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Palm oil production and processing business plan in Nigeria

by Biztraction Research

Overview of Palm Oil Production in Nigeria

Palm oil production is one of the major sources of income for Nigerians. In 2021, it was estimated that 1,280 thousand metric tonnes of palm oil were produced in Nigeria. This shows the immensity of the production of palm oil in the nation. Infact, Nigeria is one of the five nations, leading in the production of palm oil in the world. 

Palm oil production has to do with the extraction of edible oil from the mesocarp of the palm fruit, which is suitable for human consumption and is used in making various kinds of products and things.

Palm oil was one of the major sources of income for the Nigerian government in times past, before the discovery of crude oil. However, it is being focused on again, as the government is now investing a lot to revive that sector of the economy. 

Overview of Palm Oil Processing

The Palm tree is important, as many things can be derived from it, to be used by humans. To start with, palm fruits can be used to get palm oil, the stems can be made into woods for building, palm wine can also be tapped from palm trees as a form of refreshment, etc.

Now, Palm oil is gotten from palm fruits and there is an extraction process that takes place before the oil is gotten from the mesocarp of the palm fruit. The Palm fruits seedlings are planted, and after they have been harvested, the bunches of the palm fruit are threshed and sterilized, to get the palm fruits from them. 

Afterwards, the palm fruits are crushed, to extract the crude palm oil. This crude palm oil is then purified and dried before it can be put to use at home, in industries, etc. It can also be exported to other nations for exchange in international trades. 

Uses Of Palm Oil

Palm oil is used for various things and in various industries. It is used in the home, industries, etc. Palm oil is used in preparing meals, cosmetics, soap, animal feed, etc. The following expounds more on the uses of palm oil.

  1. Cooking: 

Palm oil is one of the important ingredients used in cooking meals of different kinds, ranging from soup, stew, sauce, etc. Different tribes use it for various meals, and it is a key part of the food industry. Palm oil is used to cook Egusi soup, Banga soup, oha soup, vegetable soup, beans, etc 

Palm oil is also used to fry food such as plantain, pepper, etc. It can also be used in making food items, such as pancake, cereal, chocolates, etc

  1. Drugs: 

Palm oil is also used in making drugs in the pharmaceutical industry. Due to the properties of palm oil, it is also very useful and effective in enhancing the bioavailability and solubility of drugs. And this helps drugs last longer by extending their shelf lifespan.

  1. Manufacturing:

Another important thing palm oil is used for is in manufacturing different things, ranging from cosmetics, snacks, margarine, stock cubes, detergents, candles, deodorants, shampoo, toothpaste, etc.

  1. Exportation:

Palm oil is also one of the important products used in trading between nations of the world. Nations like Indonesia, Malaysia, etc have palm oil as a major export product, which yields a lot of income for their economies.

  1. Feed production:

Palm oil is also used in the production of feed for animals and livestock, due to its heat-resistant and edible nature.

It is used in making feed for animals, ranging from dogs, cats, pigs, etc. Also, since it is good as preservatives, it helps to prolong the lifespan of feed, to help it stay longer on the shelf, before expiration.

  1. Preservation:

Palm oil is used as a preservative in many food items, ranging from human food to feed for animals. It is used in preserving food items to ensure that they don’t get spoiled on time. 

Requirements Needed To Start Palm Oil Business

In starting a palm oil business, there are many things required to be acquired to attain success. Some of them are as follows;

  1. Capital: 

Capital refers to the money used in starting the palm oil business, which would be used in purchasing the facilities needed to kickstart. 

Firstly, you need to purchase the land where you would plant palm oil seedlings. This could range from many acres to some hectares. It is important to get a large portion of land, to help you plant as many trees as possible.

You would also need capital to hire workers to work on the land, from the planting stage to the harvesting and transportation stage.

Some equipment and materials such as tractors, fertilizer, etc also need to be purchased to aid the planting process.

  1. Land: 

After securing the capital for the business, the next thing is to make the purchase of the land for the palm oil plantation. When buying the land for the plantation, it is important that the quality of the soil is examined, to ascertain that it would be suitable to grow palm trees. 

Now, If you are unable to determine the fertility of the soil by yourself, you can hire experts to do this for you. This is important, to ensure growth for the palm trees after planting.

Another key thing to consider when purchasing the land for your palm oil plantation is the closeness of the land to your buyers. This would make it easy to transport your palm fruits to customers, as at the due, without hassle.

  1. Labour:

Another requirement for your palm oil business is the labour that would be needed in planting, harvesting, and transporting the produce of the farmland.

You would need to employ extra hands to assist you in the work, and you would have to pay them.

  1. Storage: 

Another requirement for the palm oil business is the storage facilities needed to store and keep the palm fruits and palm oil, after being extracted and purified.

Storage facilities are very important for the palm oil business, to preserve the palm oil got, from the extraction mill. This is also important to protect them from getting spoiled before they get to their buyers.

  1. Transportation:

Another requirement for a palm oil business is the transportation facilities needed to transport your equipment, palm fruits, palm oil, etc to and from your palm oil plantation.

You could get trucks to help you transport things to and fro the plantation.

  1. Suppliers/Retailers:

Getting reliable suppliers to supply you with the needed equipment, palm fruit seedlings, and other things is also a key requirement to consider when starting your palm oil business.

Getting retailers who would buy directly from you to supply to consumers is also important, to ensure the smooth transfer of palm oil from your plantation to customers, in exchange for money.

Production season of palm oil:

The production season of palm oil differs from nation to nation. However, in Nigeria, the best time to plant palm fruit is during the rainy season, which is usually around June-September.

This is recommended so that the roots of the trees would have been well-rooted in the ground before the dry season comes in.

Now, an oil palm starts to produce about 3 to 4 years after it has been planted. So, patience is required as a palm oil businessman or woman. It is also important to not relent during this waiting period, as one would be required to tend the plant from time to. time, by removing weeds, and doing other things to enhance growth.

Where to get palm seedling for planting:

Just like for every other tree, to grow palm nuts, you need to first get the seedlings to plant. And this is the cheapest way because palm trees are rarely grown through cutting, layering, and other asexual means.

You can either get them from the seed pods of flowering palms or buy them. And these palm seeds differ in size. While some are small and bright red, some others are very large. 

Now, if you would like to get your seeds from your tree, it is advisable to get them immediately when they fall from the tree; showing that they are ripe. It is also important to use these seeds on time. This is because the lifespan of some of them is not long, however, for some, they can last for up to a year.

Now, you must test your palm seeds before planting them. This would help determine whether it would germinate or not. To test, simply put the seed in a container of warm water. Now, if the seed floats in water, it is not good for use. But if it sinks in the water, then it is good for planting.

Is the palm oil business profitable?:

The palm oil business is highly profitable, due to the many uses of palm oil, domestically and even industrially.

As a palm oil businessman or woman, there is always a huge demand for your product, as it is needed in high quantity and quality in nations, industries, families, etc. And although it is a capital-intensive business, its rewards and profits are far-reaching.

How much does it cost to start a palm oil business?

Starting a palm oil business depends on the type you want to venture into. To start a palm oil plantation business, you would need to purchase or rent some acres of land, and this would cost a lot. You would also need to buy palm fruit seedlings, and this would also require a lot of money, hiring manpower, machinery, etc also costs a lot.

On the other hand, if you were to start a palm oil extraction mill or sell palm oil directly, you would not spend as much as if you wanted to start a palm oil plantation.

Popular palm oil producing states

  1. Delta State
  2. Akwa-Ibom State
  3. Cross-River State
  4. Bayelsa State
  5. Imo State
  6. Rivers State
  7. Ondo State
  8. Abia State

Types of palm oil business

There are three types of the palm oil business that one can venture into, as a palm oil business man or woman. They shall be discussed as follows:

  1. Palm Tree Plantation:

The first type of palm oil business is the palm tree plantation business, where you would be involved in planting and harvesting palm fruits. Here, you would be required to purchase or rent hectares of land to use in planting and harvesting palm fruits.

The palm tree plantation business is one of the intensive types of the palm oil business, which requires you to buy palm fruit seedlings, clear and make ready the land for planting, plant, monitor growth, and harvest at the end of a season.

It is quite capital intensive. However, its benefits are mind-blowing.

  1. Set Up A Palm Oil Extraction Mill:

Asides from setting up a palm tree plantation, you can decide to set up a palm oil extraction mill, where you would specialize in crushing palm fruits, to extract the palm oil from them.

This is also capital intensive as you would have to purchase machines for the crushing process, as well as hire manpower to make the work faster. Setting up a palm oil extraction mill is another type of palm oil business, which has huge benefits to be enjoyed.

  1. Sales Of Palm Oil:

Another type of the palm oil business is the direct sales of palm oil. This could be either large-scale or small-scale. When operating on a large scale, it is advisable to purchase directly from dealers who own extraction mills.

And if it is on a small scale, one can easily purchase from large-scale dealers or wholesalers.

How To Start a Palm Oil Business In Nigeria

To start your palm oil business, you need to sketch a plan to follow through, to ensure success in the business. The following steps can be taken to start the palm oil business in Nigeria:

  • Choose The Palm Oil Business You Want To Invest In:

Having learned earlier that there are different types of the palm oil business that one can engage in, it is then important that you decide which of them you would be venturing into.

You could decide to set up a palm oil plantation, where you would plant palm trees and harvest for others to get palm fruits from. You could also decide to have an extraction mill, where palm fruits are crushed to extract the oil from them. Or rather, be involved in the direct sale of palm oil.

Whatever choice you make, you need to consider your capital, skill, interest, etc.

  • Draft a business plan:

After deciding on the kind of palm oil business you would be venturing into, you should move forward to draft a business plan. 

Your business plan would include the kind of palm oil you intend to start with, the amount of capital needed, how the capital would be sourced, mode of operation, etc.

  • Register Your Palm Oil Business With CAC:

CAC is the corporate body in charge of registering businesses in Nigeria. To make your business legally recognized by the law, you need to register the business under the business name you have chosen for it.

Registering your palm oil business with CAC also gives you access to some loan facilities, grants, and other national recognition.

  • Set up your production factory or store:

Now, you can go ahead to set up your production factory or store, depending on the type of palm oil business you would be venturing into.

If you would be going into the direct sale of palm oil, you would not need a factory. But for an extraction mill, you would need a production factory, as well as storage facilities to store the palm oil, before you sell them.

  • Secure suppliers:

Securing reliable suppliers is also important. As a palm tree plantation owner, you need to secure suppliers to supply you with palm fruit seedlings and other equipment.

Also, as a palm oil mill extraction business man or woman, you are to secure suppliers who own palm tree plantations, who would give you a steady supply of palm fruits to extract palm oil from.

  • Plan for logistics and transportation:

Next up, you need to plan for logistics and transportation to enable you transport the palm oil and palm fruits out of your farmland and extraction mill respectively to people who need them

Transportation is an important aid to trade which is not to be trivialized. A smooth medium of transportation would ensure that your product leaves your factory on time, and gets to the consumers who need them.

  • Market your products:

Now, after securing your transportation details, you are to market your product to prospective wholesalers and retailers who are in the palm oil business.

This is important to facilitate sales and get profits.

Palm oil production and processing business plan in Nigeria

In preparing a business plan for your palm oil business, the following items must be included, featuring important details to help you attain success as a businessman or woman. 

The following elements shall be considered, to help you come up with a business plan for your palm oil business:

  1. Executive Summary:

The executive summary appears first in the business plan. However, it may be the last thing to be written, because it summarises all the details about the whole business plan.

The executive summary contains the amount of capital needed, work plan, estimated income over a period, estimate of labour required, etc.

  1. Company Description:

The company description contains information about the kind of business the palm oil establishment is. It talks about whether it would be a palm oil plantation business, a palm oil extraction mill, etc.

It also contains information about whether it is a one-man business (sole proprietorship), partnership, etc.

  1. Team:

This segment of the business plan contains information about the individuals involved in the business. 

Here, their names and roles are spelt out, to aid comprehension.

Team members could include the Managing director, farmers, secretary, warehouse manager, etc.

  1. SWOT Analysis:

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

This is a very important analysis to be done, which helps you identify your areas of strengths to capitalize on, weaknesses to work on, opportunities to explore, and threats to eliminate. 

Strength has to do with the areas where you have a better advantage, as a palm oil business owner. This is to enable you to capitalize on these strengths to get more profit. 

Analyzing your weaknesses helps you to know the areas you need to work more on, to get better results. Your weaknesses are also the areas that your competitors may want to take advantage of. So, you need to pay attention to them.

Opportunities refer to new areas or aspects of the palm oil business that you can take advantage of, to increase revenue and expand your network.

Threats refer to things that could pose danger to your business. It could be bad weather conditions, pests, etc. 

  1. Market Analysis:

Market analysis has to do with examining the market, to know what is in demand per time.

The market analysis would help you understand what consumers need, what kind of packaging appeals to them, how to market to them and how to get them to make purchases.

  1. Financial Analysis:

The financial analysis for your palm oil business carries details about how much would be needed to start and run the business.

Capital required to purchase land, machinery, palm fruit seedlings, storage facilities, labourer’s wage, salaries for other staff members, etc.

  1. Marketing Strategies:

This involves details about how you intend to market your product and move fully into the market, to sell.

Marketing can be done either through the traditional ways of connecting with retailers who deal in the palm oil business. It could also be through online marketing strategies, using social media, SEO, etc to market your products.

  1. Competitive Analysis:

There would always be competition in the palm oil industry. Hence, it is important to carry out a competitor analysis, to check your competitor’s weaknesses, to take advantage of it. 

You could also examine the strategies being applied by your competitor, which yields a lot for them and apply those strategies too, to get better in your business.

  1. Appendix:

The appendix of your palm oil business plan includes additional documents that are not included in the body of the business plan. It could include charts, tables, graphs, and some other important elements, which are not yet included in the main body of the business plan. 

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