Business, How To

Profitable Steps To Starting A Palm Oil Business In Nigeria: Step By Step

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Palm oil business in Nigeria is very lucrative if done properly. The demand for palm oil  in Nigeria and world at large is very high and there are consumers who are willing to buy. 

Palm Oil Business In Nigeria.

To start a palm oil  business in Nigeria, even on a medium scale, you need to know the step by step, how to process and make palm oil, the market and intensive capital. However, the profit is exciting and encouraging. Below are the steps by steps and everything you need to know to get started with palm oil business in Nigeria:

How To Make and Process Palm Oil

There are five major steps involved in the  processing of the palm fruits into palm oil. They are:

  • Weighing and Off loading from trucks: Weighing the palm fruits is important for easy calculation of the amount you are producing and calculation of the cost from sellers. Offloading from trucks, on the other hand, has to be done carefully because it may affect the overall quality of the product. If it is handled carelessly the acid content may rise and alter the taste and increase the processing hurdles as the acid content has to be reduced to a certain minimum.
  • Threshing: This is the process where the fruit are cut off to separate them from their bunch. They are subjected to high temperature boiling in water to loosen the fruits in a process known as sterilization by pressurized cooking.
  • Pressing/Extracting the Palm Oil: This is the peak of the processes involved in the processing of the palm oil, where the oil is being extracted from the fruit bunch.
  • Filtering of the palm oil: The oil at this stage will contain unwanted remains of the fruit shells and water and some other dirt. So it is purified at this stage.
  • Storage of the palm oil: After the whole work is done, they are stored in gallons or barrels, to be transported later to the market or for buying customers to come and pick up, as palm oil is often sold on-demand

How Profitable Is Palm Oil Business?

The palm oil yield per hectare is estimated at 8 tons per year at most. Additionally, the profit farmers make per hectare is around 3.4tons per year.

There are other factors that also affect the profitability of your palm oil business such as the effect of pests and other diseases. Hence, this should be taken into consideration because it can affect the overall profit of your business.

Importantly, the age of the palm tree also has an effect on the yield. Normally, the peak production period of oil palm plantation is between seven (7) and eighteen (18) years after which it started to decline.

Steps You Need To Take Before Starting a Profitable   Palm Oil Business

1. Market research

Proper research of palm oil business is necessary if you must succeed in the business. Apart from market research, it is also important to understand the nature of the business. The nature of the business should answer questions such as; is it time-consuming? Where can I source for cheap palm oil? Can I store palm oil for at least a year without it losing its taste? Once you’re able to provide answers to these questions, you’re halfway done. You also need to know your competitors and the existing price of palm oil before delving into the business.

2.  Capital Investment

After carrying out market research, the report you have made will point out the right amount of capital to start the business. The amount of capital should be able to cover the following expenses.

  • Working Capital: this is the amount of money needed to buy wholesale palm oil from farmers. This working capital also includes the transportation cost.
  • Building Capital: this is the capital needed to rent or build a warehouse to store the already purchased palm oil
  • Storage Capital: it is the capital needed for proper storage of palm oil. You need to invest in the security of your warehouse and also purchase jerry cans or kegs to store your palm oil.
3.  Sort for  Contacts

If you must succeed in this business, you need to get the contacts of suppliers from different states. You can compile a list of suppliers in a spreadsheet (using Microsoft Excel). It is necessary to know how reliable these suppliers are, the quality of palm oil they need and the prices they offer.

4.  Get Mode of Transportation

This is another important investment you have to make. If you have the money to get your own vehicles, then that’s alright, otherwise, you’ll need trusted drivers to deliver palm oil to your customers all over the country.

5.  Idea of Exporting Palm Oil

If you’re planning to export palm oil to other countries, then you should consider searching online. Alibaba is a great site to list your palm oil for sale or you can use Vconnect to search for reliable exporters online. You should do a proper background check before giving your palm oil out for export.

General Uses Of Palm Oil

A lot of people know palm oil to be used for cooking. Asides from being used for cooking, palm oil can be used for:

  • Prevention of vitamin A deficiency, cancer, brain disease, and aging
  • Production of soap, cosmetic, body cream, exfoliation cream, margarine, etc
  • Release of stomach pain
  • Production of drugs
  • Treating malaria, high blood pressure, high cholesterol, dementia, etc
  • Weight loss and for increasing the body’s metabolism
  • Water treatment
  • Production of dog and other domestic animal food
  • Preservation of food

Profitable Steps To Starting A Palm Oil Business In Nigeria.

Are you ready to kick start this business? These steps you need to follow:

1. Get a Suitable Location.

When choosing the location, you need to consider some factors:

  • First, you will need a decent amount of open space for the plant.
  • The distance of the plant from the nearest farm that can supply you with the palm fruits known as Fresh Fruit Bunches (FFB).
  • Is there enough space to accommodate a parking space for trucks for offloading the palm fruits?
  • Will there be enough room for many workers to work and move about comfortably?
2. Water Supply.  

This is a very important aspect of planning. You need to ensure uninterrupted or reliable supply of water mainly for washing of the fruits and boiling/steaming of the palm fruits during processing.  There is a high possibility of being located in a remote area where there is neither electricity nor treated water supply, so it is advisable to dig a borehole on site.  This makes water cost effective and readily available.

3. Get The Needed Equipments.

A mill is setup for the processing of palm oil. The mill does almost everything in the palm oil processing operation such as the boiling, threshing, fermentation, fruit clarification etc. Depending on how much of the processing plant you wish to mechanize, the machines you need may vary. For example, if the threshing is left to manual laborers, you wouldn’t need a thresher. But of course there would be a wide gap when it comes to efficiency between the workers and the machine. Machines will perform faster and reduce waste significantly.

The most common machines found in a palm oil processing mill are the thresher, boiler, presser, and the clarifier. Each mill has a capacity rating, that is an amount of palm oil it can process daily. Small ones usually produce about 1 tonne every 24 hours and medium to large ones produce over 10-100 tonnes daily.

The suppliers of the machinery provide tech support, they should be able to provide you with any information you need regarding the setting up of the mill and its maintenance.

4. Hire Trained Labour or Staff.

Employ experienced hands to handle the processing and production for optimum results. They must have undergone training on how to operate the specific set of machines available in your processing plant.

You also need to employ professional engineers, chemical engineers for testing and evaluating of the oil product and mechanical engineer for the mill maintenance. You can hire on a contract ground. 

You also need more hands for offloading the fruit bunches and other manual labours.

Types and Step To  Starting a Palm Oil Business in Nigeria

Palm Oil Business In Nigeria.

1. Palm Tree Plantation

This aspect of palm oil business requires huge capital investment. It also needs a large area of land. However, the profits of this business is huge and you’ll make it big, once you’re able to acquire at least 4 acres of land.

So, you have to decide the area of land to buy. This business isn’t really ideal for startups because the capital needed runs into millions of naira. Again, the incubation period for palm oil trees can take between 5 to 10 years. So, as a farmer, you have to be patient to make good profits from the business

Once the palm oil tree is due for harvest, you can decide to set up a mill to extract the oil or just sell out to those who are into full-time palm oil kernels processing.

2.  Palm Oil Mill

This is another lucrative aspect of palm oil business. It requires huge capital investment to purchase the milling machines. You can decide to fabricate one locally or simply import one from China’s foremost online site, Alibaba. Generally, there are two ways of processing palm kernel seeds and they include;

3. Commercial Processing: 

This involves processing other people’s palm kernel seeds for money. It is a lucrative business as the cost of getting a palm oil milling machine is expensive. It is a good business because you’ll make huge ROI after a few months. 

The only expense you’ll have to pay is constant servicing of the milling machine. During the palm oil season which is between January and May, customers are always available to processes their palm kernel seeds. But during the offseason, the business is fairly stable

4. Personal Use: 

As the name implies, this involves the owner of the milling machine buying palm kernel seeds from different farmers in very large quantities and processing it in order to sell to end users. In this category of palm oil business, you need to set up your milling machine in a location that is easily accessible to farmers and close to the target market.

5. Bulk Trading of Palm Oil

This involves investing a huge amount of money in buying and selling palm oil. In this business, investors buy palm oil in bulk, store them in large quantities and sell off when the supply of palm oil has reduced.  During this period, traders bring out their stock, sell them and make a reasonable profit. If you have the capital, this business is ideal for you.

However, you need to be patient to make a good profit from this business. Let’s do a quick profit analysis of this business. Imagine buying 50 kegs of palm oil for N500,000 at N10,000 per keg and selling off to retailers at N12,500 within 3 days depending on your customer base. Depending on the source and quality of the palm oil, you can get it at a much cheaper rate.

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