Requirements of marketing high quality palm oil in cities
Business opportunities in palm oil in Nigeria are quite many. From kernel to refined oil, the palm produce industry has empowered millions of small-scale farmers and middlemen marketing such.
It is estimated that palm oil makes up almost 50 per cent of edible oils consumed in Nigeria. Apart from being a popular ingredient in African food, it is also used as skin moisturiser, dietary supplement because of high beta-carotenes (Vitamin A), bio-fuel and many more.
At present, it has become the second most traded crop oil crop in the world after soya, with Nigeria being the fourth largest producer after Indonesia, Malaysia and Thailand.
In Nigeria, palm oil is widely consumed mainly for food purposes. The demand for the product domestically is on the increase, and this usually escalates in festive periods.
The surging demand, obviously a derived demand connected to the rise in the population and the demand for more foods, is most likely to continue for a very long time, with intermittent scarcity of the product.
Its production is not elastic; that is, not immediately responding to surges in demand. It takes three to four years to start harvests from highly improved varieties.
In a nutshell, there are business opportunities around the product from production to marketing.
Most city and semi-urban dwellers in Nigeria have developed a life-long taste for red palm oil, and this definitely presents packaging and marketing opportunities for Nigerians.
Why palm oil marketing?
Palm oil business, considering the large number of Nigerians consuming it, is what can sustain an innovative and hard-working entrepreneur in the city. Lagos for instance, being the hotbed of most of fresh farm products in Nigeria, is now a huge market because of the growing population as a result of increasing rural-urban migration.
Other major cities, state capitals especially, also witness daily influx of rural migrants. All of this presents a business opportunity for youths, women and wealth seekers through honest means. Palm oil marketing is one of such honest means.
How sustainable is palm oil marketing?
Justina Okpara, a trader in the Oyingbo market, revealed to The Guardian that a drum of palm oil could be sold at two to three times its sourcing price at the right time.
“Palm oil is usually very expensive during festival periods like Christmas and Easter,” she explained.
The best period, as she said, to procure the product in large quantity and at reasonable price is from February to June. This is so because palm plantations are harvested in the producing areas starting from February, immediately after the harmattan. The harvest of palm fruits climaxes in May, while the products are readily and cheaply available till June. The price of palm oil rises steadily from June upwards.
However, there is always a price differential between the producing area and the city regardless of the period of procurement.
Okpara added that she had been doing the business for 20 years and had been able to sustain her family through it.
Another trader in Mile12 market, Waziri Sani Zafari, who sells wholesale, disclosed that it is a demanding business to run as he always has to travel out of Lagos to other states to bring the oil.
Start-up capital requirement
Starting a business requires adequate capital. To start a palm oil trading business, the required start-up capital depends on the scale one intends to start. Operating a small-scale but standard palm oil business with the capacity to sell to retailers in Lagos or other states will require from N200,000 to N1 million, according to Zafari, who sells palm oil at Mile 12 market in the Lagos cosmopolis.
Other things required, apart from the running cost, are plastic containers for storing the products and smaller kegs (25-30ltr) to sell to retailers.
Where to get quality palm oil in Nigeria
Naturally, palm trees do survive in the rain forest ecologies. Therefore, they are planted in the south-western and eastern Nigeria, as well as in the Niger Delta regions.
Specifically, palm oil is abundant in Enugu, Imo, Ondo, Edo,, Ekiti, Cross River, Delta, Akwa-Ibom, Bayelsa, Anambra, Oyo, Abia and Ogun states, and these are considered to be the largest producers of palm oil.
Palm tree plantations are spread over an area estimated to range from 1.65 million to 2.4 million hectares. The estimate of palm tree plantations in Nigeria ranges from 169,000 hectares (72,000 hectares of plantations property and 97,000 hectares of small plantations) to 360,000 hectares of plantations.
The palm fruits are processed in small factories located in rural areas by farmers, packaged in barrels and then transported to the market for sale.
“I source my oil mainly from Edo, Akwa Ibom, Delta and Bayelsa, but my customers usually insist that the palm oil produced in Edo is the best. Regardless of that, we just buy the oil, so far it is good,” Zafari said.
Palm oil has a long shelf life and can be stored at room temperature. The preferred temperature for palm oil is 30 degree Celsius. It is best stored in a neat and tightly closed gallons or drums, and placed on pallets or on a wooden floor.
“If you place the gallons or drums of oil directly on the floor, it will cause it to solidify and this will result in quality and quantity reduction of the oil,” Zafari added.
Marketing and sale
A critical phase in the palm oil value chain is getting the product to the end users, which includes branding; securing an accessible outlet or store in a strategic location and possibly, an online platform where one can reach more potential buyers.
A good brand design communicates the product; it creates an easy explanation of what the product is about, and enhances credibility and ease of sale.
Fred Emeka, a branded shop owner at Illasa, said some people like to buy branded products because they believe it is trusted.