Palm oil business is very profitable in Nigeria because many people use palm oil both domestically and industrially.
The oil palm (Elaeis guineensis) is one of the important economic crops in the tropics.
It belongs to the family palmae, and the subfamily cocoideae of which it is the most important member.
The oil palm is a versatile tree crop with almost all parts of the tree being useful and of economic value.
The principal product of oil palm is the palm fruit, which is processed to get three commercial products.
These include palm oil, palm kernel oil and palm kernel cake.
The uses of palm oil are many and varied.
Locally, it is used for cooking, soap making, metal plating and lamp oil.
The palm kernel oil, however, is used for soap making, as a source of glycerine, for manufacturing margarine, cooking fats and for making lubricants.
The residue got after extraction of oil is called kernel cake, which is useful in livestock feed production.
The midribs and rachis of oil palm are used for making brooms and roofing materials.
The thicker leaf stalk is used for making the walls of village huts.
The bark of the frond is peeled and woven into baskets while the trunk (main stem) can be split and used as supporting frames in buildings.
A sap tapped from the male flower is drunk as palm wine, which is a source of yeast.
The spent fruit bunch and fibre that remains after oil extraction can be used for mulching, as manure and as fuel.
Steps to Starting Palm Oil Business in Nigeria
Here are the steps to start a profitable palm oil business in Nigeria:
1. Choose the Palm Oil Business Type to Invest in
(a) Palm Tree Plantation
The capital requirement for planting palm trees runs into millions of naira.
If you want to earn from palm oil business fast, this may not be the best option for you.
It requires the purchase of acres of land.
The land and type of soil used in planting and cultivating the palm affect the quality of the fruits and must be tested to be sure it is appropriate for palm tree plantation.
The incubation period after plantation of the palm trees can take five to ten years before harvesting.
To plant, buy seedlings.
Usually, one seedling in Nigeria costs ₦250 and you will need at least 1000 seedlings for a start.
Importantly, ensure you give at least 8-9 meters space between two plants.
After harvesting, you can either sell the palm oil kernel seeds to those processing it or you set up a mill to extract the palm oil.
(b) Palm Oil Extraction Mill Setup
Setting up of palm oil extraction mill is also capital intensive but not as expensive as the palm tree plantation.
To begin, install palm oil milling machines for the processing of the palm oil kernel seeds.
- Use milling machines for personal or commercial processing.
- Rent out the machine to people who want to process their palm kernel.
- Earn cool cash from this business if you are positioned in an environment where the machine is usually needed.
Note the palm oil season.
The peak season is between January to May.
Alternatively, you can install the milling machine for your personal use, process the palm oil kernel, and sell the palm oil to consumers or resellers.
To process for yourself, 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) Palm Oil Supply and Storage
If you have capital, this is the cheapest and easiest part of the business for you.
However, you need to be patient to make a good profit from this business.
This involves buying palm oil in large quantities and selling to consumers during the off-peak period, when the supply to the market has reduced.
To get more profit from this business, 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.
2. Fully Understand Palm Oil Trade (Market Research)
To start and successfully scale a palm oil business in Nigeria, you must have in-depth knowledge of how it works.
Before starting, you must know the answers to these questions:
- How does the business works?
- Is it time-consuming?
- Where do I source for cheap and good palm oil?
- Can I store palm oil for at least a year without it losing its taste?
- Who are some of the top palm oil traders and companies in Nigeria?
- How do they operate and serve their customers?
You also need to know your competitors and the existing price of palm oil before starting the business.
The best ways you can get a better understanding of palm oil business in Nigeria and succeed without making costly mistakes is by undergoing mentorship under a proven palm trader or company and by reading from detailed guides online.
After carrying out market research, the report you have made will point out the right amount of capital to start the business.
3. Have a Business Plan
To make your business work, sit down and draft out a realistic plan.
A business plan is a formal statement of business goals, reasons they are attainable, and plans for reaching them.
Your business plan will state:
- The name of your business venture.
- The states you are selling to and countries for export.
- Palm oil business potentialities and risks.
4. Business Registration
Register your business name with the Corporate Affairs Commission (CAC) in Nigeria.
This is done to legalize your business and avoid any legal issues that might come up.
With your CAC certificate, you can open a corporate bank account where customers can pay into.
Doing this will also make you appear more reputable to your customers.
To begin registration, run a name search on CAC’s portal to confirm if your chosen name has not been registered by another person.
With basic information like valid ID card, passport photograph, signature, and personal details, you are good to go.
Alternatively, you can hire a lawyer to help you register it.
5. Source for Palm Oil from Reliable 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.
You can get palm oil cheaply during a peak period from places like Delta State, Bayelsa State, Imo State, Rivers State, Abia State, Akwa Ibom, Ondo State, Edo State and Rivers State.
It is very important to buy palm oil of good quality as this would make it easier for you to get customers to sell to.
6. Decide on the Mode of Transportation
If you don’t know the right mode of transportation to use in transporting your palm oil, you may end up incurring huge costs that will affect your profit.
So, compare prices with several commercial carriers before settling for one.
Ask your supplier to suggest the cheapest, reliable, and safest mode of transportation to you from experience.
If you have your own vehicle, then that’s better for continence and reliability.
Otherwise, you’ll need trusted drivers to deliver palm oil to your customers all over the country.
7. Get a Storage Space (Room)
Know and learn how to preserve palm oil.
You need a place to store your goods in wait for the off-peak period; somewhere cool, dry, and safe.
The storage space (warehouse) must be spacious, cool, safe, and dry for the storage of palm oil.
Rent a space or a room where you can store the palm oil while you wait for the right time to sell.
Purchase kegs or drums to store your oil, preferably the 25-liter yellow kegs.
Also, the kegs for storing the oil must be arranged.
8. Set Right Prices for Your Products
You must learn how to fix the right prices for your products if you don’t want to make a loss from your business.
To put the right price on your product, calculate all expenses, do market research and analysis on how much palm oil is being sold, how many consumers will pay, and the rate of demand of the product.
These details will help you price your product correctly.
9. Look for Customers
Customers are the most important part of a business.
Without customers, your business will not thrive.
Wait for the off-peak period, which starts in July. Take active measures to look for customers and sell your palm oil to.
You can find some retailers among market sellers, stay-at-home parent, food companies, cosmetologists.
Use a unique container to bottle your palm oil, make it appealing by placing a label on it.
Alternatively, you can market your business online to reach a wider audience.
10. Locate Genuine Foreign Buyers for Your Palm Oil
Sourcing for buyers can be tasking, especially if you are new in the business.
Quality palm oil is in high demand by Nigerians based abroad.
Locate these Nigerians or create a means through which these commodities can reach them.
Here are some tips on how to get genuine buyers abroad:
- Join your local seller association and cooperative society for the palm oil you want to export.
- Join online trade hubs companies that have the directories of both buyers and sellers. Though it will cost you a subscription fee. It may be yearly or monthly.
- You can contact the embassies of the countries you are exporting to, in your country of residence, to confirm the legitimacy of the buyer’s details.
- Search on the internet for companies that use that product as a raw material. Send mail and put the call through for better communication.
- Join B2B (Business to Business) and B2C (Business to Customers) forums and portals to connect with buyers.
- Join some social networks like Facebook, twitter, LinkedIn pages to connect with buyers.
- You can advertise on some trade portal websites for availability of the products and services for sales.
- When you have one buyer, encourage that one to put word across to other Nigerians, Africans, and Foreigners around.
11. Arrange for Palm Oil Export Logistics
As a palm oil trader, you need to have some knowledge of palm oil logistics.
If you are too occupied with doing this yourself, contact a reliable company to do this.
Your products are expected to be packaged and labeled correctly to prevent damage and misplacement on transit.
Document them and insure against losses.
Inspection of the product by an authorized body, such as FIIRO, Nigerian customs, and NDLEA, is also vital.
Know and have the basic documents required for exporting goods which are: certificate of origin, insurance certificate, shipping bill, certificate of inspection, palm oil license, commercial receipt, packing list.
Before you have the goods shipped out, confirm with your contact where the commodities should be shipped to.
If for any reason, you do not document your palm oil process with required government agencies, then it can be termed smuggling and you’ll be punished if caught along the line.
Where Can I Get Palm Seedlings for Planting?
You can get palm seedlings from the seed pods of flowering palms or purchase them from the market.
These palm seeds vary in size.
Some can be small and bright red, while others can be quite large.
If you prefer to get your seeds from your tree, it is better to get them immediately when they fall from the tree.
Also, use these seeds on time because some of them have a short lifespan.
You must test your palm seeds before you plant them.
This determines if it would germinate or not.
Just simply put the seed in a bowl of warm water.
If the seed floats, it is unsuitable for use.
However, if it sinks in the water, it is suitable for planting.
Price of 25 Liters of Palm Oil in Nigeria
Presently in Nigeria, you can buy 25 liters of local palm oil at a price of ₦35,000 per 1 keg.
Palm Oil Production Season
Unlike other types of businesses, this is a business that has its seasons and not an all-year round kind of business.
The palm oil peak season starts in February through April/May.
This is when you would buy your palm oil in large quantities in wait for the off-peak period.
During Peak Periods, you could get a 25-liter keg of palm oil for as low ₦4,000 which could be sold for as much as ₦11,000 between July and January, which is the off-peak season.
How to Know Good Palm Oil/Grades in Nigeria
(a) Grade 1
This is the best oil which can be stored within 8 months or more.
The oil doesn’t sleep, nor is it harsh. From the top to the bottom, it remains the same.
A little shake of the content will make the oil to flow freely; the taste is excellent, has a beautiful fragrance and does not foam at the top.
The colour is most times dark red.
(b) Grade 2
Grade 2 palm oil can be stored for 3-4 months.
The oil is the opposite of grade one; it is choking, sleeps from the top to bottom, etc.
(c) Grade 3
Grade 3 palm oil should be sold immediately or at most within a month. It is used in soap making.
You must make a good use of your nose to distinguish good oil.
Just dip your finger into the oil and smell.
The colour of palm oil may not mean the oil is bad, for instance there is a species of palm tree called agric.
It is not as reddish as the local one.
Agric reduces in quantity by about 5 litres from its content.
Most millers mix agric and local species together to make it come out well.
How Much Do I Need to Start Palm Oil Business in Nigeria?
To successfully start a palm oil supply and storage business in Nigeria, have at least ₦100k.
If you want to set up a palm oil extraction mill or even a palm tree plantation, you will spend more than selling palm oil directly to customers.
How to Succeed in Palm Oil Business in Nigeria
- Always check and turn your stored oil monthly. Bring them out and sun them or use a stick to stir.
- Be able to identify good oil from the bad ones. This is where the success or failure of the business begins.
- Buy re-used kegs if you are using gallons, although purchasing drums is far cheaper than gallons.
- Cut your cost of transportation. You don’t need to hire a whole van for yourself alone, as you can partner with others to pay for transportation.
- Know when to buy and when to sell.
- Locate someone who is experienced and whom you trust to take you through the business.
- Purchase gallons you will use in storing the oil.
- Start your palm oil business with a few gallons, if possible, 10-20 gallons.
Where to Buy Palm Oil in Bulk in Nigeria?
Here are the best places to buy cheap and quality palm oil in bulk in Nigeria.
- Abia State
- Akwa Ibom State
- Bayelsa State
- Cross-Rivers State
- Delta State
- Imo State
- Kogi State
- Ondo State
- Rivers State
Risk in Palm Oil Business in Nigeria
The palm oil business in Nigeria is profitable, but it is not without its risks.
Here are the most common risks associated with the palm oil business in Nigeria:
- Leakage of kegs.
- Identifying good oil.
- Not been able to source for the oil on time or delay by the palm oil millers, etc.
- Fluctuation in prices.
- Importation of palm oil into Nigerian market from Malaysia and other neighboring countries affects pricing.
- Selling on credit.
What Companies Buy Palm Oil in Nigeria?
These are companies in Nigeria that you can sell palm oil to:
- Planet Oil and Chemical Industries Ltd, in Abia State.
- Phemson Nigeria Limited, in Lagos State.
- Sunny Oil Nigeria Ltd, in Lagos State.
- OM Oil Industries Ltd, in Lagos State.
Palm oil business is one of the profitable businesses anybody can engage in Nigeria.
Start buying immediately. Palm fruits are prevalent and the price considerably drops.
That should be between January-March.
Don’t wait until the price completely drops.
Buy in batches, little by little until the price eventually drops.
You will have nothing to lose even if the price doesn’t come down lower than you thought.
The right time to sell your palm oil is when the rains are coming down heavily and continuously.
Currently, palm trees bring out less fruit or you sell from September down to December.
It can also be when you see a sharp increase in the price of palm oil in the market you sell your own.