ALEMU INTEGRATED FARMS LTD

PALM OIL PLANTATION

ODHOLU GBOJI,AHOADA-WEST
AHOADA - MBIAMA HIGHWAY

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 FEASIBILITY STUDY FOR THE ESTABLISHMENT OF
AN OIL PALM PLANTATION MILL IN AHOADA WEST
LOCAL GOVERNMENT AREA RIVERS STATE

LOCATION: ALEMU FARMS,

ODHOLU GBOJI VILLAGE
AHOADA-MBIAMA HIGHWAY

CLIENT: ALEMU INTEGRATED FARMS LTD

OWNER: 2, ALEMU CLOSE, TOMBIA EXTENSION,

GRA, PHASE 2, PORT HARCOURT, NIG.
TEL: 083-886314, 08033035822
FAX: 084-464884
E-mail: alemu@kinsegltd.com

Consultants: AIDALAN ASSOCIATES LTD

Team: Bomo Albert-Oguara,Lead Consultant.
Theodore Ogbolu,Associate Consultant.

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TABLE OF CONTENT
1. Executive Summary 5
2. Introduction 6
3. Justification of project 10
4. Objective of report 11
5. Study of scope 11
6. Product/Service Description 13
7. The Promoter 19
8. Marketing Plan 19
9. Market Trend 21
10. Defining Strategy 23
10. Market structure 26
11. Competition Analysis 26
12 Marketing strategy 26
13. Technical Analysis 27
14. Management of Mill and Plantation 28
15. SWOT Analysis 30
16. Critical Success Factors 31
17 Financial Projections 32
18 Conclusion, Finding, Recommendation 34
19. Appendices 37

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 TABLES AND FIGURES

TABLE
Page
1. Estimated yields per hectare planted per year 5
2. Projected tree planting plan 6
3. Estimated annual yield per hectare from year of plantation 7
4. Several uses of palm oil 8
5. Summary of oil palm unit of operations 9
6. Estimated yields and monthly distribution pattern 15
7. Financial projections 19

FIGURES
1. Oil palm hectare in Nigeria 3
2. Oil palm processing unit operations 10/11
3. Potential consumption of palm oil per year 15
4. Swot Analysis 18

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LIST OF ACRONYMS

CPO - Crude Palm Oil

FAO - Food and Agriculture Organization
FFA - Free Fatty Acid
FFB - Fresh Fruit Bunch
NIFOR - Nigeria Institute for oil palm
PKO - Palm Kernel Oil
PKC - Palm Kernel Cake
SPO - Special palm Oil
RBDO - Refined Bleached Deodorized oil
TPO - Technical Palm Oil

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EXECUTIVE SUMMARY

Alemu Integrated Farms Ltd. proposes to develop a medium scale palm oil plantation and
mill of Tenera a hybrid palm nut(between Dura and Pesifera) planted approximately on a
102ha farm land in Odholu Ogboji Village of Ahoada West Local Government Council
Rivers State.

It is the intention of Alemu Integrated farms Ltd. to impact the immediate economy of the
community where its palm oil plantation is located through direct and indirect employment of
rural dwellers living around its vicinity. But more importantly to boost rural incomes and
raise living standards.

Investment on them will be in excess of N200 million in the short to medium term of which
shareholders of Alemu Integrated Farms Ltd. have committed over N70 million in the
planting of over:
 20,000 – 30,000 palm seedling between years 2012 - 2014
 Purchase of a 10 ton (10,000kg) per day palm oil mill capacity of fresh fruit Bunches
(FFB) of palm fruit
 Construction of Industrial area, which includes the mill, quarters for mill staff,
security post and a snake administrative building.

Given Seasonality, the expectation is that the plant will operate at rear capacity for four
months of the year, (April-July) and less than this or half capacity for the rest of the year
(August – March).

Therefore it is estimated that the plant will operate at an average capacity of 5 tons (5,000kg)
per day throughout the year.

Total capital expenditure is put at N390,000,000 including land purchase (350HA), 10 ton
(10,000kg) per day mill equipment, seedlings planting of over 100,000 Tenera trees, and the
construction of the industrial area housing the mill and palm kernel cracking unit, staff
quarters for workers and security personnel.
In year 2016, it is accepted that a palm kernel oil processing plant will be commissioned to
optimize gains in the value chain.

6
Pay back period is estimated to be between 10-12 years provided more investments continue
to be made to upgrade activities in the value chain within the first three years of
commencement of operations. A moratorium of three years is therefore advised.
This feasibility study is focused on oil palm, its products and direct by-products. Whereas
from the palm tree derives palm oil, palm, wine and wood product; three dominant products
of the oil palm are technical palm oil(TPO),special palm oil(SPO) and palm kernel
oil(PKO),with the palm kernel cake and sludge as significant by-products that serve as input
into the production of animal feed. Such is the versatility of the oil palm tree.

The literature, based on extensive studies has shown that the market largely exists for three
oil palm products namely, technical palm oil(TPO) with free fatty acid (FFA) of between 5-
30%;special palm oil(SPO) with less FFA of less than 5%;palm kernel oil(PKO),a by-product
of the palm oil product whose demand has grown over the years as an industrial raw material.
Present production is estimated at about 200,000tonnes per annum.

It is also estimated that the small scale producers of palm oil using traditional methods
account for about 80% of local production (688,500 tons) whilst the medium and large estates
account for 161,500 tons or 20% of total annual production. Lack of information about how
to access the market for SPO supply to secondary processors and the lack of technical ability
to produce to specification of industrial production are some of the factors militating against
the small scale producers .
The conclusion is that there is great growth opportunity for the palm oil industry over the
short to long term, especially for medium to large estates due to the huge demand-supply gap
and existing capacity deficiencies. As a corollary, there are major opportunities along the
palm oil value chain to be exploited by investors such like Alemu integrated farms Ltd.

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1.0 INTRODUCTION

Palm oil is the world’s yielding oil crop with an out put 5-10 times greater per hectare than
other leading oils, such as ground nut, beniseed, coconut, sunflower etc.

Rapidly expanding populating and changing consumption patterns as well as increasing

demand from the food industry have resulted in sustained high prices for crude palm oil.

These market forces have driven the sustained growth the industry has witnessed in the last
decade.

Analyst predict further global demand acceleration for palm oil in the short term potentially
of a 36% increase by 2013 and more than 65% by 2020 (Mielke, 2011).

Rosy as the picture may be, success is not or cannot always be guaranteed. Palm oil yields
vary across the oil palm value chain, based on management practices, genetics and geography
(soil yield).

Yields range from less than one to more than 7 metric tonnes crude palm oil per hectare.
Besides this, the dynamics of the industry can pose challenges such as land and labour
shortages social conflicts erratic weather pattern’s rising fuel and fertilizer.

Oil palm is indigenous to the coastal plain migrating inland as a staple crop. For millions of
Nigerians, oil palm cultivation and processing is a way of life. Nigeria used to be the world’s
largest producer of palm oil responsible for about 43% total would production in the early
1960s’. It now accounts for only 0.82% of global production. Malaysia and Indonesia
together account for more than 50% of world production.

Nigeria’s production of crude oil palm comes from dispersed small holders who harvest
semi-wild fruits and use manual processing techniques. Several hundreds of thousands, are
spread over the oil palm belt in an estimated area of 1.65 million to 2.4 million hectares, up
to a maximum of 3 million hectares under cultivation. The small holder is the king of palm
cultivation in Nigeria. Small holders cover a range of 1-5 hectares of land. The wild Dura
exists alongside the semi-wild plantations which when put together with the small holdings is

8
accountable for 80% of Nigeria’s palm oil production. Private estate holdings run by
companies are fairly large and account for 20%
Alemu Integrated farms Ltd is projected to grow to a 200hectares of oil palm plantation over
the long term; thus categorizing it as a medium sized plantation.

This said noteworthy is the fact that many of large plantations were the product of past
attempts by the Federal Government in its drive to implement the establishment of large scale
oil palm plantations. Many of these attempts ended in failure. Most were collaborations
between the FGN and the European Union of 1990s. This included the Risonpalm Ltd
Plantation in Rivers State on an estate of 66,750 hectares of oil palm, thought to be one of the
largest of such efforts.

International organization such as the World Bank, the UN’s Industrial Development
Organization, UNIDO have continued to play complementary roles to those of FGN, most
with poor results.

Attitudinal shifts of governments at local and national levels have seen to the eventual
inheritance of abandoned government oil palm plantations by privates sector producers under
various privatization schemes.

In tandem with this shift, the key lies in the promotion of private sector participation in oil
palm plantation which holds the key to the revival of the industry. Private sector participation
has witnessed increased interest and investment from abroad, with the involvement of firms
such as Presco, a subsidiary of Belgian company SIAT, S.A, in Edo state with 6000 hectares
and in Delta State, 3,000 hectares.

Figure 1
Type Hectarage
Wild grove 2,300,000
Small holder 117,625
Estate 96, 465
Total 2,514,090

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Source: Oil Seeds Association of Nigeria (OSAN) 2003, Raw Materials Research and
Development Council (RMRDC) 2004

The Italian Company Fri-RC Green Power equally has taken over the Abia Palm Ltd. at
Ohambele, a concessioned plantation of 11,292 hectares, with opportunity for concession
extension up to 100,000 hectares.

The Okomu oil palm company, located in Edo Estate, a Federal Government pilot scheme in
1976 under its oil palm rehabilitation programme, represents we believe, the only success
pasis in a desert of failures. The success largely owes to the privation of the estate in 1990
and subsequent take over of the reins of management by SOCFINAF, of Holland, with a
53.32% share in Okomu oil Palm Plc, SOCFINAF, is the single largest shareholder of the
company.

Okomu covers a survey area of 15,580 hectares out of which 12,500 hectares could be
planted with oil palm.
At present, 8,800 hectares is planted and mature along side an extension of 4,000 hectares of
rubber, a palm oil mill of 30 tons per hour capacity. Several other major oil palm production
plants are dispersed along the coastal plains of Cross River, Akwa Ibom and Edo States
respectively. These are complemented by numerous local production plants using fruit
bunches sourced from wild fruit trees as well as small holders of between one to 10 hectares
of land.
ALEMU Farms, a subsidiary of Nakspec West Africa Ltd. is a 350 hectares oil palm
plantation situated in Ahoada-West Local Government Area of Rivers State. As shown
overleaf, tree plantings commenced in year 2012 with seedling of 4000, 7000 in 2013 and
10,000 projected for 2014. All these activities, land clearing, preparation and tree plantings
have been under taken by the promoters from funds dedicated from their earnings elsewhere.
Also cited on the estate, is a poultry farm of 8,000 birds, growing to 30,000 birds in the third
quarter of year 2015, a fish farm of between 50,000-100,000 fingerlings, a plantation of 5,000
plantain suckers and sweet potato of 3,000 plantings.

With good agronomic and farm management, it is hoped that these young trees will grow into
maturity and begin to yield fruits for harvesting. See table two below for the estimated yield
per hectare planted per year

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 TABLE 2
ESTIMATED FFB YIELDS AFTER PLANTING RELATION TO PLANT
CAPACITY
YEAR / YIELD IN M/T

Hectares 1 2 3 4 5 6 7 8 9 10 11 12 15 20
66 - - 198 281 303 396 479 541 568 627 693 726 825 891
190 - - - 570 808 1045 1140 1378 1558 1634 1805 1995 2375 2565
800 - - - - 2400 3400 4400 4800 5800 6500 6880 7000 8800 10000
400 - - - - - 1200 1700 2200 2400 2900 3280 3440 4400 5500
400 - - - - - - 1200 1700 2200 2400 2900 3280 3440 500
Total 1 1 198 851 3571 6041 8919 6619 12526 14121 15558 16441 19840 23656
Peak - - 29.7 128 536 906 1338 1593 1879 2118 2334 2556 2976 3548
month
Plant - - 0.09 0.4 1.7 2.8 4.2 5.0 6.0 6.6 7.5 8.0 9.5 11.0

Source: Poku, K, FAO

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TABLE 3
Projected Tree planting plan
YEAR NUMBER OF LAND AREA ESTIMATED YIELD PER
TREE YEAR OF HECTARE
MATURITY
2012 4,000 - 2015
2013 7,000 - 2016
2014 12,000 - 2017
2015 20,000 - 2018 3.0
2016 25,000 - 2019 4.25
2017 30,000 - 2020 5.5
2018 - - - 6.0
2019 - - - 7.25
2020 - - - 8.2

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2.0 JUSTIFICATION OF PROJECT:
Nigeria from analysis is a net importer of crude oil palm, from being the world’s largest
producer in 1950’s and till the mid-1960s at 650,000 metric tones.

According to Index Mundi an online date source, domestic crude oil palm production stands
at 850,000/MT as at 2012 against a consumption of over 1,000,000/MT per annum. Official
figures puts the short fall in consumption at between 150,000 M/T per annum, and a 500,000
MT/PA a gap new investments in crude oil palm production should help to fill.

The market for crude oil palm, is divided into two segments, consumer and industrial, with
the former consumption standing at 90% in the form of technical palm oil or TPO and
industrial or special palm oil SPO at 10%; used for the production of refined vegetable oil
and other food products, annual shortage is also experienced in the TPO and SPO segments
of the market-300,000 MT per annum (TPO) and 200,000TM (SPO) per annum which is
filled through importation.

It has also been established that 90% of palm oil is consumed by the food industry while the
non-food industry consumes the remaining 10%. Foods such as noodles, shortenings, cereals,
washing detergents and soap, all use palm oil in their production process. For instance, the
noodles industry alone consumed 72,000 metric tones of imported palm oil. Due to the failure
of the domestic market meeting the demands of the industrial, some leading industrial
producers like PZ Cussons have integrated backwards in a strategic move to secure for
themselves, a vital stage in the oil palm value chain, by investing in oil palm plantations.

2.1 OBJECTIVE OF REPORT:

The raison deter of this study is to establish the viability of investment in a 30 tons per a day,
scalable to 10 tons per hour oil palm production plant as the promoters contribution towards
the reduction in the gap of domestic production of palm oil.

It is also the hope of the promoter to integrate forward into the refining and bleaching of oil
palm for the production of refined vegetable oil in a value added process that increases the
profitability of the initial investment.

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2.2 STUDY SCOPE
Feasibility is for the ascertainment of the viability of the establishment of a 10 ton per day
crude oil palm mill scalable to 10 tons per hour per day industrial plant with value-chain
optimization possibilities which the oil palm makes possible. Further investments will
therefore be recommended in forward integration of value addition towards the production of
palm kernel oil, PKO, hence to vegetable oil with further chemicalisation of process.

This study is based on current planting activities by the promoters on a land acquisition of
about 350 hectares of land in the Ahoada West Local Government Area of Rivers State,
Nigeria.

A land area of 20 hectares is currently under cultivation with over 10,000 young tenera oil
palm seedling. A further 90 hectares is projected for clearing and cultivation bringing the
total cultivated land portion to 100 hectares over a six year period (table 2). Given the
gestation period of 3 ½ to 4 years for maturity of the tenera species, projected take off of the
mill in 2014, shall be with wild fruits (Dura) from suppliers in and around the industrial
location of the mill. Studies show an abundance of small oil palm plantations, including
harvested oil palm bunches from the wild oil palm tress to complement those from the small
plantations.

The oil mill shall be built on 6 hectares of land to take care of future expansion. Take off
infrastructure will include a 20 room building for living quarters for staff,an administration
building including workshop. This will also feature security facility to be manned by a joint
task force of army and police.
Also to feature will be the industrial area with receiving facilities for fruit bunches for
processing preparatory to milling

Table 4
Estimated annual yield per hectare (from year of plantation)

Year 1 2 3 4 5 6 7 8 9 10 11 12 15 20
Estimated - - 3.0 4.25 5.5 6.0 7.25 8.2 8.6 9.5 10.5 11.0 12.5 13.5

Yield in

Town
www.fao.org, accessed 21/7/14

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3.0 PRODUCT / SERVICE DESCRIPTION
Crude palm oil production is the focus of this business plan crude palm oil is consumed by
the food industry in Nigeria with the remaining 10% consumed by the non-food industry.
Foods like noodles, vegetable oil, biscuits chips, margarines, shortenings cereal, baked stuff,
washing detergents and cosmetics depend on palm oil (business day, 2013)

The noodles industry alone consumes about 72,000 metric tones of imported palm oil,
because domestic. Production is unable to meet the needs of the Nigeria market domestic and
industrial.
Because of the non-availability of palm oil some industrial users have integrated backwards
into oil palm production through strategic alliances to invest in oil palm plantations.

Figure five below gives a breakdown of the main uses of palm oil in Nigeria which domestic
production is unable to meet.
Table 5
SEVERAL USES OF PALM OIL PRODUCT
Food products Non-food products
Cooking oil Cosmetics
Deep-frying oils Detergents and soap
Margarine Drugs
Shortenings Cardles
Spreads Lubricating oil
Alternative fats Grease
Confectionary fats Chemicals
Ice creams Paints and coatings
Nutrition Electronics
Leather.

For the processing plant under the purview of this plan it is envisaged that a fully integrated
machinery configuration which combines several process operations/ digestion pressing and
fibre/nut separation) into one continuous assembly shall be recommended.
We have found out through study that these machines so configured fit into two key process
groupings, namely batch and semi-continuous processes.See figure four for illustration
A summary of oil palm unit of operations indicated in figure six is given as to purpose of
each stage of the operation.

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Table 6

S/NO UNIT OPERATION PURPOSE

1. Fruit fragmentation To loosen fruit base from spikelets and allow ripening
processes to abate
2. Bunch chopping To facilitate manual removal of fruit
3. Fruit sorting To remove and sort fruit from spikelets
4. Fruit boiling To sterilize and stop enzymatic spoilage coagulate protein
and expose microscopic oil cells
5. Fruit digestion To rupture oil-bearing cells to allow flow during extraction
while separating fibre from nuts
6. Pulp pressing To release fluid palm oil using applied pressure on rupture
7. Oil clarification To boil mixture of oil and water to remove water soluble
gums and resins in the oil dry decanted oil by further heating
8. Oil drying To separate de-oiled fibre from palm nuts
9. Second pressing To recover residual oil for use as soap feed stock
10. Nut drying To sun or dry by other means for later cracking processing
as feed stock

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FIGURE 1.0

Oil Palm Processing unit operations

Bunch reception

Bunch sterilization

Bunch Threshing Separation of bunches

Digestion of fruit

Pulp pressing Nut & fibre Nut recovery

Separation

Clarification Nut drying

Oil drying Nut cracking

Oil storage Nut separation

Refinery

Customer Palm kernel Kernel oil

Storage for Processing
Packaging

Customer
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 FIGURE
‘DRY’ DIRECT 3.1
SCREW-PRESSING

BOILED/STERILIZED
FRUIT

BATCH PROCESS SEMI-CONTINOUS

‘DRY’PROCESS

WET FLUSH ‘DRY’ DIRECT DIGEST INTEGRATED

PROCESS SCREW-PRESSING DIGESTER AND PRESS

Clean and
Separate
PRESS OIL+NOS
fibre and nuts OIL+NOS

OIL+WATER+NOS
MIXTURE Screw
spindle
hydraulic

CLARIFY Cake of fibre,nut

And residual

OIL+NOS

CLARIFY

As shown in figure 4, above, the extraction and processing of palm oil from palm fruit, can be
accomplished either using the batch process or the semi-continuous dry process which is semi
driver by machinery the batch process is completely manual .

3.1 BATCH SYSTEM

This system works on successive loads of boiled fruit directly from sterilization of
clarification. It involves the use of a vertical digester with a perforated bottom plate to poured
a batch of fruit and then the oil digested is mashed up in hot water, which is then screw-
pressed through pressure exertion and oil is expelled, all in one operation.

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Though very simple and manual, extraction efficiency of oil from water using this method is
low, given that oil/water emulsion is difficult to separate from the fibre mass.

3.2 SEMI CONTINOUS PROCESS

Our first observation about the semi-continuous process is that it involves for more
machinery than the batch system, it is ‘dry’ in the sense that far less water is required for
processing.

Once a semi continuous process has been fully achieved to attain continuity, the capital
investment outlay has gone beyond the small scale. This level of automation requires a large
increase of working capital for raw material which comes with increased mechanization.

The downside of the ‘dry’ system however is that the process leaves substantial residue of oil
in the press cake, put at 2-3%. Depending type of screw press, efficiency rates range between
60-70 percent for spindle presses 80-87 percent for hydraulic presses and 75-80 percent for
Caltech presses.

First extraction rates range between 12-15 percent for spindles 14-16 percent for hydraulics
17-19percent for motorized screw presses (Rouziere, 1995)

THE PROMOTER
NAME: NAKSEC WEST AFRICA LTD (THROUGH
ALEMU INTEGRATED FARMS LTD.

ADDRESS: ALEMU CLOSE TOMBIA EXTENSION

GRA PHASE 2, PORT HARCOURT, NIGERIA

TELEPHONE: 084 – 886314

MOBILE: 080 – 33035822
FAX: 08037401999
EMAIL: alemu@kinsegltd.com, md@nakspecwestafrica.com

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4.0 STATUS OF PROMOTER
Naksec West Africa Ltd, is a limited liability company registered in Nigeria. it has been
involved in the oil and gas industry in Nigeria for over a decade; whose chief executive has
cognate experience of over 30 years in industry; more than twenty of which has been spent in
project management of complex procurement supply, engineering and construction of oil and
gas production facilities. Promoter has been involved in the procurement supply and
installation of machinery for oil production for various clients since the founding of
NAKSEC West Africa Ltd. Back in 2010, the decision was taken to invest in the
establishment of an oil palm milk to process the fruits from the plantation to which a
350(hectare) land acquisition was made. This acquisition has come in installments as the
states land tenure system would hardly permit such huge acquisition in one fell swoop.
Planting of young oil palm trees of the tenera species commenced in 2011. So far a land area
of over 20 hectares has been cultivated with oil palm planting interspersed with those of
plantain sucker. Over 4,000 plantain suckers have so far been planted. Oil palm plantings are
in excess of 10,000 young trees, with further plantings planned for 2014 and 2015 to reach
20,000 trees. Further plantings planned for 2014 and 2015 are expected to reach 100,000
trees. Table one provides a synopsis of future planting activities.

5.0 MARKETING PLAN

Market Assessment:
The market for palm oil and its by-products is assured; demand for the product is well in
excess of one million tonnes per annum whilst local production stands at 850,000 metric
tonnes palm oil and 200,000 tonnes (PKO) per annum as at 2012. Official data puts the
shortfall at well over 500,000 metric tones per annum, represented by consumer and
industrial consumption. The domestic market is segmented into consumer and industrial with
the consumer sub-market accounting for 90% of demand, and the industrial segment taking
up the rest. Industrial palm oil, also known as special palm oil, SPO is used as feed stock in
the production of refined oil on the one hand, and food products on the other market gap as
identified above is filled through importation. Backward integration by industrial and food
products of such as noodles, vegetable oil, biscuits, chips migraines, and soap and detergents
and cosmetics have formed alliances to invest in oil palm plantations geared towards crude
oil palm production to satisfy their never ending raw material needs. Seemingly a threat, we
observe however, in the medium to long term, that Nigeria lacks the capacity to satisfy its

20
ever growing population on one hand, and its ever expanding industrial needs. We also will
state that given the paucity of data generally about the economy, the demand profile of palm
oil may be understated.

FIGURE 4
Potential Consumption per annum (Ton) for Alemu palm oil

CUSTOMERS YR1 YR2 YR3

DOMESTIC 12 20 28
FOOD INDUSTRY 16 24 32
SOAP AND COSMESTICS
INDUSTRY 20 28 36
TOTAL 48 72 96

NOTE:It is assumed that plantings will begin to bear fruits in year 2017 from our projection
for the plantation which will impact production

Finally government policy which seeks to replace crude palm oil importation with increased
domestic capacity production means market opportunities for investment in oil palm milling
is guaranteed to be a viable one in the medium to long term.

5.1 MARKET TREND

The crude oil palm, market is basically a generic one with mineral competition it is a seller
market wherein demand pressure for the commodity is dictated by the demand from
industrial buyers as well as by seasonality. We note the seasonal nature of rainfall patterns in
the West African Region where 2 rainfall seasons predominate oil palm bears fruit in
response to rainfall patterns in the west African Region where 2 rainfall seasons predominate
oil palm bears fruit in response to rainfall patterns even through yield is distributed all year
round, but reverently. The peak season is between April and June each year, up until July
sometimes depending on the rainfall pattern for the year. In particular peak seasons
experience glut with attendant price/demand moderation, spiking during the rains when
fruiting is low.

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Table 7
Estimated yields and monthly distribution pattern of oil palm production
Month % yield Seasonal distribution
March 9
April 12
May 16 50%
June 13
July 8
August 7
September 8 34%
October 11
November 7
December 5 16%
January 3
February 1

Peak season of April of June/July, which represents 50% of annual yield is generally
available for processing. Plant must ensure therefore, capability of processing the peak season
output. By this time plant personnel are expected to work two shifts to be able to cope with
fruit yield.

Off Peak  November – February (4 months)

Peak  March – June (4 months)
Mid point  July – October (4 months)

5.2 DEFINING THE MARKET

Data available to this study through the Oil Palm Grower Association of Nigeria (ODGAN),
states that about 200,000 persons are employed in the oil palm trade alone in Imo state. The
producer group of actors account for over 35% of all actors in the CPO value chain which
means over 70,000 small holders, farmers and plantation owners are involved.

Another 20,000 processors and 100 millers are also involved, with about 100,000 trading in
palm oil as wholesalers or retailers with agency. The remaining 30,000 constitute the labour
force involved in plantation maintenance, harvesting of FFb and logistics. 50% of these
numbers constitute actors in the palm oil value chain in Imo State, which in turn influences
the price of CPO in the environ of this project. the influence of demand supply gap need not
be overstated. Inferentially, we can deduce that the Imo State oil palm trade should serve as
the reference point for all other players in the industry within the zone of this would be
industry in Odholu Gboji, Ahoada-West, Rivers State.

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 DEMAND/SUPPLY GAP FOR SPO VALUE ADDED PRODUCTS IN RANDOMLY
SELECTED AND SAMPLED END MARKETS

Findings/ Data Honey well superfine Dufil Prime Foods Plc

Foods Ltd
1 Majors suppliers of RBDO Golden Oil, Presco and Sudit dedicated one
Sudit plant to Dufil
2 Average monthly requirement 350 tonnes 4,000 tonnes
of RBDO
3 Importation of SPO No Yes Malaysia SPO; is
about & 900 per ton
equivalent to N144,000
while SPO from Okomu
Plc is N220,000.00 /
MT
4 Acquisition cost of RBDO N260,000 – 270,000 MT Same
5 Challenges encountered in Congealing of product Same
getting RBDO during rainy season
Control of product in
transit so that the driver
will not tamper with the
quantity or even quality.
Price fluctuation
6 Strategic Automation of Involved in mechanized
Production system oil palm plantation of
Backward integration not less than 100,000 ha

Nigeria’s position in the world in the oil palm trade-production, export, import and
consumption (for food and non-food purposes) in 2010/2011. All figures are in million tones

Production 47.9 (Indonesia, 23.6, Malaysia, 18.2 Thailand 1.3, Nigeria 0.85,
Columbia 0.8 other 3.2)
Exports 36.8 (Indonesia 16.2, Malaysia 16.3, other 4.1)`
Imports 35.6 (India 6.7; China 5.7; EU-27, 4.9, Pakistan 2.1, Bangladesh 1.0;
USA 1.0, other 14.2)
Consumption 47.1 (India 7.1, Indonesia 6.7; China 5.8; Malaysia 3.4; Pakistan 2.0,
Nigeria 1.2; Thailand 1.0, USA 1.0, Bangladesh 1.0, others 12.9)

Sources: Lipid library, 2012 adapted by Aidalan Associates Limited

5.3 MARKET PRICE STRUCTURE

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The crude oil palm market is not price sensitive in the sense of a packaged fast moving
consumer goods product price sensitivity is relative to availability which in turn obeys the
seasonality law. The oil palm market experiences price spike during the difficult rainy
season, with accompanying reduced production activities due largely to low yields from oil
palm trees during he period. Speculative pricing and hoarding during the peak season, offen
leads to price hiking by speculators during the off peak season when supply is limited. This
activity requires that the crude oil palm must be kept in ambient temperature to ensure quality
and taste before its release into the market.

This activity requires large amount of capital to stock in plastic barrels and drums storage of
processed oil palm is usually in 200kg plastic drums for long term storage sales to the trade
however are in 20ltrs Jerry cans. For the bulk breaking takes place at the retail end into 1.5 –
3.5 litrs plastic bottles which sell at the retail price of between N880 – N1,900.00
respectively. Large oil palm companies like Okomu in Edo State are adding value by
branding their retail offerings and selling through modern outlets such as supermarkets and
departments area. We are unable to ascertain how well this method of marketing is at present
as at the time of writing this report. Suffice to say however marketing activities such as this
does point to future developments that the promoter may explore and exploit.

5.4 COMPETITION ANALYSIS

The crude oil palm is a seller market; it is one devoid of competition in the sense that we
know it to be. This is so because of the supply gap identified in our introduction to this study,
a gap of over #500,000 M/T per annum for which production facilities are unable to fill in the
short to medium term. The paucity of investment in oil palm production of any worth further
exacerbates the supply gap. Large scale producers such Okomu Presco,as well as Presco all in
Edo State, Ceat/Risonpalm in Rivers State, Abiapalm Ltd in Abia State, along side a plethora
of small scale village based producer using traditional method of oil palm production are
unable to fully meet the supply needs of Nigeria.

5.5 MARKETING STRATEGY:

A key component of market accessibility in the oil palm industry is used of wholesalers who
buy and hold stock, either to resell to the retail trade supply to industrial users as raw material
inputs or speculate this later tactic is done to optimize higher prices during the low peak
season, November-February. Our proposal shall be for a two track approach, namely:-

24
1) Direct marketing to large buyers such as RIVOC in Port Harcourt
2) Registered distributors in the company’s books who shall be pre-qualified on the basis
of ability to purchase a minimum of 100 metric tones per month or 1200 metric tones
per annum to quality.

Packaging for sale shall be in 200litres plastic drums, which is the arrant industry standard for
delivery. This in turn can be broken-down into 20litres plastic jerry can for retail sale for
domestic use. It has been established that the 20litre Jerry cans are further broken down into
lower litrages of 1 – 3 and sold in super stores and road side kiosks

6.0 TECHNICAL ANALYSIS

As shown in figure 4, the extraction and processing of palm oil can be accomplished either
using the batch (or wet) process or the semi-continuous dry process, driven partially by
machinery. The semi-continuous dry process is the preferred method of palm oil extraction
and is hereby recommended (please section on product/service description for a fully
treatment of the subject). The mill under consideration is a thirty (10) tones per day oil mill
scalable to 10tons per hour in the medium term

6.1 TECHNOLOGY/EQUIPMENT REQUIREMENT

The full configuration of palm oil processing involves the bunch thresher, the fruit sterilizer
digester, press (spindle or screw) clarifier and storage tank. Together they form a complete
complement of a 10 ton per day palm oil mill; scable to 10tons per hour. Mill site is located
on the outskirts of the semi-urban area of Ahoada – West Local Government Council Rivers
State with abundant supply of skilled and semi-skilled labour. The industrial site sits on a
1000 by 500square metres (and encompassing the mill a twenty room residential building for
workers, an administrative building, including workshop).

7.0 MANAGEMENT OF MILL AND PLANTATION:

Management of the palm oil mill requires a production manager who shall be in charge of all
production and operational oversight for oil palm processing activities. He will be supported
by a mill/technical manager whose background shall be in agricultural engineering;
responsible for the smooth and optional running of the mill. A plantation manager shall be
required with a background in agronomy; who shall be in charge of the plantation currently
under cultivation; as well as fruit bunches received from third party suppliers. It is envisaged

25
that fruit bunches from around the mill site shall form the initial supply sources for
processing since maturity of the first plantings (2012) will not take place until first quarter of
year 2016 at the earliest.

PROPOSED COMPANY STRUCTURE / ORGANOGRAM

Board of Directors

Managing Director

Plantation Farm Mill Mgr Fin/Admin Mgr Sales Mgr.

Mgr.

Agronomist Supervisor Accountant Sales officer

Harvesters, Cutters, Mill Operators Admin Officer Sales Clerk

farm laborers

Maintenance Admin. Asst.

technician

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7.1 CAPABILITIES:
Existing managerial capabilities assures the project of efficient management.
It is the expectation that experienced hands will be recruited from outside the environs of the
palm oil plantation to augment existing competences already acquired during the project
phase of the planning and development of the oil mill .

SWOT ANALYSIS
Strength: Weakness:
Strong demand for products, Low skills base,
Large market all year round. Lack of experience in oil plantation and
Well Capitalized with strong entrepreneurial production
drive by promoter. Locational advantage

Opportunities: Threats:
Suitable climate for oil palm Seasonal nature affects output of FFB’s
development hence production.
Surplus labour skilled and unskilled Growth Low entry barrier for new entrants
potentials enhanced due to value chain Losses and theft of FFBS and poor handling
extendibility during harvesting and quartering for
Availability of raw materials (Dura species production.
which grows in the wild, small holders) Backward integration by secondary
processors.

7.2 CRITICAL SUCCESS FACTORS:

1. Adequate working capital availability particularity during the peak and mid point
periods for purchase of FFB’s. This will minimize down times of production during
the first years of the plantation. Bear in mind young trees planted in year 2012 will
begin to fruit in the third or last quarter of 2016
2. Adequate security to prevent or minimize poaching by villages and runagates.
Day/night patrols, especially during peak and mid point months of harvesting is most
critical.
3. Minimization of losses due to internal thefts of FFBs and processed palm oil by staff
4. Minimization of overhead costs
5. Optimization of peak harvesting months for peak production.
6. Organizational capabilities built on the foundation of sound business
Enterprise management both for the palm oil plantation and the Mill
Operations.

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8.0 FINANCIAL ANALYSIS
The size of the palm oil market is in the region of the N220 billion per annum
contributing about 4.5% to Nigeria’s Gross Domestic Product, GDP. Annual growth
rates is estimated at 8% to 15% which when considered means that the palm oil
market will continue to expand in tandem with population growth and economic
development

Future volume projections annually will be between N237 Billion and N253 billion
over the next decade.

Below in tables 10 and 11 we provide unit analysis of production using a 10 ten per
day profile. Next to this is the financial projection for four years 2014-2017. These
projections are highly conservative as they reflect the paucity of actual data. They
represent only figures for palm oil production and do not include cost and revenues for
the other investments on the plantation (Poultry, Cassava, Plantain, fisheries and sweet
potato)

Analysis of variable cost and revenue involved in the processing of fresh fruit burches, based
on 10 tonne FFB.

Table 10
DESCRIPTION COST REVENUE
N K N K
1 Cost of palm fruit processed 10 tonnes 225,305.00
2 Cost of processing 3,030.00
3 Palm oil sales 308,000.00
4 Palm kernel sales 17,600.00
5 Total 325,600.00
6 Profit on 10 ton of FFB processed 97,265.00
Note that cost and revenue variability reflects the seasonal nature of the palm oil plantation
business as it fluctuates with the quantum of harvested FFB’s and attendant processing cost
as well as revenue derivable there from.

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 Table 11
FINANCIAL PROJECTIONS

CAPITAL 2014 2015 2016 2017

Mill equipment 17,900,000 - 15,000,000 -
Land/building & others 370,000,00 - - -
Seedlings (panted) 16,590,000 4,000,000 5,000,000 6,000,000
TOTAL CAPITAL 394,490,000 4,000,000 20,000,000 6,000,000
Add 5% Add 5%
Operating expenses
Palm fruit bunches 26,503,738 26,503,738 30,828,924
Mill operators (5) 1,200,000 1,500,000 2,500,000
Plantation workers 5-20 2,000,000 2,200,000 2,500,000
Management 2,440,000 2,440,000 2,600,000
Travel 1,300,000 2,000,000 1,500,000 1,500,000
Plantation transport / 1,000,000 1,500,000 2,000,00
logistics
Mill (water, electricity) 500,000 600,000 6,000,000
Maintenance /repair 200,000 200,000 300,000
Taxes/levies 1,000,000 2,000,000 2,000,000
Miscellaneous 250,000 100,000 100,000 200,000
Total operating expenses 36,943,738 38,543,738 50,428,924
Annual income
Palm oil 38,400,000 40,463,738 52,486,924.90
Palm kernel oil 7,000,000 10,000,000
Palm kernel cake 1,500,000 3,000,000
Other income 500,000
Total income 38,900,000 48,963,738 65,486,924.0
Net income/loss (1,550,000) 1,956,262 10,420,000 15,058,000.9

29
9.0 CONCLUSIONS, FINDINGS, RECOMMENDATIONS

Our conclusion based on projections points to the feasibility of the project and a rewarding
financial investment in the palm oil plantation industry.

Given the numerous activities and investable opportunities in the palm oil plantation value
chain, it is a verifiable fact that the business has a future provided sound business and
investment practices are undertaken both on the plantation side as well as processing and
marketing aspects.

A business succession plan is therefore imperative to secure these both in the present and post
investment phases of the business. We also highlight the need to emplace an organizational
culture that conveys a sense of seriousness of purpose, shared value, mission and objectives
as to why the project was embarked upon by the promoter(s) ab nitio.

Having said this, we will not fail to underscore the social and economic impact an investment
of this magnitude will have on the local economy of the village of Odholu Gboji and its
neighbours through employment, supply of FFBS and other ancillary services to the industry.
Living standards will be lifted; just so other services will be attracted into the vicinity of the
industry. We foresee the creation of an oil palm plantation cluster, attracting other services in
the value chain with Alemu Integrated Farms Ltd serving as the cluster’s governor provided it
is able to develop the needed and relevant competencies.

9.1 FINDINGS

It is established through the course of field data gathering for this study that the Umuagwo –
Umuapu axis of Imo State actually dictates the price movement of palm oil and its
derivatives. This assertion is validated by the PIND report on the value chain scoping study
of the palm oil industry 2012. It is also established that secondary processors of special palm
oil, SPO, are concentrated in the Lagos and Onitsha axis of Nigeria; that most of them are
producing at about 40% of their installed capacity.

Golden oil industry Ltd, situated in Onitsha, for instance, imports the bulk of its, SPO, from
Malaysia in order to meets its annual production/ commercial target of over 15,000tons of

30
vegetable oil. It is also established that the demand-supply gap of over 500,000 tones for SPO
and PKO will increase due to population increases and continuous improvements in living
standards.

This supply gap may exacerbate in the short to medium term, as lack of funding and clear
Policy initiatives for the industry have not spurred new investments in the sub-sector; thus
leaving the space to the small holder traditional producer who may hold sway into the
foreseeable future.

We also establish that the demand-supply gap will continue to holds way; stabilizing the
prices of various products in the short to medium term. A price band of 200,000 – 270,000.00
naira per ton is established for SPO and PKO and has held over the last five years. However,
the price of imported SPO is lower at N144,000.00 per ton of lower quality. The Nigeria
palm oil industry needs to improve its efficiency to be able to produce at lower costs for
competitive pricing of products.

We further establish that more large estate plantation investments need to be put on stream to
close the huge demand-supply gap which may continue to spiral due to increase in population
and higher standards of living.

9.2 RECOMMENDATIONS
The following are our recommendations for the future growth of this start-up. Ahemu
Integrated Farms Ltd, should from the start-up of operations ensure the institution of proper
corporate governance practices as an organizational culture. Proper accounting books must be
kept.

The best and only the best should be recruited to fill posts available. Every effort should be
made to avoid over manning as this increases overhead costs. We recommend that a three to
five year strategic plan for the growth of the plantation should be instituted as a follow-up to
this study, as it is by no means exhaustive given the constraints of data and record keeping
the authors experienced during the preparation of this report.

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We recommend good agronomic practices for the sound growth of young trees and health of
those that will mature from year 2015/2016. An appropriate measure of fertilizer and
herbicides in quantity and time ensures this.

We also recommend continuous investment into the poultry, plantain and fisheries business,
basically to optimize the synergy and strategic fit between the businesses.

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APPENDICES.

Appendix1

PALM OIL PLANTATION VALUE CHAIN

A graphic illustration of the palm oil industry value chain and applications

Upstream:

Plantation

Fresh fruit bunches

Milling

Crude palm oil

palm kernel oil

Trading / transport
Mid Stream

Down Stream
Refining

RBD Palm oil

Fractionation

RBD stearin (20%)

Olein (80%)

Double Hydrogenation Oleo

Fractionation Interesterification Chemical
Palm mid Processing
Fractionation

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 Splitting

Glycerol/fatty acids

Reduction

Fatty alcohols

Ammidisation

Fatty nitrogen

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 APPENDIX 2

PALM OIL MARKETING CHAIN THE CHAIN VARIES FROM COUNTRY TO

COUNTRY DEPENDING ON THE STAGE OF ITS PALM OIL INDUSTRY
DEVELOPMENT

Oil palm plantation

Fresh fruit bunches

Crude palm oil CPO Mill Palm Kernels

Refinery crushing plant

Refined bleached Palm kernel oil Palm kernel

deodorized palm oil PKO Cake/meal
(RBDO)

Oleo chemical plant Refinery

Refinery

RBO/PKO

RBD Olein RBD Stearin Faith acids faith alcohols,

esters glycerine a.o

Food industry Detergents and cosmetics Chemical and other Animal feed
industry industry industry

Source: Van Gelder J-W (2004); UNITED NATIONS Conference on Trade And
Development, 2014

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 APPENDIX 3

VALUE CHAN MAPPING OF PALM OIL PLANTATION CLUSTERS IN RIVERS

STATE

Commercial uses Industrial users

End Markets HH consumers TPO TPO P=N230,000 SPO/PKO
IT

Rural P=N240,000 Urban

Ton P=N2560,000 ton

Palm oil retailers

Retailing P=N230,000 ton
Presco automated
Secondary plant & refinery
processing Palm oil dealers Palm kernel
P=N200,000 ton collectors
Aggregation &
whole sale Traditional Mini/Medium
processing processors

Primary processing

Wild groves Wild groves

N91,655HA small/medium holder Large Estate SIAT
N=57,000Ha Nig. Ltd UBIMA
Estate
Production

NIFOR IRCHO
Seedling

Channel 1 Channel 2 l TPO /

traditional TPO SPO

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