Palm oil is a thick reddish liquid extracted from oil palm kernel and it is one of the most lucrative business in Nigeria. It is told to have is base in Africa! Palm oil is used in cooking and in production of some commodities by industries; It is also known for its medicinal and therapeutic value. Personally, I prefer palm oil to every other type of oil because palm oil is a very healthy oil, rich in vitamin E and other minerals.
Although West Africa lies in the center of the world’s oil palm belt, it produces less than percent of the palm oil consumed worldwide. Malaysia and Indonesia have become the dominant powers in palm oil production and presently supply more than 70 percent of the palm oil consumed worldwide.
However, Africa produces much less palm oil than it is truly capable of because not enough palm trees are cultivated on a commercial scale.
The features which make Africa most suitable for cultivating oil palm plantations include:
- An all-year-round hot weather – The oil palm grows well where it is hot all the year round: between 25 and 28 degrees Centigrade. Hot temperatures allow the oil palm to grow many leaves and, as a result, produce more fruit. Higher temperatures also mean that the palm trees are less prone to disease attack.
- A lot of sunshine – Oil palms need a lot of sunshine to grow well. All year round sunshine helps the palms to produce large and well-ripened fruits which contain a lot of oil.
- Abundant rain – Oil palms are not likely to do very well in areas with water shortages. Plentiful rain is very good for the trees and allows them to grow a lot of leaves which lead to more clusters of fruit.
- Rich, deep, flat and permeable soil – The oil palm needs access to water and mineral salts deep in the soil to do well. If it does not have full and easy access to these essential nourishments, the yields (harvest) may be very poor. The soil must also be able to allow water to soak through (permeable) to ensure that the soil is always well drained. However, in the absence of adequate minerals in the soil, fertilizers can be used to supplement the existing supply.
Currently, no African country, except Cote D’Ivoire, produces enough palm oil to meet the demand of its local market. If you are honestly looking for a profitable agricultural products to invest on; Palm oil should the first to come to your mind. Why?
Why Investing In Palm Oil Business?
- It can be produced locally
- It has a very flexible capital investment
- It is in high demand
- it can be exported for profit
- it is medicinal and healthy
Phases In Palm Oil Business
There are basically three phases of in the palm oil business. There are the areas or level by which you can come into the business. I mean, you can come into this business in three ways.
Phase 1: Oil Palm Plantation Business
This is the phase that involves planting of large number of palm trees on an acre of land or more. This phase of the business is very capital intensive as it requires lot of capital and time to profit from this business. At least, you will need to wait for like five years for the oil palm trees to mature.
If you’re considering an oil palm plantation, growing the right variety of palm fruit will be most essential to the success of this business. A significant amount of the palm fruits in Africa are of the Dura variety which is characterized by a thick shell and a small pulp.
On modern oil palm plantations, this variety is crossbred with the Pisifera variety to produce a hybrid (Tenera). The Tenera variety is every plantation owner’s favorite because it has a lot of pulp, a thin shell and a big kernel.
Phase 2: Palm Oil Milling Business
The oil milling business which is the second phase of the palm oil business is concerned with the extraction of palm oil from the kernels. This requires you to have various machines for the extraction process. It also requires you to buy the palm products from the plantation owners if you don’t own the farm. It is also capital intensive!!!
Charge a service fee to mill/process harvested palm fruits for customers. You could charge a flat fee on a per kilogram or per hour basis. The value you offer to customers is a quick, easy and labor-free way to get their palm fruits milled and processed to palm oil.
Another popular method of making money from palm oil mills is to buy off harvested palm fruits directly from small-scale farmers, produce the palm oil and then sell directly to both local and international markets.
Phase 3: Palm Oil Sales Business (Bulk)
The third phase of the Palm Oil business; it involves the Sales of palm oil . This is the phase of the business that I love most because it simply involves the buying and selling of palm oil at any quantity. All you have to do in this phase is to buy and sell the products. There are two ways by which you can make money from the phase:
1. Continuous Buying and Selling of Palm Oil: This involves you to go and buy the product from the local producer themselves and take to the market to sell at a profit. e.g you buy from the village (source) for 5,000 and you take it to the village market or any market to sell at a profit – let say 6,200.
2. Storage and Resell of Palm Oil: In this method of the business; you will buy the palm oil when it is plenty and cheap then you will resell when it is scarce and costly (high).
In the former you will purchase palm oil from the millers (source) – local producer regularly and resell at a profit. While in the latter, you buy large quantity of palm oil and store. This is because palm oil is seasonal! Usually, the profit is higher with this method.
Palm oil has two different seasons. The highest period which is when you can buy palm oil in bulk and store because it is available in excess and cheap . This season comes between February and May. The second season which is between September to December is a very good time to resell stored palm oil. Palm oil is sold for N5,000 to N5,200 per 20litre keg during peak periods. This same amount of oil can go for N10,000 to N12,000 if you buy in large quantities, store and resell.
Features Of Quality Palm Oil
It is very Important that you get the right quality as Palm-Oil can be differentiated by the levels of its processing.
==> Grade A: SPO
==> Grade B: TPO
==> Grade C: SLUDGE
==> Grade D: ROUGH
==> Grade A: SPO – Low Water Content: This is the best quality palm oil. It is suitable for human consumption, use in food industries and as raw material for industries such as in soap making.
==> Grade B: TPO- High Water Content: This type of palm oil is used for manufacturing soap e.g black soap.
Grades B, C and D are not suitable for the purpose of palm oil reselling business. Instead, they are mostly used as raw materials in soap making companies.
Asides for cooking purpose, red palm oil is also used in the production of soap (and detergent), candle, cosmetics (and cream), lubricants, bread making, glue, bio-diesel and plastics.
Things You Will Need To Start Palm Oil Business In Nigeria
Capital: You will need capital to start palm oil business irrespective the quantity or the phase of the business you intend to do.
Find A Good Supplier: To start this business, you will need a safe, steady and reliable source or supplier. You supplier is a key determinant of your success in this business. Millers of palm oil are found in the south-east and western states in Nigeria. These states are Osun, Ondo, Anambra, Edo, Abia, Enugu, and Rivers and so on. You can also ask from people who are experienced in the sales of palm oil, for the best source.
Market: When starting your business, you should have a market which your product is targeting. It could be an international market if you have an interest in exporting. It could also be a local market i.e within Nigeria. If you want to sell in a large scale you would need to find retailers to patronize you. It is usually best to have your market targeting the urban areas.
Storage facilities: Palm oil is a type of product that has to be stored somewhere. First, you will need to get a lot of containers to store the oil and you will also need storehouse, where you will be keeping it before sale.
Transportation: Apparently, this is very important in this business, you will need a stable means to transport the product from the millers to your store and the market. The palm oil business is a very lucrative business but it requires dedication, capital and time. It’s a business that has been existence since the earliest times and it will still continue to exist. The chance of its existence is across a lifespan.
Good Customer Relation: For every business to survive there’s a need for a good communication between both parties involved in the transaction. Thus, make sure you have a good relationship with your customers.