Palm Oil business is fast becoming a money spinner in Nigeria.
The palm oil business is one of the lucrative businesses in Nigeria because of its diverse usefulness and the huge profit involved. In Nigeria, palm oil is one of the essential needs for cooking most meals. The interesting part of this business is that every part of the palm tree (fruits, leaves, trunks, and sap) is used for different things.
The palm fruits are processed to produce palm oil, the leaves on the other hand are used for roofing homes in rural areas. While the popular palm wine which is the sap is a refreshing and widely loved beverage in Nigeria.
Gone are the days when people think that the only sector to make cool money in Nigeria is oil and gas. Nowadays, industries that are being overlooked are the ones raking in huge profits for the business owners.
An aspiring entrepreneur must be able to look wide and deep when investing in a business. Not long ago, Nigeria was the third-largest producer of palm oil, with over 2.3million hectares (5.7×106 acres) under cultivation.
This article covers everything you need to know about starting and running a successful palm oil business in Nigeria. Additionally, you will also learn about the different areas of the palm oil business so you can choose the best that works for you depending on your start-up capital.
Palm Oil Business Defined
Palm oil is an edible vegetable oil derived from the fruit of palm trees and it is reddish in colour. It is a native oil with rich components found in Nigeria and some parts of Africa. Palm oil can thicken when you store it in a cool place for a long time.
Palm tree plantation
This aspect of palm oil business is highly capital intensive. It requires the purchase of large expanse of land, preferably acres of land. The soil must be tested for appropriateness of its use for palm tree plantation, since the quality of the palm oil depends on the land used for cultivation.
So you must decide on the size of the land and its location for easy access to production plants and market. The incubation period after plantation of the palm trees can take between five years and ten years before harvesting. So as a farmer, you must be very patient. And once the harvesting begins, it is a regular exercise since different palm trees will produce ripe palm oil seeds at different times and must be harvested.
The palm tree plantation owner has to make a choice whether to set up a mill to extract the palm oil, or to sell the palm oil kernel seeds to those who do the processing. The capital requirement for this type of project runs into millions of naira.
So in summary, to set up Palm oil tree plantation:
- Purchase a land or make use of family land
- Test the soil to see if it is good for plantation. Not all soil are suitablle
- Be certain that there is access to the land to move your palm produce
- Plant the palm tree
- Wait for five to 10 years
- Harvest your palm produce
Setting up palm oil mill
This is another aspect of palm oil business. This is relatively capital intensive since it requires the installation of palm oil milling machines for the processing of the palm oil kernel seeds. The processing of palm oil kernel can be done in two ways;
- Commercial processing This is a situation whereby the milling machines are rented out for processing other peoples palm oil kernels and such people pay hire fee for the use of the milling machines. It is a very good business since the machines are used to capacity through out the year particularly during the season of palm oil kernel harvesting, between January and May. During the off season, July to December, the processing business is fairly stable.
- Installation and use of the milling machines for own use. The second category of palm oil business is to process the palm oil kernel and sell the palm oil to users. In this exercise, the investor installs the milling machines and arranges to buy the harvested palm oil kernel in relatively large quantity from different sources of farmers. The purchased palm kernel seeds are then processed (extraction of oil from the palm kernel oil seed) and the oil sold to resellers or users.
You have to look for a good location to site your Pal oil milling machine. It should be close to farm and also close to major road for easy transportation.
Trading on palm oil
This is the category majority of investors in palm oil business engage in because it is in the buying and selling you make quick money. This business involves the buying of palm oil in large quantity, storing them for months, relatively in large quantity and selling during the off peak period, when the supply to the market has reduced. During this period, the traders will bring out their stock for sale and make reasonable amount of profit. From the background analysis, it is assumed you understand the different aspect of the business.
The steps you need to take before starting your palm oil business are as follows:
1. Formal and/ or informal market research to understand the nature of the business, the volume of the business, who are the existing buyers and seller of the product, where are they concentrated and which states you have the chief producers of palm oil. You must also find out the prevailing prices of buying and selling and from which states you can obtain the palm oil cheaper and at the right quality.
2. Capital to be invested. From the research report, you will be able to assess the capital requirements of the business and where to access it. The amount of capital required must be able to meet all of the following:
- Working capital : This is the minimum amount of money required to buy the palm oil for sale. Also, there will be sufficient amount of cash for transporting the palm oil from where they are purchased to the warehouse.
- Cost of acquiring the warehouse where the palm oil will be stored during the period of low sales until business picks up again in the peak period.
- Cost of means of storage – kegs of mainly twenty five litres . The quantity to be purchased depends of the level of investment to be made in the business.
3. You need to know how to preserve palm oil. So, Storage space and means of storage must be arranged. The storage space (warehouse) must be spacious, have security, access road and conducive for the storage of oil. Also, the kegs for storing the oil must be arranged. You can rent a room for storage too.
4. Contact suppliers You must find out where sellers (suppliers) of palm oil are and which state produce the best quality at reasonable prices. You must compile list of suppliers and make efforts to find out whom they are, how reliable, quality of oil they sell, credit facility offered and possibility of establishing long term relationship with them.
5. Decide on the mode of transportation of purchased palm oil . There are so many commercial carriers available and you can approach many of them to compare transport fares, how reliable they are, security of goods on transit and the ability of the carrier to maintain the condition of the oil carried from where they picked up to their destination. If at all possible, buying own vehicle for transporting the palm oil is better for continence and reliability.
6. Market your products. From the outset, it is important to contact the would be retailers (buyers) of your products and intimate them that you are going to be a reliable supplier for palm oil during the season and off season. Compile their list and do get in touch with them occasionally since they are the reason you are in business.
Finding Palm Oil Exporters and marketing your Palm Oil Business
If you are planing to export your palm oil. You can reach out to Easer Lifestyle Africa (+234) 810 905 5475, a known exporter of food products from Nigeria.