesel is fine for their engines, but the whole engine system can be affected if it is inefficient, and by applying the right fuel solutions we can give them 10% fuel savings. The problem is that, for some industry players, fuel savings is not something they want to preach, and the same goes for measuring CO2 emissions.
Secondly, we can address issues caused by a particular grade of fuel called La Casera, which is diesel mixed with kerosene or other fluids. Mixing it reduces the ignition index. This diesel is usually cheaper in the short term but its damaging effect makes it very expensive over the long term. In fact, machines will still run on this fuel, but the fuel burns faster as it is more volatile. It also loses the power; it does not give the type of power that device has been rated for. So, the inside of the machine is not getting what it is supposed to get either in frequency or amperage. Technicians thus need to work harder to keep the machine working in an efficient manner.
These are issues clients must know about and this is where our lubricant and fuel solutions come into play. We advise on the best options and provide treatment fluids. This is the reason I said we do a lot of consultancy for the market now and where necessary we provide the products for clients.
What inroads have you made in the areas of waste and oil spill management?
When it comes to waste management, we have done a lot of advisory work but we want to start managing operations. We help the government or company take the waste out and process it into something useful and resalable. This can have a real impact and bring value to society. We have already started contacting states and companies, and we have a strong partner on board: the CUTEC institute in Germany. We have a business partnership with them through which we collaborate to find clients, discuss the technical aspects and solutions, and operate the project. This involves any kind of waste, including petroleum waste.
We also offer solutions in the area of oil spill management. We have partnered with a company called Bioremed. In the event of an oil spill, we apply a product made out of microorganisms that eat up and absorb the oil spill, whether it be on soil or water. After this, the bacteria dies when there is no oil to eat. We are now in the process of product registration with DPR [Department of Petroleum Resources]. We are trying to speak to downstream firms that have effluent facilities. We want to be treating the effluent before it’s discharged into the waters.
How can Vegasirius’ know-how enhance the efficiency and performance of a customer’s engine?
We bring knowledge and expertise to the market, and especially to the lubricants sector. There are differences between synthetic lubricants, such as a 5W30, and a 10W30, which is mineral based. The car warranty may stipulate 5W30 should be used and the oil should be changed after 15,000 kilometres. Yet both products have the same viscosity characteristics, with the only difference being the amount of time the product would stay in the engine.
However, why should the oil be changed every 15,000 kilometres if the vehicle is not new? The owner of the vehicle does not know these intricate matters so he or she will stick to the warranty instructions stipulating 5W30. As a matter of fact, that means spending money that could be saved when the performance of the engine could be sustained with good technical advice even if another type of product of the same viscosity grade is used.
Another indicator would be the use of your car. The type of lubricants used will depend on the usage of the vehicle. For example, a customer that drives the car often needs an SAE40, like a 15W40. The weather is also an important factor to consider. The lowest temperature in Nigeria is 15 degrees centigrade, which means that the oil will always flow. So an SAE40 will move fast as it is designed to do so in higher temperatures.
Thus, advice and expertise are what we bring to the market and to the customer, saving them money and enhancing engine performance. Therefore, we do a lot of Consultancy in each of the Service areas.