Processing Of Oil Palm Seed (Fresh Fruit Bunch-(FFB)) To Produce Palm Oil And Palm Kernel Nuts In Nigeria; The Feasibility Report.

The Oil palm is as old as creation. Every part of the tree is useful economically and for domestic purposes. It is generally agreed that the Oil Palm (Elaeis guineensis) originated in the tropical rain forest region of West Africa.

The main belt runs through the southern latitudes of Cameroon, Côte d’Ivoire, Ghana, Liberia, Nigeria, Sierra Leone, Togo and into the equatorial region of Angola and the Congo.

In nature, the oil palm exists in two (2) forms. These forms are the thick shelled – Dura and the shell-less – Pisifera. In the groves (where the oil palm trees grow naturally with other vegetation) the Dura palms are found more in number than the Pisifera palms.

The Dura palm has thin mesocarp oil bearing portion of the fruit and the shell-less fruit of the Pisifera palm contains mainly oil and fibre.

Quite often the Pisifera palm is female sterile. A cross of the Dura and Pisifera gives the Tenera variety, which has a thick mesocarp (palm oil bearing mesocarp) with a thin shell. On account of the thickness of the mesocarp and the thin shell, the Tenera variety produces far more palm oil than the Dura variety. Also, because of the high probability of the female sterility, the Pisifera variety is inferior to the Tenera variety.

Therefore, for high productivity of palm oil, the Tenera variety is the preferred commercial variety of the oil palm.

The increase in demand for palm produce necessitated the genetic improvement of the crop, improvement in the methods of cultivation of the crop and ways of tapping its vast potential.

In order to accomplish this, the Nigerian Institute for Oilm Palm Research (NIFOR) was established to provide research and innovation to achieve high and comprehensive productivity to the oil palm growers and processors.
The institute has developed oil palm seedling that starts fruiting in three and half to four (3.5 – 4) years after planting.

Processing oil palm fruits for edible oil has been practiced in Africa for thousands of years, and the oil produced, highly coloured and flavoured, is an essential ingredient in much of the traditional West African cuisine.

The traditional process is simple, but tedious and inefficient. Mature palms are single-stemmed and grow to twenty (20) meters tall. The leaves are pinnate and reach between three to five (3-5) meters long. In Nigeria, it is cultivated in the South East Zone and the Niger Delta areas.

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.

This report examines the financial viability of establishing a crude palm oil (CPO) and palm kernel nuts (PKN) production plant in Nigeria.

The equipment required for production are Debuncher/Stripper, Boiler, Digester, Presser, Clarifier, Evapourator, Holding Tank, Semi-Automatic Filling Machine, Weighing Machine, Palm Kernel Cracking Machine, Generator, Project Vehicle, Wood Pallets and Accessories.

The installed capacity of the proposed capacity of the palm oil plant is two thousand (2,000) litres per day of single shift of eight (8) hours each working at eighty percent (80%) of the installed capacity for three hundred (300) working day producing about sixteen thousand (16,000) packs of five (5) litres of palm oil and ninety-six (96) tons of uncracked palm kernel bi-monthly.

The fresh fruit bunch (FFB) would yield twenty percent (20%) and twenty-four percent (24%) uncracked palm kernel.The investor would also procure and installed a eight (8) tons per day of palm kernel nuts and would operate a single shift of eight (8) hours each for three hundred (300) working day at eighty percent (80%) of the installed capacity, producing three hundred and twenty (320) tons of palm kernel nuts bi-monthly. The plant would source ninety-six (96) tons of uncracked palm kernels internally while the remaining would be sourced from supplier.

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 Critical Success Factor of the Business 1.5Current Status of Business 1.6 Description of the Business Industry 1.7 Contribution to Local and National Economy 2. Marketing Plan 2.1 Description of product 2.2 Product Packaging and delivery 2.3 The Opportunity 2.4 Pricing Strategy 2.5 Target Market 2.6 Distribution and Delivery Strategy 2.7 Promotional Strategy 2.8 Competition 3. Technical Analysis 3.1 Description of the Location 3.2 Raw Materials 3.3 Production Process 3.3.1 Pre-Export Documentations in Nigeria 3.3.2 Post-Export Documentations (Exchange Control Documents) 3.4 Production Cost 3.5 Stock Control Process 3.6 Pre-Operating activities and expenses 3.6.1 Operating activities and expenses 3.7 Project Implementation Schedule 4.0 Organizational and Management Plan 4.1 Ownership of the business 4.2 Profile of the promoters 4.3 Key Management Staff 4.3.2 Management Support Units 4.4 Details of salary schedule 5. Financial Plan 5.1 Financial Assumption 5.2 Start - Up Capital Estimation 5.3 Source of Capital 5.4 Profit and Loss Account 5.5 Cash Flow Analysis 5.6 Viability Analysis 6.0 Business Risk and mitigation factor 6.1 Business Risks 6.2 SWOT Analysis

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