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 FEASIBILITY STUDY ON PALM OIL PRODUCTION IN NIGERIA

This is the front/cover page.

It shows the name of the company and the Logo, the title of the feasibility study, the author, period covered and date. This page must be well designed to give good impression of what is inside of it.

This is the list of the topics in the document and their page references. Every item in the document must be identified here for easy referencing.

This assessment is based on the design system requirements. It is to determine whether the company has or could afford the technical expertise to handle completion of the project.

• The first stage: Bunch Reception: the palm will be cut from the tree in bunches .
• The second stage: Threshing: cut it from the bunk and after few days it will be selected. 
• The third stage: Sterilization: cook the selected with an industrial pot/kettle for sterilization.
• The fourth stage: fruit digestion and pulp pressing.
• The fifth stage: Oil clarification (sieving).

The sixth stage: package in a container and the oil is ready for sale. After this process, the kernels and the chaff will be separated from others for domestic uses and consumption in these steps below;
 First stage: Nuts and fibre recovery from the threshing & clarification
 Second stage: Palm kernel nuts drying (using heat from sunlight)
Third stage: Palm nut cracking (using kernel crusher)
Fourth stage: Kernel separation (shells from nuts)
 Fifth stage: Kernel storage (for sales or further processing to CPKO).

This aspect is to determine whether the proposed system conflicts with legal requirements of the business/project. It must comply with the local protection, regulations and if the proposed venture is acceptable in accordance to the laws of the land.
This will highlight the relevant regulatory bodies and laws, patent rights and other intellectual property laws involved. It will also show the cost implications if there are needs for franchise, business registration etc.

The operational feasibility assessment focuses on the degree to which the proposed business fits in with the existing business environment and objectives with regard to development schedule, delivery date, corporate culture and existing business processes.

To ensure success, desired operational outcomes must be imparted during the planning stage. These include such design-dependent parameters as reliability, maintainability, supportability, usability, reducibility, indispensability, sustainability, affordability and others. These parameters are required to be considered at the early stages of design if desired operational behaviours are to be realized. 

It will also show list of equipment needed such as:

Other Facilities:

In addition to obtaining appropriate equipment for the palm fruit processing just described above, a facility will also be needed to house the mill. It is estimated that a simple building of about 1000 square meters would be sufficient to house the equipment, and to provide room for both an office and limited storage. There will be 2 bore holes and a medium size generator to power the operations. Documentation and record-keeping would be best facilitated with a computer and printer.

A business will fail if it takes too long to be planned before it is useful. Typically this means estimating how long the business will take to start. Schedule feasibility is a measure of how reasonable the planning timetable is going to take. It is to say ‘given our technical expertise, are the project deadlines reasonable? This area shall have some topics like this.

MILESTONE

The milestone schedule of the palm mill if the business is to start operation in 201

This involves questions such as how much time is available to build the new business, when it can be built, type and amount of resources required and the source of such funds.

The following is an illustrative table of source of funds:

This table shows that N35,000,000.00 is required for this business, and will be provided over 5 years period, and by who.

This is one of the most important sections of the feasibility study as it examines the marketability of the product or services and convinces readers that there is a potential market for the product or services. If a significant market for the product or services cannot be established, then there is no project.
Typically, market studies will assess the potential sales of the product, absorption and market capture rates and the project’s timing.FEASIBILITY STUDY ON PALM OIL PRODUCTION IN NIGERIA

Therefore, this aspect of the feasibility study will show the following:

Marketing plan section will have sub-sections that explain the product to be sold, pricing, promotion and distribution plans to achieve good sales.

This section will show things like;
“The products include Crude Palm Oil (CPO), Crude Palm Kernel Oil (CPO), Special Palm Oil (SPO), Palm Kernel Nut (PKN), Palm Kernel Cake (PKC) and, Palm Kernel Shells (PKS). The management is looking at the products in drums (tons), and 20litre kegs. This is to enable both small, medium and large scale customers to have full access to the quantity they want to purchase”.

Other sources of product must be listed here such as:

– Would you be buying unprocessed fruits/bunches in like manner?

– Would you be processing palm fruits for third parties commercially?

– Would you be storing products – your products and those you buy from third parties to sell in future?
Then you highlight the Uses Of The Finished Palm Products.

The products will be used to produce other primary and secondary products in the food and drug industry and for other industrial purposes

Apart from palm oil, palm kernel and palm kernel oil which are the main products of the oil palm, the processing wastes generated from the trees and during palm fruits processing (to obtain palm oil and palm kernel oil) have several uses. The sludge is used in making traditional soaps and fertilizer and the Palm Kernel Cake is used widely as an input into the animal feed industry and for fertilizers. The processing wastes include empty bunch refuse, fibre, shell, sludge and mill effluent.

In addition, the other parts of the palm tree (trunk, leaves, fibre) have broad uses, while the bunch refuse, and by-products from the oil processing (fibre, shell, sludge) can be used as fuel for the mills, making briquettes to substitute for fuel wood,

PRICING OF PALM OIL

The pricing of palm oil is seasonal. You have to show in a table like the one below, how oil palm prices fluctuate between the season period and the off season period, and the category of buyers. Use your own researched figures.

A proper feasibility study will reveal all these and will give you the basis for estimating your sales/turnover for the period in question. You will do the same for all other products and by-products of palm oil.

The pricing of palm kernel and palm kernel oil is also seasonal depending on the supply of palm fruits. Prices can also nearly double between peak production season (when prices are lowest) and the off season when prices are higher. Consider the following tentative prices.· 

Consider the following statements;
“although the company’s current contacts in the palm oil product chains are for local consumption, expansion to every part of Nigeria and other countries (for exportation purposes) is quite likely in the foreseeable future. The unique marketing approach of using local and foreign distributors, and customer awareness will be maintained using T.V, Radio and Online advertising. Direct researcher/sales personnel will be available in the Company; this is to enhance first-hand information on what the customers are seeking especially in cities and state. The management will develop a fully loaded website highlighting the palm oil processing mills, technical analysis of production process and the organizational chart of the company’s management”.

You must use this medium to explain how you intend to market your products, including your distribution plans.

The financial viability can be judged on the following parameters:

1. Total estimated cost of the project 
2. Financing of the project in terms of its capital structure, debt to equity ratio. 
3. Existing investment by the promoter in any other business – eg industry average.
4. Projected cash flow, 
5. Profitability ratios like gross profit margin, net profit margin and rate of return on investment (RIO).

– Full details of the assets to be financed and how liquid those assets are.

– Project’s funding potential and repayment terms.
Remember a feasibility study is a survey. Information as the following are necessary here:

1. TAX deduction is 30% taking advantage of tax incentives for agriculture and agro-allied firms.
2.Depreciation is charged on all the tangible capital items on a straight line basis on the following;
· Building 2%
· Motor Vehicle 25%
· Plants and Machinery 25%
· Furniture’s and Fittings 20%
· Amortization of intangible capital items are absorbed at 20%.

4. Borrowing rate is at current commercial lending rate.
5. The accounting records are in accrual basis.
6. Every expenditure incurred in the first three years is capitalized and amortized/depreciated accordingly.

The analysis of this revenue estimates must be shown. Remember they are to be generated by your marketing feasibility study. Now you can understand that there are various feasibility studies to be incorporated in this one feasibility study.

Notice that this estimate is in sections.

ANNUAL DEPRECIATION OF FIXED ASSETS:

Sample of Schedule of Annual Depreciation:
The table shows the cost of the depreciation of fixed assets over the projected years.
Tangible Fixed Assets will be depreciated as per normal depreciation rate for such assets, while intangible assets ( other capitalized expenses) will be amortized over 4 years from the year of revenue earning. You could decide that the amortization rate adopted be 10%, 20%,30% and 40% for year 1 to 3 respectively or amortized on equal basis for the specified period.

These are the start-up expenses capitalized, which must be amortized as per the entity financial policy.

This part will now be used to analyze the entire operations financially.

Note the accounting ratios generated here. Gross profit margin, Net profit margin and ROI. These are good investment indicators.
With this you will understand that if you generate unreliable figures that shows that the business is feasible which is not true, the business will soon be in trouble.

This shows that this project pays back in 5 years.

This will carry your recommendations based on the feasibility study. Your recommendation could be to go ahead with the project, stop the project, modify the project or any other alternative.

Note also that these tables can be converted to graphs, bar charts, pie charts etc. for better illustration.

Now you can write your business plan, or business proposals. In addition to giving a comprehensive report based on this study, you can also attach some of these reports as part of the business plan main body or as appendix.

GOOD-LUCK – You can now write your business plan on palm oil production. You can make contacts for professional attention if you have need to do so.

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