Want to start a palm oil business in Nigeria? No problem. When you’re done reading this article, you will know what to do to make your business successful.
There was a time when the palm oil business was Nigeria’s major source of revenue. This was in the colonial era when the British government depended on palm oil as the main source of revenue, especially in the then-Eastern region. Today, crude oil has taken over, relegating palm oil to one of the businesses of local people. However, it is still a profitable business as many Nigerians are patronising more local produce because foreign-made become more expensive, thanks to the crippling exchange rates between naira and US dollars. You, too, can take advantage and join the business.
What is palm oil business?
Palm oil business is investing a huge amount of money in buying and selling palm oil. Investors buy palm oil in bulk, store them in large quantities and sell it off when the supply of palm oil has reduced. The reason why sellers sell palm oil when production has reduced is to make a higher profit. It’s simple economics, the higher the lower the supply, the higher the demand, which means the higher the profit that will be made.
Palm oil business in Nigeria
Nigeria is the world’s fifth-largest palm oil producer, with less than two percent market share producing 1.03 million metric tonnes. This means the country has depended more on imported palm oil from countries like Malaysia and Indonesia to meet the demands of the teeming population.
Palm oil is an essential commodity in Nigeria. This produce has many uses, such as cooking, medicine, cosmetic uses, animal feed, and preservation of items, especially other food produce. Despite the fact that crude oil has taken over as the main source of revenue for Nigeria since its discovery in the 1950s, palm oil remains a very profitable business in the country. As long as Nigerians exist, palm oil will continue to be in great demand and supply.
According to Nairametrics, palm oil prices have reached record highs in 2022, driven primarily by the disruption in the sunflower oil market caused by the Russia-Ukraine war and export restrictions imposed by the Indonesian government. In fact, global supply issues and high prices have pushed Nigeria to reduce imports and focus more on local production. The high prices have produced more consumers, forcing the government to encourage local producers to meet the supply gap.
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The publication also confirmed that palm oil cultivation in Nigeria is carried out on over 3.0 million hectares of land and is dominated by small-scale farmers (roughly 80% share). Hence there are a lot of opportunities Nigerian palm oil market amid a growing population. Even the Nigerian government has encouraged local production through tariffs and low-cost loans to farmers.
There’s no better time to invest in palm oil business than now. Nigerians are now looking inwards to consuming produce made in the country because they’re cheaper and of better quality. Previously, most Nigerians preferred to consume imported goods rather than locally produced ones. Local businesses suffered. But now, things are beginning to change in favour of local producers, thanks to the exorbitantly high naira rate to US dollars in the exchange market.
There’s no money flowing in the country, and everybody has learned to cut their clothes according to their size. No more “I can’t use Nigerian products” or “Nigerian made are too local.” So far, Presco and Okomu are among the largest Nigerian palm oil producers in the private sector of the palm oil business, and more businesses are expected to be established in the nearest future.
How much do I need to start palm oil business in Nigeria?
The capital for a palm oil business depends on if you want to be a wholesaler or retailer. It will cost you more if you want to do wholesale business than retail. As a wholesaler, you will need a capital of at least N500,000 (five hundred thousand naira). You will need about N200,000 (two hundred thousand naira) as a retailer. Note that it all depends on the business scale you intend to start.
Opportunities in palm oil business
Palm oil is the most widely consumed vegetable oil in the world. It is especially consumed in Nigeria, which also boasts the world’s largest black population. This means the demand is always more than the local supply, which makes it a great opportunity for investors and entrepreneurs in the industry. Apart from cooking, palm oil is used for medicinal purposes, animal food production, cosmetics, and the production of other foods for consumption and preservation. So you see, the market is huge.
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There are three main types of palm oil business opportunities you can invest in:
- Palm tree Plantation
- Set up a palm oil extraction mill
- Sales/trading of palm oil
You can do all three if you have the capital. Let’s take a look at how each of the three businesses works.
Palm tree Plantation
This is a highly capital-intensive business that will require a lot of patience. First, you need to acquire fertile land to plant palm trees. You must also make sure to test the land for the quality of the soil. After planting, you have to wait years for them to grow and produce palm fruits. It can take up to 5 years before harvesting, after which you either sell the palm fruit to those processing it or set up a milling factory to extract the oil yourself. Don’t forget to buy the right seedlings for your plantation from the right sources.
Set up a palm oil extraction mill
Like in tree plantation, setting up a palm oil mill requires a lot of capital. You need money to purchase and install palm oil milling machines to process the palm kernel seeds. The best part is that you can use the mill for personal use or charge people who want to mill their palm kernels for commercial purposes. You can also rent out the machines and make profit off them. That’s not all. You can go big by buying palm kernels in large quantities and processing them in your mill to resell to wholesalers and consumers.
Sales/trading of palm oil
Most people prefer this business because it’s cheaper and faster to make profit. Here, you can buy palm oil in large quantities and resell them for a higher price. Typically, you have to store your stock for a while before selling when the production of palm oil declines. That way, you make a higher profit from the business.
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Risk in palm oil business in Nigeria
- Cases of land grabbing and disputes discourage investors from buying palm tree plantations.
- Most producers are farmers who use local and substandard tools to produce palm oil.
- Poor quality of locally produced palm oil due to poor facilities. Thus palm oil cannot be competitive in the international market.
- Bad government policies.
- Poor attitude towards work. Palm oil production is physically intensive in Nigeria. Most Nigerians, especially the youths, prefer white-collar jobs.
- Unequal distribution as most palm oil producers process for their own immediate needs. So a seller has to take extra measures to source palm oil for sale.
- Poor storage facilities result in post-harvest losses.
- Inadequate credit facilities where the government has failed to give loans to farmers with little or no interest to encourage production. However, this present Mohammadu Buhari administration has taken steps to address that, as cited above. However, more should be done to encourage people to go into palm oil business, from farming to trading.
Where to buy palm oil cheap in Nigeria
Palm oil is mostly produced in the Southern part of Nigeria, particularly the South-East. Below is a list of some of the places to buy palm oil cheap:
Imo
- Orlu Market
- Afor Ogidi (Orlu)
- Orieagu Market
- Eke Obodoukwu Market (Ideato North)
- Eke Oha Market Onicha (Ezinihitte, Mbaise)
- Nwaorieubi Market
- Eke Opuma
- Nkwo Mmahu
- Afor-ajala market
- Orie Abacheke
- Mission Market Ezedibia
- Eke Umuagwo
- Ukwarasu Market
- Nkwo Amafor
- Obinze Vegetable Market
- Ahia Mgbirichi
- Eke Oforola market square
- Orie Umuokanne
- Nkwo Ihitte Market
- Ahia Ohoda
- Afor Inyishi (Ikeduru)
- Nkwo-Idemiri Amankwo Ebenator
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Abia State
- Umuahia Ultramodern Market
- Ahia Ohu Market
Enugu State
- Gariki Market Enugu
- Eke Agbani, Market
- Nkwo Inyi Market
- Old Artisan Market
- Eke-Obinagu Market
- Ogbete Main Market
- Eke otu
- Amahausa Mini Market
- Eke-Aku Market
- Opi Junction Market
- Eke-Aku Market
- Afor Opi Market
- Ugbo-Odogwu Market
- Oji River Main Market
- Udi market
- Eke Mgbowo Daily Market
Anambra State
- Eke Market Amichi
- Nkwo Market
- Eke Nibo Market
- Afor- Udo Nanka
- Eke Oyinbo market And Park, Amawbia
- Eke Market Umuokpu Awka
- Ugwu Orie Market Ozubuku
- Orie Achina Market
- Ekenweje Market
- Uke Market
- Nkwo Market, Omor
- Eke Awgbu Market
- Ezi Ibi Market
- Okijah Market
- Ùgwù Órìè Market
- Azuiyi Udene, Abakaliki
Ebonyi State
- Abakaliki International Market
- Onueke Market
- Eke Market
- Ngele Market
- Effium Main Market
- Ndibe Beach Road, Afikpo
- Mgbom Market
- Ahia Ofu Market
- Omege Market
- Okwo Ngbo Market
- Nkwagu Market
- New Kpiri Kpiri Market
- Obubura Daily Market
- Ebem Daily Market
- Amebelu Market
- Biko Biko Market
- Egbizum, Morning Market
- Umunze St, Ntezi Abba, Abakaliki
- Eke Market, Oso Edda
- Ijiman Daily Market
- Agoi Ibami Central Market
- Nkwo Achara market
- Ikpa Commodity Market
- Max-lysa superstore LTD
- Mba Ise Market
- Rijo Untonko Market
- Eke Okigwe Market
- Ohaji Egbema Market
- Nkwo abo market
How profitable is palm oil business in Nigeria
Palm oil is a huge agricultural business. According to entrepreneurs.ng, palm oil yield per hectare is estimated at 8 tons per year. This means the profit farmers make per hectare is around 3.4tons per year. A tonne of palm oil sells for a minimum of N2,400,000. In addition, gross revenue of 12 Million is obtained from red palm oil.
Also, Business Day reports that Nigeria’s palm oil producers posted their highest profit in six years in the first half of 2021 due to the boom in demand. Thanks to policies established by fiscal and monetary authorities, especially the ban on accessing forex for palm oil and border closures, more people in Nigeria are looking to local producers to provide oil.
However, palm oil has its season, and the peak season is between January to May. This means you may not make so much money in the other months, especially if you’re in the oil milling business.
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