MARKET OPPORTUNITY IN THE NIGERIA CRUDE PALM OIL SECTOR
What does ice cream, pizza dough, animal feed, shampoo and bio-fuel have in common? Palm oil. The oil palm fruit has become a critical ingredient in food and beverages, skincare, cooking oils and recently bio-diesels. This small unassuming fruit has gained global prominence and usage for its versatility and durability
The efficiency of the oil palm compared to other oils has also bolstered the interest and demand for the fruit. A hectare of oil palm is expected to yield 5 tonnes, by comparison soybean has a yield of 2 tonnes per hectare, while rap-seed has a yield of 0.8 tonnes per hectare. The efficiency, versatility and durability of the product has led to increased demand globally. Oil palm production has jumped ten times in the space of 20 years.
In recent years, the production and processing of oil palm farming has come under scrutiny due to environmental concerns, and the US-China trade war. There have been negative concerns due to the amount of deforestation undertaken to produce the oil palm, and tariffs on the commodity by both the United States and China has led to fear of a slowdown in demand. This has not happened. The results of demand in the first quarter of 2019 has remained strong and with talks of an end to the trade war, demand is expected to continue its steady growth.
INCENTIVES ABOUND FOR ENTREPRENEURS OPERATING IN THE MARKET
Palm oil is an important commodity to Nigeria. It currently produces a little over 1 million metric tons of palm oil annually. The export of this commodity has become the second largest foreign exchange earner for the nation. Even yet, the total production has not been able to keep up the nation’s growing need. Nigeria uses the oil palm for cooking, animal feed, skin care and even making drugs. There is a mismatch domestically between production and demand.
Organizations have been exploiting this gap to generate remarkable revenue growth. Two of the largest oil palm farmers and producers, Okomu Oil and Presco Oil are good examples. The revenue generating capacity of this firms continue to rise year-on-yeat. Both firms have seen increased revenue through Nigeria’s recession and foreign exchange decline. This has research analysts outlining their stocks with STRONG BUY sentiments.
Cheap loans and readily accessible land are the major incentives put in place by the government to encourage upcoming entrepreneurs. With a rising need to diversify the revenue sources of the country, the Central Bank of Nigeria (CBN) has decided to provide single digit interest for the oil palm market. In addition to this, the South East and South West regions in the country have earmarked a combined land area of a hundred thousand hectares for farming the produce.
Small-scale entrepreneurs account for 95% of overall oil palm produce, hence the possibilities are numerous. For new entrants with deep pockets, the possibilities of introducing modern agricultural techniques to drive up crude palm oil production, revenue and profits are exciting opportunities. Smaller entrants also have the possibilities of available lands, cheap finance and training to operate in a profitable market with governmental support.
The truth is, if you’re searching for a supplementary source of revenue or looking for new business prospects, the Nigerian crude palm oil market is an interesting prospect to consider.
