Democracy unleashes new investment and marketing drive in Nigeria

Sep 14, 2001 02:00 AM

That the over two years of democratic governance have unleashed a new investment and marketing drive in the Nigerian downstream sector of the petroleum industry, may not have surprised industry watchers or analysts that understand the operational linkages between the upstream and downstreams sectors and the dynamics of the industry.
Quite remarkably, the last two years of President Olusegun Obasanjo administration's commitment to the development of the upstream sector and other strategic steps taken to reactivate the refining, distribution and marketing infrastructure have come to represent a new phase in the annals of the petroleum industry.
For an industry that had been put into a state of operational inertia following several years of neglect, corrupt practices and other bad values in corporate governance, the various investment decisions by the Federal Government in area of Joint Venture (JV) cash call payments, enactment of regulatory framework, rehabilitation of infrastructure and theproposed plan to deregulate the downstream sector have translated into substantial gains to the economy.

To the major marketers in particular, the last two years of sustained investment drive in the upstream and downstream operations and the downstream players' strategic repositioning programmes have thrown up new marketing opportunities and challenges.
As part of their efforts to leverage their operations in a terrain that had hitherto remained largely harsh to investment, no thanks to the inglorious Abacha years, most of the major marketers are adopting the strategies of huge investment in sales outlet and innovates products development to enhance their performances in the market.
Other measures that are becoming increasingly handy to the major marketers' vision of improved market share are their insatiable appetite for improved products and services standardization, computerisation of operations, manpower's training, building of strategic alliances with other corporate entities and end-users andimproved customer services.

For companies like Unipetrol Nigeria, TotalFinaElf Nigeria, Mobil Nigeria, African Petroleum (AP), and other major marketers, these initiatives are considered imperative for the containment of the increasing threat to their market share posed by aggressive exploration of the market by their independent counterparts.
These initiatives could not have adopted by the major marketers at a most auspicious moment than now when the market is going through a remarkable period of volatility occasioned by unregulated entry of new players. According to a recent survey, the last one year has witnessed the construction of over 180 sales outlets in Lagos alone even as illegal roadside sales points are increasing by the day.
Like every player-saturated market, the challenge for players to create credible identities for their companies and brands is becoming increasingly important. This, perhaps, seems to explain why the major players are embracing sundry options to separate themselves from "the crowd".

Another development that can be attributed to the growing penchant of major marketers to position their brands and services to the leading edge of the market is the fact that the potential dividends of the past two years of renewed investment drive by Federal Government to stimulate growth in the petroleum industry are beginning to manifest with attendant implications for sustainable growth of the downstream sector.
For instance, despite the severe capacity limitations witnessed in the various refineries last year, which led to the decrease of their total products supply from 30 % in 1999 to less than 20 % last year, continued efforts to encourage upstream development, reactivation of the decaying refineries as well as private investors' investment in depots and other distribution and marketing facilities have helped to boost corporate performance and profitability.
Reflecting on the operating environment at the just concluded yearly general meeting of Unipetrol Nigeria, the Chairman, Major-General Muhammed Magoro (rtd), noted that although the downstream sector suffered severe capacity limitation due to decaying and aging infrastructure in 2000, the company was still able to enhance its operational performance through sound investment policy adopted by its management.
According to him, a total sum of N 339.590 mm was committed to capital projects in 2000 on the development of retail outlet network acquisition of modern dispensing pumps and computers among other projects. Another strategic initiative embarked on by the company to leverage its competitiveness in the downstream market was the N 218.6 mm invested in equity acquisition in Gaslink Nigeria in pursuit of Unipetrol's diversification strategies.

To Total Nigeria, the immediate gears prior to its recent merger with Elf Oil Nigeria, have been charactered by sundry investment and sound managerial policies aimed at increasing its market share across the broad spectrum of the downstream sector. With 336 sales outlets throughout the country, the Total network in the country is the core of its business presence and continues to account for a large portion of its investment. The company, which posted in excess of N 26 bn turnover last financial year, has also maintained a dominant share in the lubricants market over the year.
According to the explanatory statement prepared by financial advisers of the company and Elf Oil Nigeria on their recent merger, the company's achievement in the lubricants market was made possible by "research into new techniques and products that meet customers' expectations and requirements.
"In line with the company's policy of quality services to customers, Total continuously invests in projects including oil in-service monitoring, sundry workshops and seminars and lubrication surveys of plant and equipment. "One of its very popular lubricants brands is Total Quartz 7000, which is a synthetic based, high performance engine oil meeting the API: SJ/FC classification", the statement added.

Another area that has come out as one of the major thrust of the company's investment drives in the downstream industry is its continued efforts to boost its performance in the LPG and aviation products markets. With over N 1.5 bn already committed to the LPG marketing sector, the company remains till date the largest investor in LPG marketing in the country. Its assets in this market consists of 10 LPG plants, 22 LPG trucks over 400,000 LPG cylinders and a professional manpower resource base.
"The company's aviation operation, Air Total, has one distinction of being the first oil markets to receive the Standards Organisation of Nigeria (SON) certification.
"Air Total has also acquired a brand new hydrant servicer, equipped with the most modern facilities in filtration and delivery services.
The company recently completed the conversion of its coalescer filters to filter monitors on three servicers and is currently planning to convert its refueller filtration to filter monitors in due course", the statement added. But by far the most fundamental initiative that is bound to radically impact positively on the company's performances over the years is its merger with Elf Oil Nigeria to form a new corporate entity: TotalFinaElf Nigeria. Besides improving its market share, the alliance will result in other dividends for its stakeholders.

Speaking on the implications of the strategic alliance for the companies' market shares, product lines, financial, dividends and administrative efficiency at the court ordered meeting held in Lagos recently, the Chairman, Mr. Francis Jan, expressed optimism that the merger would bring fortunes to its stakeholders.
His words: "We expect the combination of 10.8 % (Total) and 4.75 % (Elf Oil) to produce an enhanced market share of 16 % in the downstream market. According from the expected product mix from both companies, we expect significant increases in lubricant sales as well as a prominent position in the all-channel sales of white products.
"The new company will also continue to take the lead in the sales of aviation fuel and LPG. The number of stations outlets should move from Total's current 336 to 492 which will give the enlarged company the widest coverage in the country. Other operational synergies will include the fact that storage/depot facilities will increase significantly by a combination of operational assets from both companies", Jan said.
He also projected a drastic boost in turnover for the enlarged company from a forecast of N 28.7 bn pre-merger at the end of December 2001, to a post-merger figure in excess of N 40 bn at the end of 2002". To another major players in the industry -- Mobil Oil Nigeria, the last few years have represented a major phase in the company's renewed investment drive to sustain its leadership position in the downstream sector.

According to the company's management, apart from the huge investment committed to sales outlets, which this year alone is estimated to be in excess of 1 bn naira, the company has continued to leverage on its operations by maintaining a focus on strategy and discipline of customer-centric retail organisations anchored on the core values of quality products, friendly customer service, hygiene, health's safety and value for money.
Speaking on the core values and their places in corporate plans and goals at a public forum recently, the company's Chairman/Managing Director, Mr. John Pototsky, explained that the values have come to represent the propelling strength that is driving it towards the attainment of its corporate goals in the downstream sector of the nation's petroleum industry.

Reflecting on the recent positive changes in the country, Pototsky said: "Mobil Oil Nigeria has been in Nigeria for almost a hundred years. We are now a part of the merged companies. Exxon and Mobil. We want to be part of Nigeria's development and future. As they say in financial markets, we are "bullish" on Nigeria. "Mobil Oil Nigeria has grown to become a very successful company by building our brand image, and by maintaining a strong commitment to safety, health and the environment."
"This commitment ensures that we conduct our business in a safe manner that protects our employees, our partners, our customers and the community in which we operate. Mobil is leading a drive to improve transportation safety by upgrading the safety specifications of the vehicles that we operate, or contract, and by training our drivers in defensive driving techniques."
"It also means that wealth is a key focus, whether it is the 'Roll Back Malaria' programme, or drug and alcohol abuse support. Finally, for the environment across Africa and around the world, ExxonMobil is leading an initiative to combat air pollution, by eliminating lead in gasoline. In all these programmes, we are working in partnership with the government for the development of Nigeria," Pototsky said.

To complement the various operational values targeted at building a strong image and enhancing the performance of the company in the downstream sector, anew strategic partnership relationship was recently forged by its management with Mr. Bigg's a division of UACN, as part of their joint efforts to redefine convenience in the country's retailing industry.
Described as an innovative marketing approach with unique benefits far the parties, the new relationship, according to industry analysts, will further boost Mobil's reputation as a quality conscious and consumer-centric organisation in the downstream market.
To give vent to its strategic importance in the company's overall operations, about four of such retail outlets have been launched in Lagos in the past two months even as the management is determined to introduce the new concept to other major cities including Abuja, Kaduna, Port Harcourt among others in no distant future.
Delivering his address at the year 2000 general meeting of Agip Nigeria, the Chairman, Otunba Adekunle Ojora, attributed the increasing encouraging performance of the company in the downstream sector to the various strategies, adopted terms of capital investment, safety, health, environment as well as manpower development.
He explained that the business environment, which was characterized by incessant product scarcity, affected the realization of sales volume objectives, the overall performance of the company during the period was impressive. He particularly identified the new fuel handling depot located in Apapa Lagos as among the key assets that helped the company to be more dynamic in sales.

Reflecting on the impact of the various business initiative embarked on during the year, he said: "I am pleased to inform you that the construction of our new fuel handling depot locate at Apapa, Lagos State was completed in April 2000 and commenced operations in May of the same year.
"The excellent result achieved in the year under review is attributed largely to the completion of the new fuel handling depot which provided the opportunity for the company to be more dynamic in sales and less dependent on third party facilities to satisfy the needs of our numerous customers as well as the cost reduction approach and the prudent management of resources," Otunba Ojora noted.
According to him, the above measures and others, including the N 178.570 mm expenditure on capital projects, the importance placed on environment, safety of personnel, high standards of health for the workforce and manpower capacity development programmes, contributed to the company's better performance over previous years.
"Our company continues to attach great importance the environment, the safety of our personnel and high standards of health for the workforce. Investments are made in these areas to achieve the required standards in keeping with environmental requirements. "Our company embarked on various training programmes for staff at all levels. Participation in seminars were encouraged, while training of retail personnel was emphasized to improve service delivery to the public," the chairman added.

The resultant effect of the various measures was that the company's turnover volume increased substantially from the N 10.352 bn recorded in the previous year to N 12.610 bn during the year under review just as the Profit After Tax (PAT) rose from N 591.992 mm in 1999 to N 1.015 bn in 2000, representing an increase of 71.5 %.
Other major companies that have sustained their investment drives and other competitive strategies in the downstream sector with remarkable successes in the last two years include National Oil Company, Texaco (Nigeria), African Petroleum (AP) among others.
Like their contemporaries in the downstream operating terrain, the above companies are refocusing their operations in the area of the construction of new sales outlets, development of innovative products and a new approach to customer-centric services to sustain the various reputations earned by them over the years.
But as some industry analysts have pointed out, the extent to which the individual company's efforts can empower it to sustain its leadership in the market would depend on the level the operating environment supports their investments and other strategic repositioning efforts.

This point is better captured by the statement of Otunba Adekunle Ojora's delivered at Agip (Nigeria), 41st yearly general meeting held on April 11, this year in Lagos. His words: "The petroleum marketing sector witnessed yet another period of fuel scarcity during the year under review which affected the activities of the marketing which had to rely on the usual product rationing and allocation. The incessant product shortage affected the realization of sales volume objectives."
"For the sustainable development of the economy, there is urgent need for the authorities to address the persistent fuel scarcity in the country in order to sustain growth and attract more local and foreign investment as well as provide the opportunity for growth of the downstream sector."
"The rehabilitation of the four refineries should also be seriously addressed by the government to achieve installed production capacity", Ojora canvassed.

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