Giwa Ihesha
Member
MY MENTOR, DANGOTE, WANTS TO MAKE ME POOR
Sometimes, I look at what Aliko Dangote is doing in the downstream petroleum market and ask....
“Sir, why do you want to chase your business children out of business?”
Dangote now has thousands of trucks delivering petroleum products directly to filling stations at the same advertised depot price we suppliers buy from.
No separate transport charge.
No loading expenses.
No union tickets.
Only the depot price.
For independent marketers like us, how do we compete with that?
One of our loyal customers ordered 45,000 litres from Dangote six days ago at N1,265 per litre.
Pamtech offered him the same product at N1,290 per litre, including transportation, union expenses, financing costs, our small commission, and even two days’ credit.
The difference was only N25 per litre.
For 45,000 litres, that would have been N1,125,000 to cover everything and still allow us to breathe small.
But the customer rejected our offer and paid Dangote directly. Who would blame him?
N1,265 looked cheaper than N1,290.
But yesterday, while the truck was already at his filling station, the market price changed. He was asked to pay an additional N85 per litre to bring the price to N1,350.
That additional payment which my customer didn't have became....
45,000 litres × N85 = N3,825,000.
So, the N1,125,000 he was trying to save suddenly became an additional N3,825,000.
This is not an attack on Dangote. It is a real lesson about business, scale, market power and risk.
Everybody in the downstream oil and gas business just dey collect serious wotowoto nawadays.
Three years ago, I could mobilise about 20 trucks and buy one million litres of petrol with roughly N180 million.
Today, to buy that same one million litres at N1,350 per litre, I need....
N1.35 billion.
You see that the volume did not increase, neither did the trucks multiply but the litres remained the same.
Then, the working capital required moved from approximately N180 million to N1.35 billion.
That is an additional M1.17 billion just to remain where I was three years ago.
Pamtech has borrowed over N1.1 billion to keep financing every 1million litters in the same business.
So, when people say a business is growing because its revenue has increased, I sometimes smile and frown at the same time.
At N180 per litre, one million litres gave you N180 million in turnover.
At N1,350 per litre, the same volume gives you N1.35 billion in turnover.
Your revenue looks seven times bigger, but you did not sell one extra litre.
In fact, your interest costs, risks and capital pressure may have increased while your margin became smaller.
That is not necessarily growth. Sometimes, it is inflation trying to outgrow your business
Is the rising price making us richer as many think? Not automatically.
If I must borrow more money, pay more interest and carry more risk just to sell the same quantity, then the business may look bigger on paper while the owner becomes poorer in reality.
This is why I jokingly say my mentor wants to make me poor.
But the truth is that he is teaching me another powerful business lesson....
Dominance does not ask smaller competitors for permission. It changes the game and leaves them with two choices..... adapt or disappear.
So, Pamtech.... adapt or disappear
Dangote is teaching us what scale can do.
He controls production.
He controls logistics.
He controls thousands of trucks.
He can reduce costs in places where smaller marketers must still pay separately.
I can sit down and complain that my mentor is dominating my business, or I can study the strategy and ask....
What must Pamtech control?
Where must we reduce dependence?
How can we use our customer relationships, credit intelligence and local knowledge as advantages?
What other services can we add that a giant may not deliver personally?
How do we make each litre more profitable instead of celebrating turnover?
The giant may have scale, but smaller businesses can still have speed, relationships, flexibility, local intelligence and excellent service.
Our job is not to fight size with noise, but to fight size with strategy.
The market does not pity anybody because they borrowed money. It only rewards the business that understands the new game early enough to reposition.
My mentor may be showing me wotowoto today, but he is also giving me a free masterclass in dominance.
And I am taking notes.
When the rules of your industry change, don’t spend all your energy cursing the person who changed them. Study the new rules, protect your cash flow and build your next advantage.
I pray that Pamtech will not disappear. We will learn, adapt and innovate by God’s grace, then, we will become stronger.
Oluwa is involved.
#thebillionairejourney
#fixingfuturebillionaiees
Sometimes, I look at what Aliko Dangote is doing in the downstream petroleum market and ask....
“Sir, why do you want to chase your business children out of business?”
Dangote now has thousands of trucks delivering petroleum products directly to filling stations at the same advertised depot price we suppliers buy from.
No separate transport charge.
No loading expenses.
No union tickets.
Only the depot price.
For independent marketers like us, how do we compete with that?
One of our loyal customers ordered 45,000 litres from Dangote six days ago at N1,265 per litre.
Pamtech offered him the same product at N1,290 per litre, including transportation, union expenses, financing costs, our small commission, and even two days’ credit.
The difference was only N25 per litre.
For 45,000 litres, that would have been N1,125,000 to cover everything and still allow us to breathe small.
But the customer rejected our offer and paid Dangote directly. Who would blame him?
N1,265 looked cheaper than N1,290.
But yesterday, while the truck was already at his filling station, the market price changed. He was asked to pay an additional N85 per litre to bring the price to N1,350.
That additional payment which my customer didn't have became....
45,000 litres × N85 = N3,825,000.
So, the N1,125,000 he was trying to save suddenly became an additional N3,825,000.
This is not an attack on Dangote. It is a real lesson about business, scale, market power and risk.
Everybody in the downstream oil and gas business just dey collect serious wotowoto nawadays.
Three years ago, I could mobilise about 20 trucks and buy one million litres of petrol with roughly N180 million.
Today, to buy that same one million litres at N1,350 per litre, I need....
N1.35 billion.
You see that the volume did not increase, neither did the trucks multiply but the litres remained the same.
Then, the working capital required moved from approximately N180 million to N1.35 billion.
That is an additional M1.17 billion just to remain where I was three years ago.
Pamtech has borrowed over N1.1 billion to keep financing every 1million litters in the same business.
So, when people say a business is growing because its revenue has increased, I sometimes smile and frown at the same time.
At N180 per litre, one million litres gave you N180 million in turnover.
At N1,350 per litre, the same volume gives you N1.35 billion in turnover.
Your revenue looks seven times bigger, but you did not sell one extra litre.
In fact, your interest costs, risks and capital pressure may have increased while your margin became smaller.
That is not necessarily growth. Sometimes, it is inflation trying to outgrow your business
Is the rising price making us richer as many think? Not automatically.
If I must borrow more money, pay more interest and carry more risk just to sell the same quantity, then the business may look bigger on paper while the owner becomes poorer in reality.
This is why I jokingly say my mentor wants to make me poor.
But the truth is that he is teaching me another powerful business lesson....
Dominance does not ask smaller competitors for permission. It changes the game and leaves them with two choices..... adapt or disappear.
So, Pamtech.... adapt or disappear
Dangote is teaching us what scale can do.
He controls production.
He controls logistics.
He controls thousands of trucks.
He can reduce costs in places where smaller marketers must still pay separately.
I can sit down and complain that my mentor is dominating my business, or I can study the strategy and ask....
What must Pamtech control?
Where must we reduce dependence?
How can we use our customer relationships, credit intelligence and local knowledge as advantages?
What other services can we add that a giant may not deliver personally?
How do we make each litre more profitable instead of celebrating turnover?
The giant may have scale, but smaller businesses can still have speed, relationships, flexibility, local intelligence and excellent service.
Our job is not to fight size with noise, but to fight size with strategy.
The market does not pity anybody because they borrowed money. It only rewards the business that understands the new game early enough to reposition.
My mentor may be showing me wotowoto today, but he is also giving me a free masterclass in dominance.
And I am taking notes.
When the rules of your industry change, don’t spend all your energy cursing the person who changed them. Study the new rules, protect your cash flow and build your next advantage.
I pray that Pamtech will not disappear. We will learn, adapt and innovate by God’s grace, then, we will become stronger.
Oluwa is involved.
#thebillionairejourney
#fixingfuturebillionaiees