Since palm oil, or “red oil,” as it is commonly known, is in such great demand and can yield substantial profits, the palm oil business in Nigeria is so popular that many entrepreneurs wants to know what they need to get started.
If you are here, it means that you are interested in oil palm business.
It is no news to Nigerians that “palm kernel oil” is one of the raw materials extracted from the palm kernel of the palm oil tree called Elaeis guineensis, a palm species that goes by several different names like “oil palm,” “macaw-fat,” and “African oil palm.”
Did you know that the entire palm tree, from its trunk to its leaves, is not only a raw material for many different products but also an ingredient in cooking?
Yes, therefore making it a good business to invest in.
Palm leaves are mostly used to roof houses in villages; palm sap, which is turned into palm wine, is a popular drink for millions across the country; and palm fruits are processed into palm oil.
This is one reason why it is a highly profitable business in Nigeria.
But the BIG question is: is it affordable to start palm oil business in Nigeria?
I do not think so, but it is totally up to your budget.
In this blog, I will highlight what you need to know to start the palm oil business in Nigeria.
Briefly, About Palm Oil
Palm oil is a vegetable oil derived from the reddish fruit of palm trees. It contains several vitamins, like vitamin E, unsaturated fats, and beta-carotene. It helps fight vitamin A deficiency, cancer, high blood pressure, cyanide poisoning, and others.
Palm oil is one of the everyday food items in our homes. Palm oil gives most of our meals a different, traditional flavor. This highly rich oil is used in the manufacture of cosmetic products.
Palm oil is easy to keep fresh and keep its taste and consistency, so people often buy it in large quantities.
Another important questions:
- Is it palm oil plantations’ business?
- Is it an oil palm processing business? (palm oil milling machines)
- Is it a palm oil distribution business? (wholesales)
- Is it a palm oil reselling business to direct consumers?
Knowing where to invest your money in the Nigerian palm oil industry gives you a clear picture of what to expect in terms of return on investment.
Is Palm Oil Business Lucrative?
This is a natural and good question to ask if you are thinking about investing money and starting an offline or online business in Nigeria.
This market is easy to penetrate because the product is on everyone’s grocery list. Surely, money can be made.
Another factor to consider is that palm oil may be used in a variety of products. Like:
- Cooking: Palm oil is used in the preparation of nearly all meals.
- Drugs: most medications have palm oil as an ingredient.
- Palm oil is used to manufacture things like cosmetics, snacks, margarine, candles, shampoo, etc.
- Feed production
Indonesia, Malaysia, Thailand, Colombia, and Nigeria are the world’s five largest palm oil producers.
In 2018–2019, worldwide palm oil output reached 73.5 million metric tons. Palm oil is one of the few products manufactured in Nigeria rather than imported. Additionally, nine out of ten households consistently use this vegetable oil.
The facts provided above should already give you an idea of how profitable it would be to establish a palm oil business in Nigeria.
Palm Oil Business Overlooked
It was once said that the oil and gas industry is where you can make your fortune. However, we saw palm oil, but we weren’t quick enough to understand it, so we put more focus on crude oil instead. Palm oil price in Nigeria for 5 liters is N6,500. This keep rising, you can already project your earnings.
Compared to other vegetable oil industries, this one makes a lot more and costs less to make. Because the ingredients are cheap and easy to get, and because demand is growing every day, this is a better investment opportunity.
If you’re an entrepreneur thinking about making a move into this business niche, you need to think strategically and do proper business research.
What Palm Oil Business is Right for You?
This is the right question you should be asking. There are businesses among businesses in palm oil; what you invest in totally depends on your budgets.
Like I have rightly listed above, I will explain further so you know which one is right for you.
Is it palm oil plantations’ business?
Palm tree plantation: this step is only necessary for those who decide to begin from the soil, and it’s not advisable for those with a low budget because it is capital-intensive. It is also time-consuming, as the palm tree takes about five to ten years to begin producing palm fruit. You acquire land and test the soil (because not all soils are suitable for the purpose).
The location of the farm is a very important thing to think about because it needs to be close to both the processing plant and the market. Modern oil palm cultivation is not a business venture you want to jump into without thinking carefully.
Capital to start palm oil plantations’ business: this ranges between N8M to N10M.
Is it an oil palm processing business? (palm oil milling machines)
This is as expensive as a palm tree plantation. For starters, you need to install palm oil milling machines to process the palm kernel seeds. There are processing machines for different stages of the palm kernel seeds process. And these processing machines will cost you millions of naira to acquire.
When it arrives from the plantation, the next step is to start the process. Extracting palm oil is a labor-intensive procedure, especially when done by hand. You may save a lot of time and energy by using machinery designed specifically for processing palm oil.
Multiple machines are used in this procedure:
- Oil press machines
- Extraction machines
- Crushers or palm kernel crushers
- Nut separating machines
- Filtering machines
These equipment aid in the various phases of palm oil processing. Let me walk you through the the stages.
- They clean the palm kernel seeds.
- They crush the palm kernel seeds.
- They separate the palm kernel nuts.
- They dry the palm kernel.
- They cook and press the palm kernel.
- Then filtration starts.
Some of these phases are performed by laborer’s; the procedure is strenuous, and workers are frequently injured while performing it. It is strongly advised to purchase milling machines for maximum productivity.
Capital to start oil palm processing business: When you include the rent, the machinery, the staff, and the transportation, this may range from N3M to N5M.
Is it a palm oil distribution business? (wholesales)
This is a little easier because you don’t need a lot of money to get started. To begin distributing palm oil in Nigeria, you must first obtain it from an oil palm processing plant.
As a huge distributor, you may buy at a discount and sell to retailers who will sell to the direct customer.
Capital to begin palm oil distribution business: It is totally based on your budget.
However to buy at wholesales price or at a discount price, you need between N100,000 to N200,000.
Is it a palm oil reselling business to direct consumers?
This is similar to the palm oil distribution business, except it takes less cash to purchase and resell. These are the palm oil vendors you see at the market, grocery store, and tiny businesses next to your house.
Capital to begin palm oil resell business to consumer: you need lesser capital. Capital ranges from N20,000 to N50,000.
Doing Palm Oil Business the Right Way
Have a business plan.
Planning is the key to the success of every enterprise. Research the market extensively before putting your money into it. Learn who your rivals are, how you can undercut their prices, and where you can get palm oil for the best deal.
You should also include your goals and a strategy for reaching them in your business plan.
Register your business
Having your Nigerian business registered with CAC is a good idea. Businesses can get assistance with registration and protection from the government through the Corporate Affairs Commission. The fee for registration is reasonable and well worth it.
Customers are more likely to give you their money if they know they can rely on a legitimate company.
You should hire a lawyer if you feel you cannot handle the procedure on your own.
Obtain suitable palm oil storage
Mishandling stored palm oil might have severe financial consequences.
A cold, dry place is ideal for extending the shelf life of your goods. Also, you’ll need to buy cans and drums in which to store your palm oil.
Find your suppliers
Building a good relationship with suppliers or the traders at the market would help you in so many ways. You could also start hunting for customers as this would provide you a ready market.
The states with the highest production of palm kernel oil in Nigeria includes Akwa-Ibom, Bayelsa, Abia, Cross River, Imo, Ondo, Rivers and Delta.
Meeting up with various suppliers in these states would help your business.
Make transportation arrangements
Palm oil should be carried with caution to avoid spills and product damage. Make inquiries and decide which kind of transportation is best for your business.
Look for customers
You’ve completed your business strategy and everything is in place except the final link in the chain.
Customers for your palm oil business should be easy to get because it is a common consumable in our surroundings. Customers might include housewives, teachers, office employees, cosmetologists, and the list goes on.
Market your products and get your business in from of customers that needs it.
The palm oil industry is undeniably a profitable one. However, understanding where to put your money is a fantastic place to start.
Smallbusiness.ltd gives you an idea of how to run an oil palm business, but it’s up to you to make the final decision. Also, your budget determines which is right for you.
If you have a capital of N20,000 to one million naira or more and are seeking a successful business to invest in, you should explore the palm oil business. If you’re reselling, you don’t have to go through as many hurdles before you make money on the business. You might even consider exporting it and earning money in USD.
It will great to hear your thoughts in the comment section.
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