Ayodeji Ogundiran is the Managing Director/Chief Executive Officer, Fuelmetrics Incorporated, a technology-driven company with major focus on oil and gas. In this interview with Nairametrics, he proffered solutions to some challenges in the oil and gas industry, how both owners of fuel stations and their patrons can get value for their money and how entrepreneurs in the sector (stations owners) can assess funds from commercial banks. Excerpts:
The plan of every entrepreneur is to bridge certain observed gaps. What gap did you see in the Nigerian oil and gas sector that informed the establishment of Fuelmetrics?
The petroleum industry in Nigeria is purely manual. Attendants wake up every morning, pick up metres, opening and closing reading. At the end of the shift, there is a manager at the back of it who does the computation and sends it to the management, depending on the structure of the station. This exposes them to a lot of error, fraud, and prevents them from making sensible decisions from data. And that is the problem we are solving.
How do you solve this?
We are providing them with reliable technology to automate most of these processes, and putting the management or the owner of the station or the company in control of their business. They could be anywhere in the world, and realtime they know how much sales we make. This is where we need to correct. This is what we need to optimise to improve our business. So, in layman’s terms, we’re helping our energy marketers to optimise their business and make them more profitable.
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Practically, how does that work?
We have a product called e-Pump. What it does is to give the owner of the fuel stations an oversight view of the entire operations of his stations irrespective of the numbers of the stations and their locations across the nation. The system has a controller that communicates with the backend, which it is the owner of the station that has access, except he authorises the manager to access such. The system alerts the owner of every activity at the station. For instance, if the pump price is tampered with or the quantity of fuel sold daily is being tampered with, he gets notified on his phone with details of such infractions and he can swing into action immediately. This saves the owners lots of stress of moving around their stations to monitor operations, as it becomes easier for the staff to know when they will likely come around but with e-Pump, everything can be done remotely.
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With your experience so far, has any of the attendants beat your system to practice infractions?
They will always try but it is not possible. When we noticed certain moves, we upgraded the system to have only one pump on each controller. That provides a report for every activity on each pump for the owner of the station.
How affordable is the product and how much does it save such an entrepreneur?
It is very affordable, as a subscriber can pay as low as N50,000 per month. On how much it saves the owner of the business, that’s about N82,000 savings a day from your N50,000 naira a month. If the total value you sold is N825,000 and you could lose 10 percent of that to inadequate monitoring, and that’s N82,500 every single day. If you accumulate that over a month, you are talking times 30, you are talking N2.4 million. So N50,000 can protect N2.4 million for you. But in real fact, it can protect the entire N24 million.
A lot of entrepreneurs, including fuel marketers, lament over the lack of access to funds. How does your product aid access to funds?
That is financing. For every business, there is always a finance component. And permit me to use FMCG for fuel in this case (fast-moving consumer goods); they churn out a high volume every day. Working capital is an issue. And like every other business, when they go to the bank, there is a lot of bring this, let’s do this… Banks still don’t have a way to drive into the business to understand the pattern but with e-pump, we are able to show you a clear pattern. This is how much this station makes every day on average. If you lend to this person, X amount of money, this is how long it is going to take him to repay it. In the past, a lot of our customers (the more structured ones) have leveraged these data to approach the banks and get financing.
However, we are taking it a step further. We are actively partnering with financial institutions such that stations using e-pump can, via one phone call, and very soon, via one click on the button, say I need financing for 100,000 litres of product and expect a decision within 24 hours, and within 48 hours expect to get the product. The banks which are our partners are also happy because the stations are no longer waiting six months or three months before they remit. They are remitting on a daily basis because now there is visibility. We know you made one million naira today so all we are saying is remit 800,000 out of it and keep 200,000 for yourself.
So if you look at that, it means that on the overall, stations are paying lesser interest as they remit daily. They are accessing this finance so easily that it doesn’t look like they are talking to a bank. It looks like they are talking to e-pump. E-pump as a platform has negotiated with all parties and made it easily accessible to everyone.
When you started, what was the worth of this process and now?
When we started, we weren’t thinking in terms of worth. We were thinking in terms of solution. We were just eager to provide a solution. So at the early stage, we didn’t start with a very complex business plan or all of that. We were just young guys who saw a problem and who were eager to solve it. It was not money first for us, so sitting down today, I can’t even put a value to what we would have seen. Because nobody was talking about numbers, we were just talking about there is a problem here, this problem is real, everybody complains about it. Someone needs to do something about it.
Let’s also talk about the fund you have raised. Would you mind giving us some insight on the first, second rounds?
Oh, everything we’ve done is still on seed round because most of our fund was invested on the R and D phase. Most of the time, we raise funds for the R and D. So, cumulatively we’ve raised a little over $1 million but that’s over a period of five years.
Now, definitely, you’re planning on expansion. If you are in 34 states in Nigeria, we can say you’ve covered Nigeria. Are you looking outside the shores of the nation?
We are already in Kenya, Rwanda and Uganda.
Looking at Rwanda, Kenya, are there any similarities between these markets and the Nigerian market? Is there any particular challenge you have here that you don’t see there?
There isn’t. I mean the problem is universal, any country in the world. The reason why they won’t talk about it in Europe and US is because they are already automated. If you are still running manual operations, the problem is the same anywhere in the world. So, for most African countries, the problem is exactly the same it is here. There might be some technical variations, maybe the type of pumps they use, there could be commercial variations, their own margin, market size. For example, Nigeria has over 35,000 licensed stations. Kenya probably has like 6,000 licensed stations. Uganda probably has like 2,000 licensed stations. So, yes it could be smaller in scale.
However, they have higher margins in Kenya, higher margins in Uganda, if I convert to Naira, they could make as much as N60 per litre whereas in Nigeria they are making N3 or N5 per litre. So, there will be some little variations here and there, but the baseline is exactly the same thing. You’re trusting your business into the hands of people when you are not there. You are at their mercy. They could make mistake genuinely or intentionally. Whatever mistake it is, affects the input into your own business so it is the same thing. We are solving exactly the same problem here. The difference is probably in how we are addressing payments so in Nigeria as well, we are beginning to provide filling stations with alternatives to cash payments. So, instead of you sending your driver with cash, you could send him with a voucher, you could send him with a fuel card to go buy fuel. So, all of this can be integrated into your banking platform. So, there could be those variations, but at the end of the day, the business is exactly the same thing.
In your operations in Nigeria, what new thing should we expect?
The biggest effort we are making now is helping the country shift from a heavy cash-based gas station operation or fuel station operation metric. In urban areas in Lagos, you can find high usage of ATM cards and all that, but once you move outside the urban areas and go into the other states, you will find that 70 percent of the operations in the filling station is still cash. This exposes the stations to a lot of risks. We hear of cases of attacks by armed robbers, because they know these guys have a lot of cash and they go to attack them. So, we are helping stations reposition their operation such that we can reverse that trend to more of a cashless transaction base. They could use their bank card in a connected transaction, they could use vouchers and bank cards as I described earlier or they could use fuel cards. Those are the kind of directions we are investing energy in the industry, to move this industry away from cash-based and all of that.
As well, what we are also doing is that there is the knowledge that fossil fuel as we know it, is dying gradually. But one thing will not die. People are in the energy business. The energy they sell will change but they will still need to sell energy one way or the other. So one of the other researches we are doing behind the scene is how to help these entrepreneurs, these business owners, which is the retailers, how to help them future-proof their business. If you need to replace your fuel pump with EV chargers, what efficient ways can you do it? If the future is hydrogen fuel, how can you transfer or upgrade your infrastructure from fossil fuel to hydrogen fuel and all that. When there is a technology partner, like we are, it is easy to address the industry as a whole and say this is a new trend and this is where you should be going. In the coming months, we will be seeing a lot of investments in LPG, CNG. Cars will begin to convert from petrol to CNG and all of that. We are making our technology available for all of them, such that even if you decide to do financing for your customers; say the cost of upgrade from petrol engine to CNG engine, how do you ensure that these customers stay loyal to you? So we are building technology to ensure that they stay loyal to you, using the KYC, knowing your customers because that is really the only way you can serve your customers optimally, right? And the beautiful thing is that whatever we do here, we should be able to scale outside the country to other markets where we are present.
How do you manage competition?
The market is still large. Today, we have about 5% of the stations in the country automated and the competition probably has about 2%. Give or take, we are all less than 10% so at this point we are not really bothered about competition. We encourage everyone, we welcome every competition. Let’s make this commonplace. Let’s go after the entire 100%, let’s make business easier for our clients. That’s the focus at this point.
But at the end of the day, you will still want to be the preferred solution provider?
Our solution is making sure we are the preferred solution provider. One, it takes an average company three days to automate a station. It takes Epump an average of 20 minutes per pump. So give or take some stations, we are out in one hour, or out in two hours. No downtime. Our cost profile is the lowest. You could onboard a pump for almost free and just be paying your subscription. Customer service is in our DNA to ensure our customers are always happy. So when you have all of these things in place, so remember I said earlier on, that we have never spent a dime on marketing. We have grown purely organically. That is a testimonial to how efficient the product is. So, we let the product do the work of competitive differentiation. For now, we even welcome more competition. Let’s get more stations automated.