Establishing and Operating An Oil Palm Plantation and Processing Plant in Nigeria; The Feasibility Report.

Oil palm is also an essential food item. About ninety percent (90%) of the palm oil produced ends in food products, while the remaining ten percent (10%) is used for industrial production. As a result of its many uses demand is growing fast as the world’s population increases and standards of living rise.

Production of palm oil is more sustainable than other vegetable oils. It consumes considerably less energy in production, uses less land and generates more oil per hectare than other leading vegetable oils — rapeseed, Europe’s leading oil, or soybeans.

Oil palm is a typical crop of the rainy tropical lowlands. The tree requires a deep soil, a relatively stable high temperature and continuous moisture throughout the year. Soil fertility is less important than physical soil properties. The plants are raised in Nurseries where proper care is given to the seedlings.

The seedlings spend one (1) year in the nursery before been transplanted to the field. Oil palm is planted in the main field in the triangular system at spacing of nine (9) meters accommodating one hundred and forty (140) palms per hectare. Planting is preferably done at the onset of rainfall during May-June. The first harvest can be taken three and half to four (3.5 – 4) years after planting.

The Nigerian oil palm belt covers twenty-four (24) states, including all nine states of the Niger Delta. The Niger Delta’s nine (9) states account for about fifty-seven percent (57%) of total Nigerian palm oil production. Eighty percent (80%) of production comes from dispersed smallholders who harvest semi-wild plants and use manual processing techniques.

Several million smallholders are spread over an estimated area ranging from one million, six hundred and fifty thousand (1,650,000) hectares to two million, four hundred thousand (2,400,000) hectares and to a maximum of three million (3,000,000) hectares.

The estimate for oil palm plantations in Nigeria ranges from one hundred and sixty nine thousand (169,000) hectares (seventy-two thousand (72,000) hectares of estate plantations and ninety-seven thousand (97,000) hectares of smallholder plantations) to three hundred and sixty thousand (360,000) hectares of plantations.

In the 1950s and 1960s, Nigeria was a leader in the world palm oil market. The production of palm oil exceeded the domestic consumption and the excess was exported to the world palm oil market.

However, during the past decades, the country has become an importer of palm oil. While in the early 1960s, Nigeria’s palm oil production accounted for forty-three percent (43%) of the world production, nowadays it only accounts for seven percent (7%) of total global output.

Nigeria is now a net importer of the product. Nigeria produces only one million, three hundred thousand (1,300,000) metric tons of vegetable oil and imports over three hundred and fifty thousand (350,000) metric tons of vegetable oil annually, expending an average of the naira equivalent of USD 500 million in foreign exchange.

World demand for vegetable oils is rising sharply, from one hundred million (100,000,000) tons in 2005 to an estimated one hundred and fifty million (150,000,000) tons in 2020, as the world population continues to grow and the standards of living increase in many developing countries.

The role of oil palm as a supply of relatively inexpensive and versatile edible oil is, therefore, expected to become ever more prominent.

In a further bid to encourage local production of palm products to satisfy local demand, importation of bulk crude and refined vegetable oil was prohibited in 2005.

In response to this ban and consequently increasing demand for local product, there has been some increase in private sector investments in the development of new oil palm plantations and the expansion of existing ones. Smallholdings and out grower schemes were also being promoted by the Federal and State Governments.

Palm oil forms an important part of the local diet in Nigeria because animal fats such as milk and butter are hardly consumed. It is used both as a cooking material and as an ingredient in soups, sauces and a variety of local dishes.
The demand for Palm Oil is high because it is consumed every day in almost every home in Nigeria mainly for cooking purposes.

Palm oil is one of the few highly saturated vegetable fats and is semi-solid at room temperature. Like most plant-based products, palm oil contains very little cholesterol.

Palm kernel oil (PKO) is an important and cheap source of oil for soap manufacturers, bio-fuel, cooking oil, vegetable ghee, Shortenings, Margarine, cocoa butter equivalent (CBE), cocoa butter substitute (CBS), ice cream, dough, creaming, coating, and other specialty fats while palm kernel cakes are used in animal feed production.

The market for Palm Kernel Oil (PKO) is very large. About eighty percent (80%) of all the edible vegetable oil consumed in Nigeria is made from refined palm kernel oil.

In Nigeria, the major buyers of palm kernel oil are vegetable oil refineries and soap making companies and our focus would be on vegetable oil refineries and soap making companies. We shall narrow down to vegetable oil refineries since their demand is far above supply.

It is estimated that only about seventy-five percent (75%) of the demand for palm kernel oil by local vegetable oil refineries and soap making companies is being meet in Nigeria.

Extensive market research has revealed that palm oil, palm kernel oil (PKO) and palm kernel cake are everyday goods used by individuals as well as Industries. Thus, the market is ongoing and is not dependent on economic cycles and can be described as a fast-moving consumer goods (FMCG) commodity market.

The company seeks to examine establish a three thousand, two hundred (3,200) hectares oil palm plantation with three thousand (3,000) hectares used for the cultivation of oil palm while two hundred (200) hectares is used for farm demarcation, office, hostel, cafeteria and civil construction.

The company would also establish a crude palm oil (CPO), crude palm kernel oil (CPKO), palm kernel cracking plant as well as a palm oil and palm kernel oil refinery plant.

The plant would comprise of two (2) units of thirty-six (36) tons per day of crude palm oil plant, three (3) units of twenty-four (24) tons per day palm kernel nut cracking plant, one (1) unit of six (6) tons per day crude palm kernel oil plant, eight (8) units of five (5) tons per day crude palm oil refinery plant (batch type) and one (1) unit of five (5) tons per day crude palm kernel oil refinery plant (batch type).

For refineries less than one hundred (100) tons per day capacity, the batch type is used while for refinery of one hundred (100) tons per day and higher the continuous type is used. With continuous type of refinery, the plant would be able to recover the palm fatty acid distillate (PFAD). Palm Fatty Acid Distillate (PFAD) contains a very high free fatty acid level and is mainly used by the quality soap industry. Palm Fatty Acid Distillate (PFAD) is obtained as a by-product of the refining process.

Table of Contents

EXECUTIVE SUMMARY 1.0 Business Overview 1.1 Description of the Business 1.2 Vision and Mission Statement 1.3 Business Objective 1.4 Value Proposition 1.5 Critical Success Factor of the Business 1.6 Current Status of Business 1.7 Description of the Business Industry 1.8 Contribution to Local and National Economy 2.0 Agricultural Practice 2.1 Nursery Raising and Planting 2.1.1 Collection of seeds 2.1.2 Seed germination 2.1.3 Raising seedlings 2.1.4 Planting 2.1.5 Manures and Fertilizers 2.1.6 Weeding 2.1.7 Leaf pruning 2.1.8 Irrigation 2.1.9 Harvesting and Yield 2.1.9.1 Method of harvesting 2.1.9.2 Yield 2.2 Factors of Production/ Cultivation 2.2.1 Soil Type 2.2.2 Seedlings 2.2.3 Climate 2.2.4 Fruits 2.2.5 Diseases and Pests 3. Marketing Plan 3.1 Description of product 3.2 Product Packaging and delivery 3.3 The Opportunity 3.4 Pricing Strategy 3.5 Target Market 3.6 Distribution and Delivery Strategy 3.7 Promotional Strategy 3.8 Competition 4. Production Plan 4.1 Description of the Location 4.2 Raw Materials 4.3 Production Equipment 4.4 Production Process 4.5 Production Cost 4.6 Stock Control Process 4.7 Pre-Operating activities and expenses 4.7.1 Operating Activities and Expenses 5.0 Organizational and Management Plan 5.1 Ownership of the business 5.2 Profile of the promoters 5.3 Key Management Staff 5.3.2 Management Support Units 5.4 Details of salary schedule 6. Financial Plan 6.1 Financial Assumption 6.2 Start - Up Capital Estimation 6.3 Source of Capital 6.4 Security of Loan 6.5 Loan Repayment Plan 6.6 Profit and Loss Statement 6.7 Cash flow Statement 6.8 Viability Analysis 7.0 Business Risk and mitigation factor 7.1 Business Risks 7.2 SWOT Analysis

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