Palm Kernel Oil Processing, Business you can start  with less than N100,000

A local separating palm kernels from chaffs

By OBINNA EZUGWU

Often many Nigerians ask: what business can I start with N50,000 or N100,000? The answers are often familiar. Sell food items, open a barber shop, start food vendor and the likes. Fair enough, people have made good living doing those.

But very few have thought about things extraordinarily different like palm kernel oil extraction, and not even the preponderance use of vegetable oil in households has prompted such inquiries. Here, you will learn from those who ply the trade at Emene, a suburb of Enugu, capital city of Enugu State, some of who have made a fortune of it, controlling from a few millions of naira to quite substantial amounts. A significant number started small, often with less than N100,000. Like in all business, it’s about discipline and making the right choices.

“It’s a business you can start with N70,000, and make it big if you are serious,” said Mr. Sunday Eze who operates in one of the crushing cites. “But it depends on how you want to start. You can start big too. You could buy your own crushing machine, which is about N1.5 million for the locally fabricated ones, and about N10 million or more for imported ones, which are more efficient.

Starting small however, means embarking on what is called mobile crushing. This is a pattern where you pay owners of machines N1500 per drum of palm kernels.

The trade basically involves buying palm kernels and extracting both the oil contents and the chaff for sale to vegetable oil producers and livestock farmers respectively.

“It all depends on how much you can afford to start with. But usually, the least the crushers can accept to crush for you is one drum (of palm kernel) which is about N50,000,” Mr. Eze explained. “So, really, you can start with about N60,000, but you have to take time to learn the tricks otherwise you lose your money.

“There are people here who started with one drum, but today, they are made. But for you do that and succeed you must be part of the system for sometime, probably work as a labourer for a month or two to learn the tricks. Mistakes are common for those who jump into it.”

The production process starts with purchase of palm kernels which are sold in many local markets. Once that’s done, extraction begins. First with toasting of kernels in a machine called toasting machine. The essence of toasting is to dry water contents from kernels. Toasting lasts for a couple of minutes after which you allow the kernels to cool for about two hours before proceeding with the crushing machine.

The crushing machine is configured in such a way that you extract four products: the chaff, sludge cake, sludge oil and the main kernel oil, none of which is really a waste.

“The crushing machine, as you can see, brings out different products from different points. You get four products after crushing,” explained Timothy Onu, owner of one of the ever busy crushing machines at the site. “You get what we call sludge cake, which are particles of the kernel that comes out while the crushing is ongoing.

“There is the sludge oil, which is the sediment of the oil. Then, there is the oil itself, which is the palm kernel oil. Then you have the chaff, which you use to feed pigs and different kinds of livestock, even poultry. All of them are useful and easily sold. From sludge cake, you still get oil after heating.”

The products so extracted are still basically in crude form. They are then sold to manufacturers of vegetable oil who put finishing touches. And the crushers say, buyers are always on the look out.

“Buyers are always at your peck and call, asking if you have materials. They are always here begging you. So, selling is not the problem. Although the major producers (of vegetable oil) crush too, they never get enough. They get our own oil, filter and get their products because they cannot get the quantity they need. They buy from local crushers to augment and meet their target,” Mr. Eze said.

Starting up

For places where there are already crushing sites and markets for products like in Enugu – where there are such sites at Emene, Garki and Holy Ghost – an individual wishing to start up on small budget mobile crushing, simply needs to meet those in the business, probably observe for one month before buying kernels of his own.

“If you want to start mobile crushing, you have to come around, stay around and follow in the crushing,” said Mr. Eze.

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“You can start with one drum, which is about N50,000, and from there, if you have foresight, you can grow gradually to the point that you will be bringing kernels in trucks.

“The cost of crushing depends on quantity. If you have up to five drums, which is one tonne, then you need to toast, which will cost you N1500 for toasting. The toasting is done once and it’s same amount, no matter the quantity. For crushing, each drum is N1500. The cost of production for five drums is N9,000.

“But you may still need to pay labourers, which, for the five drums, may cost you up to N1500 bringing it to total cost of production to N10, 500. The other cost you may also incur is in bringing the kernel to the crushing cite, but generally, you can get everything done with just over N60,000.”

Those willing to start big by acquiring crushing machine may however, just need to make contact with manufacturers of vegetable oil such that they come for supplies. But more importantly, find a good source of the raw material: the kernels.

In buying a machine, two factors are paramount: cost and efficiency. Locally fabricated machines are much cheaper, but at the same time, less efficient in terms of quantity of oil extracted. Foreign machines, often brought in from China, Korea or Japan, are more expensive but at the same time, more efficient.

Profit margin:

From one drum, profit can vary from N5000 to N20,000 or more, depending on a combination of factors. Indeed, a loss is possible. The first determining factor is prevailing market price, this fluctuates with time. The efficiency of machine used to crush is also a factor. A more efficient machine will extract more oil and therefore more profit. Again, there is quality of the kernel itself.

“The type of kernel you buy will determine your margin. If it contains lots of shells, then it’s a problem. There are different types of kernels,” Onu said.

“Overall, your profit is determined by: one, the price of oil in the market, there are changes; two, the kind of kernel you bought; three, the price at which you bought it and four, the efficiency of your machine.

“These are the factors that determine whether you make large profit or small profit. You may crush and lose. That’s why it is important to learn the ropes before committing your money.”

“If you invest N280,000, which is about the overall cost of one tonne (five drums), you may see the money in a week, or you may lose a substantial part of it in a week.

“If you jump into it without learning, before you know the secret of success in the business, your money must have been swallowed up for because you will make mistakes. But along the line, you will learn.

“But it’s better to join the system as an observant labourer. In one or two months, you would have learned. Make market survey, experience market challenges, come back and experience crushing challenges.

Selling challenges

But selling challenges is minimal. The business pays, people are making huge money. Demand for products is always there.”

Challenges

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“The only challenge,” Onu said, “is buying the material, the palm kernel to crush.

“You need to buy it at a good price to be able to make enough profit. But more importantly, you need someone you trust that will not manipulate you. If you make the mistake of buying those that have lots of shells, then it’s a problem. That’s why I said you need to be part of the system before you start.

Start up budget for mobile crushing:

Drum of palm kernel                      N54,000

Cost of transportation:                   N6,000 (estimate)

Cost of production:                          N4000

Total:                                                     N64,000.

Budget for full investment (with machine)

CRUSHING MACHINE

Local:                                                    N1.2 million

Foreign:                                                N10 million

Tonne of palm Kernel (5 drums) N270,000

Cost of transportation                    N12,000 (estimate)

Cost of production                           N10,500

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Total: N1.5 million or N10.3 million