Tips on How to Start a Palm Oil Business in Nigeria

Palm oil is one of the precious agricultural commodity in Nigeria that is used for various things ranging from cooking, soup making compound, chemical agents, lubricates, candle wax, condensed cream (milk) etc. and overtime, there has been lot of articles written about palm oil; how one can transform it into a million naira business, about how profitable it is and how easy one can dive into it without hustle. But they all do this same thing over and over again making it seems like a golden egg that every Nigerian could have while failing to talk about the misconception associated with the business.

Before I proceed further, I believe I should mention that there are different ways one can utilized this palm oil or should I call it the Liquid Red Gold.

For example;

The Federal Government Intervention in the Agricultural Sector in Nigeria, is encouraging individuals to go into palm oil plantation and other agric-related plantation;

Palm Oil Plantation

The palm oil plantation is where a piece of land is dedicated in growing palm oil trees in large quantities for their fruits (palm oil seeds) –which are used in the production of palm oil.

Though this is lucrative, it requires more capital and a lot of patience, as it take up to 2 to 3 years for one to start seeing the rewards (harvest).

Palm Oil Mill

Next is to establish a palm oil mill, quite capital extensive as you need to import these machineries either from Germany, japan or China. But it is a very profitable business as farmers can maximize the yield of their palm oil exacts from the palm fruits by either renting or leasing the mills from you, you can charge base on the quantity of the palm fruits or per bag or kilogram -All depends on you.

Palm Oil Trader

The most popular way among entrepreneur is by becoming a palm oil trader, that is, you buy from local sources and sell to the end user or a distributor and that is what we will be looking at in this article.

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I will talk about some tips in starting this palm oil business and how to go about it:

Capital Needed

Many will tell you that you can start with any capital and there is no minimal requirement, this may not be entirely true. There are some loops hole in such statement, considering the cost in every business -whether big or sell.

Going into this business you would need to consider the cost of transportation (going to the locality and coming back with the palm oil in cans), accommodation (in case of unforeseen circumstances, where you will need to sleep over), feeding (surely you would need to eat) and other miscellaneous. For example, one may be stuck in a situation, where he or she will need to tip the local community in other to access some areas and we aren’t adding the actual cost of the commodity itself (palm oil).

When going into this kind of business it is preferable to be save that sorry, you don’t want to declare bankruptcy become you even start the business fully.

Where to Purchase the Palm Oil

Though there are different places where one can buy palm oil from, most of the articles out there will not actually spell out the exact place to buy these palm oil from.

Judging from the insecurity in Nigeria, one cannot just walk around to any part of the country without a proper investigation of how hospitable the locals are over there.

I always advise people who are considering to venture into this business to please do a proper analyse of the place they are going to buy this commodity from and make sure they are comfortable with it.

Market Research

It’s easy to buy palm oil from a third party, but it becomes more difficult to resell. With time you would discover out that selling these products will become difficult as there are times when there will be lot of supplies than demand in that geographical area (markets) and it becomes very important to do your market research before diving in.

Become a field agent and going into the local market to take questionnaires about the demand and supply of the palm oil in the area you wish to be selling the oil. Market research will aid you in trying to estimate the price at which you could possibly resell your products and a bit forecast into the future to know the periods when the palm oil market might likely crash in price value so as to be prepared for the worst.

Market research gives one the advantage over his competitors, that’s if it’s properly conducted with enough facts from market woman and men rather than theories read from books.

Your Location

Your location matters. Do you reside in the Northern part of Nigeria where most agricultural products are cheaper or in the southern part where things are a bit expensive, all this things are important and should be put into consideration.

The location of where you wish to sell your produces are essential too and they determine how well you could prosper from the business and the amount of profits you would make.

Storage

Palm oil don’t get spoiled that easily, some would say. But if not properly stored, they could develop an awful taste which wouldn’t be pleasant to customers and you would gradually start losing customer than you would be making.

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A proper planning is good, so that you won’t be buying more oil than you could store.

Palm oil last longer when stored away from direct sunlight in a bit cool temperature around 25˚c to 32˚c and don’t keep then directly on the floor but on wooded rack.

Storage Container

I believe I should mention this. but the most appropriate container to store this palm oil is in a 25 litre, many use the 20 litre, which is a good substitute if one cannot find the 25 litre which I serious doubt could happen.

Pricing

This is where there is a bit misconception as many first timers that goes into this business always believe that the price they would sell to either distributors or end users would always be high.

Normally during the month of March and April, this is when many people go source for this oil in local market and during the month of November and December that’s when there is huge demand for this products thus that’s when the price skyrocket.

Since palm oil is a seasonal produce, there are seasons where it is in abundance and seasons where there is a decline in production. When there is an excessive production of the oil, it reduce the price traders buy from the producers and thus making it cheaper and in return traders buy larger quantities.

During the months of November to December, that is when everyone wants to offload there produces they have been hoarding since March and April and that massive sell out usually causes a crash in the market as people will tend to bid there purchasing price lower due to the excessive supply of the palm oil.

Hoarding

What majority of people do is to hoard the commodity and sell when price is at its peak, which is usually during the months of November to December.

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Most at times because of the fluctuation in demand and supply there are periods where prices will likely crash for example, last year December the price of 25 litre of palm oil crashed to N7,500 in my area while some people bought from the local market during the month of April at N8,000 and some were lucky enough to buy at N7,000 and they quickly sold at N7,500-while others accepted the lost some had to hoard again, hope they are able to store their oil perfectly well.

Marketing

This is another area where most people abandon and rarely place emphasizes on. There are already enough competition in this business in some places already and if you want to beat your competitors then you would need to do sometime really different, let me give you an idea.

In the Nigerian market, most people buy palm oil in plastic cans like in the ones they use when selling out bottled water, you can do something entire deferent like printing a sticker on each plastic bottle, this sticker might contain your brand such as your company name or brand name, ingredient, office or factory address, phone number and along with other details such as email and your official website you can even increase your price as it will be considered as a foreign or a banded product and gradually you will dominate a niche in the palm oil market in your locality.

In summary, the following points or would I said tips are very important factors that most people leave out when they tell you about the lots of opportunity in this business, the above should serve as point everyone should consider when deciding to venturing into this business.

The palm oil trading business is indeed very delightful as well as profitable, when one conducts his researches well enough before diving in, I enough everyone too put this points into consideration before any decision should be made.

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