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This article comes with a free business plan for Palm Oil Business in Nigeria.
IS PALM OIL PRODUCTION A LUCRATIVE BUSINESS?
Palm oil is an organic oil derived from the fruit of palm trees and it has a reddish colour. It is found natively in Nigeria and some parts of Africa. The palm oil business is one of the lucrative businesses in Nigeria because of its numerous uses and the astronomical profit that can be derived from this fruit. It is widely used in Nigeria as almost every household in the nation makes use of this oil in their dishes, it is one of the essential needs for cooking most meals. And also the tree is so useful that every part of the tree (fruits, leaves, trunks, and sap) is useful across different industries.
The palm fruits are used to produce palm oil, the leaves on the other hand are used as rooﬁng materials in uncivilized areas in the country while the sap is consumed as an alcoholic beverage throughout the country.
Uses of Palm Oil
As said earlier in the article the palm oil has numerous uses, some of which you might find surprising, a lot of Nigerians think palm oil can only be used as in the kitchen to prepare the dishes we relish so much, asides that palm oil has a range of medicinal, industrial and domestic uses, which are as follows:
- Prevention of vitamin A deﬁciency, cancer, brain disease, and aging
- Production of soap, cosmetic, body cream, exfoliation cream
- Production of margarine
- Release of stomach pain
- Production of drugs that treat malaria, subdue high blood pressure, high cholesterol, dementia
- Weight loss and for increasing the body’s metabolism
- Water treatment
- Production of dog and other domestic animal food
- Preservation of food
Requirements Needed to Start Palm Oil Business
To start this foray into this wonderful enterprise, you need the following;
The funding needed to start any business, seed money. The cost to be covered by your capital should include:
- Land acquisition or land rental cost
- Cost of hiring employees
- Farm maintenance cost
- Cost of purchasing the seedlings
- Processing machine cost
- Cost of means of storage
- Transportation cost
The scale and size of your enterprise will determine the size of land to acquire. It could be a few acres or hectares of land.
The need for manpower cannot be sidelined in this business, hence the need to hire people to assist you. However, you may opt to employ part-time staff who will only work at different stages of the business.
For instance, you may need a tractor operator to clear the land, then hire other people for the planting process. And during harvest, you can hire workers for harvesting.
There are other factors that also affect the profit yield of your palm oil business such as the effect of pests and 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 six and seventeen years after which it starts to decline. The palm oil yield per hectare is estimated at 7.5 tons per year at most.
Steps to Starting Palm Oil Business
Step One: Choose The Palm Oil Business You Want to Invest In
Typically, there are three main types of palm oil business you can invest in. If you have the required capital, you can invest in the three. Otherwise, you can invest in one or two of the types explained below:
a. Palm Tree Plantation
Palm tree plantation is capital intensive and also takes time before you can start realizing your profits, this requires patience. If you are looking to start earning from the palm oil business immediately, this is not the best card in your pack.
Planting seedlings and harvesting them after incubation, when they are ready for harvest, is what this entails. The cost of a palm tree seedling in Nigeria costs N150 and you will need 1000 seedlings, ideally, for a start. Importantly, ensure you give at least 8 meters space between two plants.
b. Set Up a Palm Oil Extraction Mill
This is also capital intensive but not as expensive as the first option. The installation of palm oil milling machines for the processing of the palm oil kernel seed is basically all you need to do. You can use milling machines for personal or commercial processing. You can also put the machine up for rent so anyone that needs or wants to process their palm kernels can borrow your mill for a sum of money, being positioned in an environment where this machine is usually needed will surely be a good stream of cash for you.
The peak season of palm oil is between January to May. So, you may not make so much money during the off-season which is around July to December.
You can also install the milling machine for your personal use, process the palm oil kernel, and sell the palm oil to consumers or resellers, you need to purchase the palm kernel in large quantities from harvesters and process them into palm oil in your mill, then sell to retailers.
c. Sales of Palm Oil
Most palm oil business owners invest in this type of palm oil business because it is the cheapest and easiest part of the business. This business involves the buying of palm oil in large quantities and selling to consumers.
To get more proﬁt from this business, you can store the palm oil in a cool place for months, then sell them during off pick period when the supply of palm oil has reduced and demand is high.
Step Two: Draft A Business Plan
As soon as you’ve selected your palm oil business niche, draft out a business plan. While writing your business plan, ensure to carry out a thorough feasibility study and market research to understand the nature of the business.
Learn about your competitions, the prevailing prices, and how and where to buy palm oil at a cheap rate. A business plan is a detailed document stating the short and long term objectives of your business and how to achieve them. Also include the following in your business plan;
- Executive Summary
- Company Description
- SWOT Analysis
- Market Analysis and Strategies
- Financial Analysis
- Competitive Analysis
Step Three: Set Up a Storage Space
Set up a space for the storage of your product, ensure the space is cool, safe, and dry. Rent a space or a room where you can store the palm oil while you wait for the right time to sell. Additionally, you will need to purchase kegs or drums to store your oil.
Step Four: Arrange with Suppliers
In case you are not the one producing the palm oil, you will need to have a solid arrangement with suppliers you can purchase from. If you carry out step two well, you will have the right knowledge suppliers to source your product from.
There are states in Nigeria that are known for producing palm oil in large quantities. Although there are several other states that produce palm oil, these states are seen as the largest producers of quality palm oil in Nigeria.
- Delta State
- Akwa-Ibom State
- Cross-River State
- Bayelsa State
- Imo State
- Rivers State
- Ondo State
- Abia State
You can visit the various states to connect with suppliers of the best palm oil.
Step Five: Source for Customers
The efforts you put into the whole business following all necessary and due steps will go to waste if this step is not effective. A concrete and foolproof marketing plan should be part of your plans, and this shouldn’t be guesswork but instead, background research and original facts should be the backbone of your marketing plan, to succeed in this business.
You can ﬁnd retailers amongst market sellers, cosmetologists, housewives, and if you are producing in large quantities, dairy industries etc. To attract a larger customer base, you can explore other modes of marketing such as:
- Online marketing
- Referral marketing
- Newspaper marketing
Furthermore, you can also export palm oil as some international countries may have the need for palm oil, and Nigeria is known for its quality palm oil.
Exportation is also an option of getting your products sold if you have a reasonable quantity to sell, and this has been made easy these days as one of the trusted places to ﬁnd international buyers is Alibaba.com, also, another website known for connecting suppliers or manufacturers with buyers is Vconnect.
Now that you know how to Start Palm Oil Business In Nigeria, there are companies in Nigeria that buy palm products and these can be your buyers also.
This business is a total win-win for you, and the nation, as you’ll be employing people and reducing unemployment, if you dutifully follow all the steps and are hardworking, determined and also stay the course.
How To Download The Palm Oil Plantation Business Plan Template PDF and Doc (with financial analysis)
Above is a part of the Palm Oil business plan template in Nigerian. In case you need the complete Palm oil plantation business plan, follow the procedures to download it.
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