Palm Oil Business Plan in Nigeria – Start Palm Oil Business
This Sample Palm Oil Business Plan in Nigeria and feasibility study can be used to access bank loans and grants.
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Palm oil business is seen as one of the most lucrative business ventures to engage in presently in Nigeria. As we all know it, palm oil is the reddish thick oil which is an extract of oil palm kernel, which is native to Africa. It is a very versatile product as it is not just used in cooking, but used by many industries as part of the raw materials for the production of their finished goods. Palm oil is also highly regarded medically because of its high nutritional content and therapeutic value. In fact it is recommended to consume more of palm oil because of its high vitamins A and E content as well as other minerals.
West Africa is right at the center of the world’s oil palm belt yet the production of palm oil in the region is far below expectation as it barely produces enough for its consumption let alone satisfying the demand from other parts of the world. Over the years, Malaysia and Indonesia have taken over the palm oil production sector, becoming world powers in production as they currently produce and supply over 70% of all the palm consumed worldwide. A major reason why Africa has under-produced palm oil is the reduced cultivation of oil palm trees as well as poor infrastructure to handle the production process. Here are major reasons why Africa is regarded as the best place to grow oil palm in the world:
- Warm weather all through the year. It is a known fact that oil palm thrives better in warm temperatures, especially between 25oC and 28o The warm temperatures allow for the tree to produce more leaves which in turn gives rise to more fruit. Asides this, the warm temperature keeps the tree free from disease attacks.
- Lots of sunshine. The oil palm tree requires a lot of sunshine all through the year for it to thrive properly. This enables it to produce fruit that are large and well ripened containing a lot of oil for extraction.
- Sufficient rain. The oil palm trees do not thrive in regions lacking rain as they require a lot of water for optimal production. Africa is blessed with abundant rain and in most parts especially in the West African rain forest region, it rains virtually all through the year.
- Rich and permeable soil. Asides water and sunshine, the oil palm tree also requires a lot of soil minerals to grow properly and be highly productive. For this reason the soil has to be very rich and easy to penetrate by the roots of tree so as to tap nutrients properly. The soil must also allow for water penetration and storage, so that the roots of the tree will gain access to soil water conveniently.
Presently, only one country in the whole of the West African region, Cote D’Ivoire, produces enough palm oil to meet the demand of its local market. Every other country even though they have the natural capacity to, produce far less than the current demand. This means that if you are looking for a profitable business in Nigeria, palm oil business could be your answer.
Reasons to invest in palm oil business in Nigeria
- There is a very high demand for palm oil in the country with a corresponding lower supply. Palm oil is a major ingredient in most local delicacies all around the country, meaning at least every family needs palm oil. Industries also require the product in large quantities for their production processes. Yet not enough of the product is available.
- Palm oil can be produced locally, you do not need to break your head over importation processes and charges.
- It has a very flexible capital investment requirement. You do not need to have millions to start, you can begin small and then grow your business steadily.
- It is very healthy and thus highly recommended medically, meaning you have a huge market out there for your business.
- It can be exported to other countries. The product is not just in high demand in Nigeria, it is in high demand all over the world for quite an array of purposes.
Phases of the palm oil business
The palm oil business is one that has different stages, each of these stages can be undertaken by an individual as a niche or all can be put together by the businessman. In other words, you can decide to pick any of the phases and specialize in it, but if you have the capacity, you might decide to take all the phases to boost your profit. The phases are discussed briefly in the next few paragraphs:
First Phase: Oil Palm Plantation
This phase is that phase which involves cultivating a huge number of oil palm trees on farm land which could be an acre or more in size, depending on the capacity of the business owner. This phase requires a huge capital outlay and it takes a long period before the farmer begins to enjoy profit. The reason for this is that the oil palm trees take between four and five before they mature to production level. When considering the idea of starting an oil palm plantation you should find out the particular specie that is most profitable in your region, this is vital to the success of the farm. Predominantly in Africa is the Dura variety of palm fruits as it seen in most African countries. The fruit is characterized by a thick shell and small pulp. In recent times, farmers have looked at creating a hybrid oil palm to facilitate more produce and profit. For this reason, on most farms there is a crossbreeding of the Dura variety with the Pisifera variety, the result of this crossbreed is the hybrid, Tenera. This hybrid is seen as every oil palm farmer’s dream as it is characterized by a thin shell, a lot of pulp and a large kernel.
Second Phase: Palm Oil Milling
This phase of the oil palm production process is majorly concerned with the extraction of the oil from the oil palm kernels. In these modern times this phase has become a big deal as it require a lot of machines to facilitate the extraction process. The business owner will have make a purchase of oil palm kernels from oil palm plantations if he/she does not run a plantation. For these reasons this phase is also regarded as highly capital intensive, the machines for extraction are quite costly and the purchase of the kernels also requires a huge amount of money as well. Though it requires a lot of capital, a lot of profit can be made as well. You can charge a service fee for assisting customers in milling their kernels, the charge is mostly a flat rate per kilogram or hour basis. This is necessary as you will be offering a lot value to customers which is virtually labor free and quick. You can also decide to buy oil palm kernels from local farmers, mill them to extract oil and sell off the produce in the local or international market.
Third Phase: Sale of Palm Oil
This phase of production is actually the easiest and most flexible of all the stages, all you need to do is buy the milled palm oil, depending on your capacity, and resell the way you like. This aspect brings the quickest profit of all the three phases and it requires the least capital outlay. There are two major ways of running this business to make profit:
- Continual purchase and reselling of the product. All you need to do here is make contact with the farmer or miller to buy the product. Once this is done, you can take it to the local market or any market of your choice to resell at the prevalent market price. This mode of the business does not produce outrageous profit but the income is consistent due to the continuous nature.
- Storage to sell at in the off season. This mode of the business entails the business owner purchasing large quantities of the palm oil when it is still cheap (during the in season period). The owner then stores it till the off season period and then resells, the resultant effect of this is that the price of the sale far outweighs the cost price making the seller enjoy great profit.
Features of quality palm oil
It is imperative to get the right quality of oil to ensure that your business thrives and you make good profits. The differences is in the levels of processing stated below:
- Grade A, SPO (low water content). This palm oil is the best quality for human consumption. So it can be sold in the market to individuals, food processing companies as well as other companies as raw material.
- Grade B, TPO (high water content). This type is used majorly as raw material in industries especially for soap making.
- Grade C, Sludge.
- Grade D, Rough.
Grades B, C, D are not for human consumption as they are very low quality. They are used mainly as raw materials in industries which produce different products like cosmetics, candle, soap, glue, plastics and bio-diesel to mention but a few.
What you need to start up your Palm Oil business
Capital. This is very important regardless of the phase of the business you want to engage in. The amount of capital you have will go a long way to determine how large your business will be at startup.
Find a very efficient supplier. Getting an efficient supplier is key to how well your business will thrive. This stage will require you to take an intent survey to seek out the most efficient suppliers around. You can make your findings by visiting existing business owners around you or going to the part of the country where they are predominantly found. The largest number of millers in Nigeria are found in the south east and south west, in states like Anambra, Osun, Enugu, Ondo, Edo, Abia, Rivers, Delta, etc.
Create your market. Make an intent study of the market and work on creating a niche in your area. Develop a workable and efficient marketing strategy that will help your reach out to your customers easily and thus earn you huge profits. You may also need to decide whether you want to stay in the local market or indulge in exports to other countries. If you are going to be selling locally, it is expedient to make urban centers your major target areas as the consumption of oil in such areas far outweighs the supply.
Storage facilities. A great attribute of palm is that it can be stored for long periods of time therefore you will need a storehouse to keep your product pending when you can sell them off completely. You should also consider getting storage containers of different sizes to make storage easier.
Transportation facilities. This is one major aspect of this business as you will need an efficient means of transport to help you move the product from the millers to your storehouse and from your storehouse to the market on a constant basis.
Customer relations. Just like in every business, you need to develop a great and working relationship with your customers. It is a known fact that your customers are the source of your profit therefore you need to do everything possible to keep them and grow your customer base.
Record keeping and staff recruitment. For your business to blossom and for you to monitor the success rate, it is important that you keep records. Develop an efficient records system which will contain names and phone numbers of customers as well as their addresses, a directory of suppliers, how much sales is made on a daily and monthly basis, how much is spent on the business, how much profit is made, etc. You may also need to recruit staff depending on the size of your business, this will help the business grow fast as you cannot carry out all the processes alone.
In conclusion, you must note that palm oil business is one which has been in existence for a very long period of time and it is here to stay. So all you need to do is grow your interest in the business, develop a smooth management plan and delve in to make maximum profit for a very long period of time.
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