How to Start Palm Oil Business in Nigeria – Palm oil is one of the most widely used and consumed vegetable oils in the world. It is derived from the fruit of oil palm trees, which are native to Africa and cultivated in many tropical and subtropical regions. Palm oil has many applications in food, cosmetics, biofuels, and other industries.
Nigeria is the largest producer of palm oil in Africa and the fifth largest in the world. The palm oil industry contributes significantly to the country’s economy, providing income and employment for millions of people. However, the industry also faces many challenges, such as low productivity, environmental degradation, poor quality standards, and lack of access to markets.
If you are interested in starting a palm oil business in Nigeria, you will need to consider several factors, such as:
The type of palm oil business you want to start.
There are different segments of the palm oil value chain, such as nursery, plantation, milling, refining, processing, marketing, and distribution. You will need to decide which segment suits your skills, resources, and goals.
If you’re looking to start a palm oil business in Nigeria, there’s nothing to waste your time on, as it is easy to start. However, without prior knowledge of how the business works, success may not be certain.
That is why we have come up with this post to enlighten you on how to start a palm oil business right from scratch to make millions of naira in profit within just a short period.
About Palm Oil Business
Also known as the red oil business in Nigeria, the palm oil business comes in two different dimensions. The first is the one where you produce the palm oil, and this covers everything from owning a palm oil plantation to processing, production, and sales. This is very expensive to start and needs an in-depth understanding of different fields including Agriculture and marketing.
The second dimension is the one where you buy palm oil from the producer (the first dimension), sell it as a distributor to retailers and companies, and even export them out of the country. This is by far the easiest way to approach the palm oil business in Nigeria, as all you need to deal with is the marketing and sales part.
Both dimensions are beginner friendly, which means you can prosper as a newbie, however, their entry cost differs. So let’s see how much it costs to start a palm oil business in Nigeria.
How Much Do You Need to Start a Palm Oil Business in Nigeria
Since there are two ways to approach this business, the capital needed differs respectively.
Although both require reasonable startup capital, if you want to start as a manufacturer of palm oil, you’ll need at least 1 million nairas because you’ll invest more in the material needed for a start.
On the other hand, if you’re looking to venture into the palm oil distribution business, you need a startup capital of about 500,000 Naira and above depending on your location. This is because apart from the cost of the palm oil itself, you’ll need to invest heavily in transportation especially if you’re living in places like Lagos, and Abuja.
While that is the amount needed to start a palm oil business in Nigeria, if you invest that huge amount, how much should you be expecting in profit?
How Profitable Is Palm Oil Business in Nigeria
The palm oil business is very profitable in Nigeria both when sold locally or exported. 25 liters of palm oil goes for anything from 15,000 Naira to 20,000 Naira from the manufacturer as of the time of writing this article.
As a distributor, you can buy from the manufacturer at that cheap price and resell for 25,000 to 35,000 Naira, as that is the market price of palm oil at the time of writing this article. This means you’ll keep a profit of 5,000 Naira and above per 25 liters after deducting the transportation cost and other expenses incurred along the line.
Therefore, the typical profit margin of a palm oil business in Nigeria ranges from 20% to 70%.
However, since the price of palm oil in Nigeria fluctuates, you could be lucky to buy low and sell high. A relative of mine was once lucky, to buy a couple of 25 liters of palm oil at extremely cheap prices, and made around 150% ROI (return on investment) within just 3 months.
With that out of the way, let’s discuss how to start a palm oil business in Nigeria.
How to Start Palm Oil Business in Nigeria
The following is a step-by-step guide on how to start a profitable palm oil business in Nigeria (mainly as a distributor).
- Start with Market Survey
In starting a palm oil business in Nigeria, the first thing that needs to be done is thorough market research. Firstly, you need to understand that running a palm oil business in Nigeria differs based on location.
So, to start with, you need to understand how the business works in your area, know the area to focus on, research the best place to buy and (market) to sell your products faster and get to know about some scopes of the business, tips, and tricks, and so on.
Without prior knowledge of how the business works in your area, you could fail if you start just like that. So, to avoid failure, you need to create a business rapport with the people already in the business in your area, they’ll guide you a lot before and even after starting.
- Get Your Startup Fund
Once you’ve known the in and out of the palm oil business and how it works in your area, it’s now time to get started by arranging your startup fund.
Now, going back to the market survey section, you should have gotten a quotation of the exact amount needed to start by now. So, what is left is to get the money, how?
Of course, if you want to start a business, you must have gotten your capital ready. In case you still seek more funds to start, you can apply for loans or reach out to friends and family to help with a little more money to start with.
See also: What Profitable Business Can I Start With 500k In Nigeria?
3. Arrange for a Storage Facility
Once you have the money required to start, setting up storage space is next, as you’ll need a good place to store your goods once they arrive.
Palm oil can be stored at any place once it is in a keg and well covered. Therefore, all you need to do is rent a store (small warehouse) or a room where the palm oil can be stored while you source for customers or wait for the right time to sell.
4. Get The Needed Materials
You may be wondering what this means or asking yourself does this business require any materials or equipment?
Of course, it does! The major material required for a palm oil business in Nigeria is kegs and/or drums. This is a little bit controversial, as some suppliers/manufacturers do sell palm oil with the kegs. But in most cases, it is best to have your keg or drums ready, as this will save cost a little.
- Find Manufacturers
Considering that your startup capital and storage facilities are ready, what next?
Of course, starting the business fully by buying palm oil and getting them sold as fast as possible. To achieve this, first, you need to find the best manufacturers to buy from.
Now, this is where the ready deal is! In case you don’t know, palm oil may be widely produced across the country, but if you’re looking to venture into the business, there are some states and locations where distributors/sellers source the best suppliers.
If step one (market survey) is carried out well, you will have the right knowledge on how to source the best supplier, and where to buy from based on your location. Regardless of your location, the following states are well known for producing the best palm oil in large quantities in Nigeria.
- Delta State
- Ondo State
- Imo State
- Rivers State
- Akwa-Ibom State
- Cross-River State
- Bayelsa State
- Abia State
- Kogi State (Igala people’s part)
- Arrange for Good Transportation Means
As I said earlier, you’ll need to invest heavily in the transportation of your goods from the supplier/manufacturer to your selling point.
While the cost of transportation may be high (especially if you live far away from your supplier) you can cut the cost by comparing the prices of several carriers and then go with the best one.
Perhaps, you can seek advice from your suppliers since they’ve been in the business for a long, they should be able to suggest the best and cheapest means for transporting palm oil.
See also: 5 QUICK WAYS TO MOVE YOUR BUSINESS FROM STRUGGLING TO PROFITING
7. Connect with Retailers
To appreciate your effort from the market survey to transportation means, you need to source the best customers you can sell your product to.
Just like any other business, without a solid marketing strategy, this business cannot prosper. So you’ll need to come up with effective marketing strategies to sell your palm oil fast.
Usually, as a distributor, your customers would be retailers amongst market sellers, and sometimes housewives (big families). Therefore, you’ll need to go to the market and connect with retailers, offer them the best prices, and if possible a flexible means of transportation to make them loyal.
How to Succeed in Palm Oil Business
Now that you’ve completed all the steps in starting a palm oil business in Nigeria, I believe you’ll be hyped and want to start right away! Of course, you can! But to gain the most out of this post, we have some tips for you if you want to make the most out of the business.
The following are some tips to make your red oil business a success.
1. Know When to Buy and When to Sell: As I said earlier, the palm oil business is like the US stock market, you can buy low and sell high.
In this business knowing when to buy is very essential, as you can buy at the lowest price ever, and if you’re very patient, you can resell at the highest price after just a few weeks or even days.
In Nigeria, there are some seasons where there is palm oil scarcity, so just try to figure out when the goods are cheap, buy and resell when there is scarcity, as the price will be extremely at its peak.
2. Cut Your Cost: The second tip that will help a lot if you’re looking to start a palm oil business in Nigeria is cutting your cost.
This includes the cost of transportation. You don’t need to hire a whole van for yourself alone, as you can partner with others to shoulder the cost of transportation.
Palm Oil Business in Nigeria – FAQs
Is palm oil a good business in Nigeria?
Yes, the palm oil business is good in Nigeria, as there is lots of money to be made there.
Is palm oil a profitable business?
Yes, the palm oil business is profitable, as you can make up to 150% ROI within just a few months.
How profitable is palm oil production in Nigeria?
Palm oil production is profitable in Nigeria, as you can make up to 100% ROI and even more especially if you own a palm tree plantation.
What are the risks involved in the palm oil business in Nigeria?
Although palm oil hardly gets spoiled, the risks involved include rapid depreciation, leakage of kegs, theft, and risk of transportation.
Where to buy palm oil in bulk in Nigeria?
The best places to buy palm oil cheaply in bulk include Ondo, Imo, Abia Kogi, Delta, Bayelsa, Akwa Ibom, Cross-Rivers, and Rivers State.
Starting a palm oil business in Nigeria can be a profitable and rewarding venture if you plan well and execute effectively. You can also leverage the opportunities and support provided by the government and other stakeholders to grow and scale your business. However, you should also be prepared to face the risks and challenges that come with any entrepreneurial endeavor.