COST OF SETTING UP A PALM OIL MILL IN NIGERIA
In this article, we will gain insight into what palm oil really is, its value, uses and then what it takes to set up a palm oil mill in Nigeria. But first, let’s describe the product.
Palm oil is the oil gotten from oil palm, (Elaeis guineensis), a tree in the palm family (Arecaceae). The oil palm tree is most common in the following countries: Nigeria and other West African countries, Indonesia and Malaysia. In addition, the production of palm oil is high in the aforementioned countries plus Honduras, Thailand, Brazil, Columbia, Cote d’Ivoire, Ecuador and Papua New Guinea.
Asides from using it for cooking, palm oil is useful in the production of soap, cosmetics, biofuels, coating of iron plates etc.
In 2010, Nigeria recorded the highest growth in oil palm, which led to an increase in palm oil production. Over the years, from 2010 to 2021, the palm oil production level of Nigeria has greatly risen to more than 1,200 000 metric tonnes as of 2021, making Nigeria one of the leading countries in palm oil production in the world.
Considering the monetary benefit of the product, the local price of a 25-litre gallon of palm oil ranges from 18,000 naira to 25,000 naira. On the other hand, in the global market, in 2021, one metric tonne of palm oil sold for $975, equivalent to over N400,000.
Requirements For Setting Up A Palm Oil Mill In Nigeria
- A well-situated space
It’s a no-brainer that the very first requirement is a suitable space to set up the plant. This is where all the activities of the business will be taking place. However, some factors must be considered before choosing a location: the space should be close to the oil palm plantation, easily accessible with good terrain, and enough space for trucks that will convey the product.
- Adequate and regular water supply
The milling process requires large volumes of water, whether for washing the fruits and equipment or cooking them. Instead of depending on public water supply or buying water, the best option is to sink a borehole within the premises to ensure adequate water supply.
- Good quality equipment
If you want to optimize palm oil production in your mill, then you need the help of machines. The machines you need are those used for threshing, boiling, pressing and clarification. Depending on manual labour will lead to inefficient and minimal output with the tendency of wastage. The production output will depend on the size of the mill. Smaller mills will yield 1 tonne of palm oil a day whereas medium-sized or large ones can produce up to 10-100 tonnes per day.
- Skilled workforce
Again, the size of your mill will determine how many hands you will hire. That means the bigger the mill, the more skilled workers and labourers you need. You will need the services of manual labourers in moving palm fruit from one location of the mill to another and unto the machine. It is important to hire trained staff or to train unskilled ones.
You will also need to hire a mechanical engineer who will see to the maintenance of the machines to ensure optimal operations. A quality control staff from the chemical science profession should also be on the ground to determine a standard quality palm oil.
There are different palm oil production machines available in the market. You can go for the one that best suits your budget and production needs. Below is a list of some of them and their prices.
|Oil Press Machine||Automatic Physical Extractor, Organic Rapeseed Expeller is a multi-function machine||₦98000 — ₦150,000|
|Electric Automatic Small Oil Press Machine||Stainless Steel Oil Extractor||₦150,000 — ₦200,000.
|Red Palm Oil Refining machine||High-Efficiency||₦617,100 — ₦2 million|
|Palm Oil Processing Machine||Industrial Palm Oil Extractor||₦500,000 — ₦1.2 million|
|Oil Palm Machine Extractor||High-Quality Stainless Steel Coconut Oil Expeller and Mini Oil Press||₦316,800 — ₦520,000|
|Nigeria Mini Palm Oil Processing Machine||local processing machine to make palm oil||₦360,000 — ₦840,000
|Multifunctional Palm Oil Processing Machine||Palm Fruit Processing Machine/Palm Oil Refinery Machine||₦1.1 million and ₦3 million
|Small Palm Oil Filter Press machine||Small Capacity Food Grade Hydraulic Filter Press||₦403,000 — ₦450,000|
|Small scale palm oil refining machine||High-efficiency /edible oil refining machine||₦822,000 — ₦1.3 million
|Automatic Small Palm Oil Processing Machinery||Mini Oil Mill||₦2.7 million — ₦3.5 million
By way of illustration, let’s find out what it will take to set up a 10-tonne capacity palm oil mill. The table below shows the items, their descriptions and prices.
|10 ton capacity mill||Production capacity= 10 tonnes, including boiler, thresher and all the other necessary machines.|| 3,500,000
|Diesel Generator||16KVA power generator.||650,000
|Borehole||Makes adequate clean water available for the daily activities in the mill. It is powered by an electric pump and channels water to a storage tank from where water is gotten for use.||350,000|
|Plot of Land||1,000,000
READ ALSO: PROCUREMENT COMPANIES IN NIGERIA
What Can You Make From Your Palm Oil Mill When It Starts Operation?
The purpose of setting up a business is basically to make a profit. Having invested or even before you invest so much money into starting up a mill, you should be able to make a probable projection of the level of profit you can make from the business. Let’s see below.
One tonne of palm oil sells for around N173,000. In that case, 100 tonnes will be sold for N17,300,000. Now let’s calculate the expenses you will incur at the initial stage of commencement of the mill.
- Purchase of palm fruit — ₦5,500,000
- Diesel — ₦700,000
- Transportation — ₦250,000
- Staff salary — ₦1,500,000
- Running cost — ₦750,000
Total expenditure — ₦3,200,000
Subtracting the expenses from the gross profit: ₦17,300,000 – ₦3,200,000 = ₦14,100,000
Further subtracting the cost of setting up the mill:
₦14,100,000 – ₦5,500,000
Your expected profit of ₦5,500,000 is proof that the palm oil production business is lucrative. However, if you want to enjoy the benefit of its high profitability, you need to invest sufficient capital.
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