Investing in a Palm Oil Plantation Business

Palm oil is native to West Africa. Nigeria used to be the world's largest producer of oil palm before the oil boom era, but Malaysia has now taken the leading position. Oil palm plantation and allied industries is now the main stay of the Malaysian economy. The palm tree can be used in various ways: the leaves are used in making brooms and for roofing materials (in the rural areas). The bark of the fond can be peeled and woven into baskets, the main trunk can be split like sawn timbers and used as part of building materials, while palm wine can also be obtained from the palm tree, as well as red palm oil, which is readily obtainable from the fresh fruit bunches.

When the fruit is processed, however, the residue obtained can be used as fuel (for cooking and fertilizer to improve soil nutrient).

Red palm oil is used in cooking, making soap, candle and margarine. Palm kernel oil can be extracted from the nut, while the residue obtainable in the process of palm kernel oil extraction, otherwise called palm kernel cake, is used as livestock feed.

Palm kernel oil is used in vegetable oil and soap making, and the shells are useful as energy source. The uses to which oil palm can be made seem non-exhaustive. This clearly indicates that investment made in the establishment of oil palm plantation is nothing but a wise one.

The market is guaranteed for all the products of oil palm plantation in this era of global food crisis.

Technical Information

To establish palm oil plantation, involves getting a good site where rich, well-drained acidic soils are abundant. The soil should have adequate quantities of potassium, magnesium and nitrogen. Soil tests should therefore be carried out to determine the nutrient status of the land. It is usually better to use the early maturing variety called 'tenera,' which bears fruits as from the fourth year.

Other requirements include seedlings procurement, which can be obtained from reputable nurseries. Prospective investors must engage the services of agricultural experts in the course of establishing this project.

Other cultural practices are planting, regular weeding, pruning and fertilizer application.

Financial Aspect

We are recommending 50 hectares for a start. 20 hectares oil palm plantation can conveniently service a palm oil mill that will be established by the owner when the plantation starts to bring fruit. To establish 50 hectares of plantation, the sum of N10, 500,000 will be required and this is broken down as follows:

Pre-investments: N300, 000
Land acquisition: N4, 000,000
Land clearing/preparation: N3, 000,000
Seedlings procurement: 120/ha(2400 @ N500): N1, 200,000
Other cultural practices @N100, 000/ha: N2, 000,000
Total N10, 500,000

Income Analysis

A mature plantation will start to give an investor five tons of red palm oil annually from the fourth year per hectare. 100 metric tons of oil can be obtained annually from 20 hectares of plantation.

A ton of red palm oil is a minimum of N150, 000, while gross revenue of N15 million is obtained from red palm oil.

We can also get three metric tons of palm kernels per hectare, which gives us 60 tons from 20 hectares. This translates to annual income of N4.2 million. Total income realisable is about N19.2 million, while the annual operating expense is put at N5.8 million.

This leaves us with net income of N13.4 million annually for the investor for the rest of his/her life. Serious-minded investors can be assisted in realising this worthwhile investment.