OVH Energy has been at the forefront of getting rid of adulterated lubricants in the market sector of the downstream oil and gas industry. It is also making moves to expand its market share beyond the shores of Nigeria. LILIAN IKOKWU, Head Lubes in this interview with OLUSOLA BELLO explains the various moves industry operators have taken to control the inflow of adulterated lubricants into the market. Excerpts;
What is your overall view of the lubricant market in Nigeria?
The lubricant market in Nigeria has evolved. Traditionally, it was dominated by the majors in those days. When I say majors, I am referring to the international oil companies (IOCs) such as the Total, National Oil, Agip and the African Petroleum which was marketing British Petroleum Lubricant. But with all the divestments that had happened in the downstream sector of the petroleum industry, a lot of local players have come in.
Interestingly this was not the only thing that happened in the industry as the barrier for entry into the lubricant market was lowered and there was massive influx of lubricants from Asia and Europe into the market. The implication of this is that there was a lot of pressure on the local manufacturers. There are about 46 licensed manufacturers here locally. A lot of them are faceless. But if you go to the market and do a count of the lubricants, you would see over 50 brands out there contesting for space.
For the consumers, there is room for options but there is also a challenge because the labels say one thing but there are only few brands that you can guaranty the quality of products they have in the bottle.
The industry has a lot of potentials. It has witnessed some growth over the years and it has been quite stable with reduced economic activities. We have just got out of recession. The country is expected to be distributing annually about 400 millions litres of lubricant. Not all of these are produced lubricants as the chunk of these is oil based or straight oil that you can see on our road sides. So essentially, the industry has grown because a whole lot players came in. This is not without its own problems. Some other issues such as counterfeiting and adulteration have besieged the industry.
How are these issues of adulteration and counterfeiting being addressed?
What OVH Energy did in 2015 to address this particular issue was that it embarked on a project which ensured it changed the 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. So in the designing process, we made sure we built in-security features so that it becomes quite prohibitive for people that want adulterate the product. We also track our bottles so that if there is any adulteration we can easily take action on it. We track our delivery chain because we have registered distributors. So it is quite easy to follow the movement of our bottles and it has helped us to curtail adulteration – so far so good.
What is your expansion programme for the product like?
This year alone we have installed two additional products lines in our Apapa lubricant plant, the first-of-its-kind in Africa, to support the drive to meet local demand and opportunity to export to the ECOWAS region. Expansion is key in growing our business.
So would it be right to say your company is working towards increasing your market share in West African sub region?
Definitely, taking a share of the market is something we are very big on. We had stepped back some time ago when we went back to the basics, when we started with the packaging. It was clear what our strategy was. It was to reposition and grow our market share and we have seen steady growth in the past 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. But we are now going to expand that by reaching out to other countries along the ECOWAS corridor and we are going as far as Niger and Chad. We plan to increase our market share locally and in West Africa’s sub-region.
Any reward for your loyal customers?
Just to show our customers that we appreciate them, we have in the last two years made it a point of duty to always give back to the general consumers. Last year, we ran a 4 -for-4 promo campaign for 3 months where we partnered with Coca-Cola and gave out soft drinks when people bought our lubricant. This year we are taking it higher. We have started the Oleum ‘Awoof Scratch & Win promo’. There is something for everyone who buys our product. This is running till the end of September and there would be a lots of gift to be offered to winners at the end of the promo when the raffle draw takes place.
Your market share?
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.
What is the worth of the lubricant market?
If we are to go by the volume that is sold annually and what the cost of a litre of lubricant on the average is, depending on the kind of base oil, this will determine your cost. But an average lubricant at the minimum rate should cost about N550 per litre. If this is multiplied by 400 million litres which is the estimated volume that goes into the Nigerian market annually we would say the industry is worth about N220 billion. It could be more than this, because I am using an average number. I don’t think we do more than 400 million litres. I actually think we are not yet at 400 million but somewhere between 320 and 400 million litres. Because there is no data published to this effect, it is difficult to say what the exact figure is. But if you add what comes to what we projected as locally produced and what is consumed, we can say the upper band is 400 million litres.
Do you see the potential for the country growing more than 400 million litres?
I don’t see that potential right now but assuming the industries are working at optimum capacities, we can begin to think along that side. A lot of the factories in the country are at their sub-optimal performance. Some of them are as low as 30 per cent optimization. As they improve their output and more industries come on stream, then we can start noticing improvement. 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 low.
This could only happen if the processing aspect of agriculture products come to live. This will engender more movement of goods and services. As we get better roads in the country, products that are harvested in the farms can then come to the city or to the market places to be sold. The more there is movement, the more engine oil is consumed. Yes, I agree with you that there is prospect but a lot of it also depend on so many other things such as our roads maintained as and when due. The industry is expected to grow three per cent a year largely driven by the estimated number of vehicles that are expected to be added yearly in the country.
What is the contribution of lubricant to your company’s bottom line?
Lubricant typically used to be the next after the white product. But the business has refocused that position. With the downstream sector experiencing thin margins, the only place you get reasonable margin is liquefied petroleum gas (LPG) and lubricants. The focus has changed. In recent times, lubricant is the major focus of the business. Today it is about the sole highest contributing product line to the business.
OLUSOLA BELLO
