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Finding Your Place In The Palm Oil Business

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Mr. Godwin Emefiele, Governor of the Central Bank of Nigeria, has outlined the apex bank’s plan to develop a sustainable financing model to boost the production of palm oil.

At a meeting with Governors from the South-East and South-South palm oil producing states, on Monday last week, Emefiele said the Bankers’ Committee has created a special sub-committee to introduce measures to enhance access to capital by smallholders in the palm oil value chain.

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The scheme will disburse loans to identified core borrowers, at not more than nine percent interest rate per year, through the CBN’s Anchor Borrowers Programme (ABP) and Commercial Agriculture Credit Scheme (CASC).

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Lamenting that Nigeria spends $500 million yearly on importation of palm oil, despite its inclusion in the foreign exchange exclusion list, Mr. Emefiele says: “We intend to support improved production of palm oil to meet not only the domestic needs of the market, but to also increase our exports in order to improve our foreign exchange earnings.”

Noting that in the late 1950s and 1960s, Nigeria was the world’s leading producer and the largest exporter of the product, with 40 per cent market share, Emefiele moans: “Today we are a distant fifth among leading producers of palm oil. We barely produce up to three per cent of the global output with an estimated production of 800,000 MT while countries like Malaysia and Indonesia produce 25 million and 41 million tonnes.”

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The goal of the CBN initiative is to enable Nigeria emerge as the third largest producer of palm oil in the world, after Malaysia and Indonesia. To this end, each state government in the South-East and South-South has agreed to provide at least 100,000 hectares for palm oil production.

Now that the CBN has removed the financing hurdle, it is time to explore the opportunities open to Small Business Owners who have the education, training, experience or interest in agribusiness, and desire to participate in the palm oil value chain.

While there is a wide range of options for entering the palm oil business, a few pointers will provide ideas on where to devote your energy, time and resources:

  1. Palm Oil Plantation: This requires the purchase of large hectares of land, with soil tested and adjudged suitable for cultivation of palm trees.

Thanks to improved seedlings, palm trees can now be planted and harvested within three to five years.

As a plantation farmer, you can set up a mill to extract the palm oil, or sell the palm oil fruits to mill owners for processing.

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  1. Palm Oil Processor. As a palm oil processor, you will set up a palm oil processing mill with machines for extracting oil from the palm oil fruits harvested from your plantation.

You can also run your processing factory on a commercial basis, by renting time on your machines to third parties who will pay a fee for each time they bring their palm oil fruits to your milling machines.

You may also wish to set up shop solely for the purpose of processing palm oil. You will not need to own a palm oil plantation, and you will not need to mill palm oil fruits for third parties. In this case, you will procure raw palm oil fruits from farmers and any other sources, process the palm oil fruits, and sell the palm oil and by-products to end users.

As a processor, your processing mill must be situated in a location in or near a palm oil producing area. It must also be close to major road to ease evacuation of products.

  1. Palm Oil Trader. This is the fast track to making money in the palm oil business. The palm oil trader is simply involved in the buying and selling of palm oil. What many palm oil traders do is to buy large quantities at low prices during the peak periods of production, warehouse the product for long periods, and sell at higher prices during the off-peak period of low supply to the market.

The palm oil trader can decide to sell to local users or package the product for the export market. The challenge for the palm oil trader is to find sources of local supplies, and find buyers in the local and foreign markets.

  1. Support Service Provider. Should you decide not to enter the palm oil business through any of the aforelisted activities, you can choose to be a support service provider. You can provide consulting services on different aspects of the palm oil business. You can design and manufacture equipment and machines for production of palm oil and its by-products. You can assist plantation owners with equipment for preparation of land, supply of improved and high-yield seedlings, or pest and disease control services.

There you are. With funding assured by the CBN, it’s left for you to decide where and how you want to go.

If you need help in realising your idea of linking into the palm oil value chain through the CBN scheme, visit the SME Clinic at https://smefinance.org/sme-clinic/

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