We’ve seen lots of entrepreneurs jumping on the trend to increase their income. Yes! It’s a lucrative business to venture, but you should remember, there are always two sides to a coin. Before giving it a head start, it’s better to understand the potential risks in the palm oil business in Nigeria.
The current biggest problems facing the Nigerian palm oil business include fluctuation in market prices, storage challenges, sustainability concerns, competitions among entrepreneurs and insufficient financing.
1. Fluctuating Prices
It’s almost very difficult to predict the price of palm oil in the current market as prices are always never stable and might turn out against you if property readings are not carried out.
For many entrepreneurs in the palm oil industry, buying and stocking red oil is the surest way to make profit, but the outcome to this is not always positive.
To successfully profit from selling palm oil in Nigeria today, a keen understanding of current economic factors, climatic conditions, political influences, market demands and geographical variations (location) that impact foodstuff prices is crucial.
These factors must be put into consideration if the sole aim of indulging into the business is to make profit.
2. Storage Challenges
Storage challenges often come with the desire to buy and store palm oil until when it is deemed profitable to sell. While this approach seems to be promising, it’s actually an unnoticed risk in the palm oil business in Nigeria.
Palm oil stored for a very long time can lose quality if not stored properly. In most cases, it ferments, leading to a change in taste and a subsequent decrease in value on the market.
Furthermore, the cost of storing palm oil can be significant compared to the potential profit margin. For example, a single container keg can cost around NGN 1,500. If you purchase 100 empty kegs, that’s an upfront investment of NGN 150,000. This cost can easily turn into a loss if proper storage facilities are not available.
3. Competition
The palm oil business is very competitive and there may be many other businesses selling palm oil in your area. This can make it difficult to find buyers for your product if you’re just staring.
To bypass this risk, get your customers all set before you indulge in the palm oil business. You should actively engage in pushing your business to the forefront by advertising your products with specific values.
Put-up banners in your locality to attract more customers to yourself. Add freebies to increase your customers.
4. Sustainability Concerns
A notable threat to the palm oil industry is sustainability concerns and the government is actively addressing them. These concerns include deforestation, environmental damage, and social issues.
Large-scale palm oil production can lead to a significant loss of biodiversity and habitat destruction. There are also concerns about land rights and fair treatment of workers, especially in smallholder plantations.
Consumers are increasingly interested in sustainable products, and businesses that cannot demonstrate sustainable practices may struggle to survive. All these factors are a challenge to the palm oil industry in Nigeria and it should be kept in check if high profit margins are expected.
5. Palm Oil Transportation Crisis
Due to the recent surge in fuel prices in Nigeria, the palm oil industry faces a potential risk that could disrupt the flow of palm oil to final consumers.
Limited storage capacity caused by these transportation problems could slow down production at mills and farmers may also see reduced income due to spoilage of their palm fruits.
This scenario could lead to a price hike for red palm oil without any added value, potentially causing customers to switch to competitors who can adapt to the market changes.
Conclusion
These risks discussed here are an eye opener to entrepreneurs seeking to start a palm oil business in Nigeria. By staying informed about current events and industry reports, you can gain a deeper understanding of the potential challenges and opportunities within the Nigerian palm oil industry.
Here’s a detailed video to help you understand the risk involved in the Nigerian palm oil industry
