Hey Fellow Agricultural Enthusiasts!
Today, I’m excited to share one of my favourite business opportunities: the palm oil business. Why am I so passionate about this? Well, this business saw me through university, and I’m hoping that anyone out there looking for a side hustle or a way to make ends meet might find some useful tips in what I'm about to share.
As my dear friend Ebi always says, “Las las, everybody must chop.” As long as there are humans on this planet, investing in agriculture is almost a guaranteed way to see a return on your investment. Palm oil, for instance, is indispensable. The average Nigerian household uses at least 1 litre of “red oil” every month. How much is a litre of “red oil” in your area now? With Nigeria’s population hitting 250 million, that’s a lot of households demanding this product. And it’s not just for cooking – palm oil is used in cosmetics too, like your bathing soap and washing soap.
Just to get your brain calculating, the Nigerian palm oil market is valued at around $500 million with an annual growth rate of 3-4%.
Now, you might be thinking, “But I can’t own a plantation,” or “I can’t rent a store to start selling palm oil.” Well, you don’t have to! Here’s how I did it back in university and made enough money to support myself.
I used to buy palm fruits from local farmers and paid some ladies who knew the business to process the fruits into oil. While this was profitable, I wasn’t a fan of constantly negotiating with different people. So, I switched to a fixed-cost contract approach. I’d buy directly from mills before the sellers took their gallons to market. This way, I got a fairer deal and saved the sellers the hassle of transport. Initially, I made a small profit (about N1,000 to N2,000 per gallon), but I discovered that storing the oil for a few months increased my profit to N7,000 to N10,000 per gallon. Buying in bulk at the beginning of the farming season when prices were lower and selling in November or December when prices doubled became my new strategy. In nine months, I was making almost a 100% return on investment.
There are major players in this sector like Okomu Oil Palm Company, Presco PLC, and small farm holders, yet the market is far from saturated. Most of us don’t have a branded bottle of palm oil in our kitchens right now, which means there's plenty of room for new businesses. During my service year, I observed that the westerners were even doing this business on a larger scale, every market day, lots of trucks filled with gallons of palm oil left the local market for the Northern part of the country and even outside Nigeria.
You can enter this business in several ways: own a plantation (if you have the land and financial means), follow my method (great if you have limited capital), or partner with someone experienced. For those who prefer a hands-off approach, consider buying shares in one of the major market players.
Of course, every business has risks. The insecurity in the country and economic fluctuations can make this business challenging. But with proper risk mitigation strategies, you can turn this opportunity into a profitable venture.
Farm Allianz is here to guide you. Shoot us an email with your questions and concerns, and we’ll do our best to help. If we can’t, we’ll connect you with a farmer in our network who can.
It’s been amazing sharing this opportunity with you. Until next time, stay safe and keep exploring!
