HOW TO START A COOKING OIL PRODUCTION BUSINESS: ALL YOU NEED TO KNOW

1. Cooking Oil Production

1. Introduction

Cooking oil is plant, animal, or synthetic fat used in frying, baking, and other types of cooking. It is also used in food preparation and flavoring not involving heat, such as salad dressings and bread dippings like bread dips, and may be called edible oil. Most cooking oil in Nigeria is made from plants. This is the reason why the oil is often called vegetable oil. Vegetable oil is cooking oil produced from either soybean, groundnut, sesame seeds, palm fruits, etc. 

The present production level of Cooking Oil in Nigeria is yet to meet the demand of Nigerians. There is currently a ban on the importation of vegetable oil into the country. The ban was placed in order to encourage local producers to expand their operations, and new investors to go into the production of Cooking Oil. This has made the business very lucrative.

This writeup will focus on cooking oil produced from soybean with soybean cake as a by-product.

2. Industry Analysis

The market for cooking oil is national. Cooking oil is consumed across all geo-political zones and socioeconomic classes. With a population of over 200 million people and an estimated national population growth of 2.56% per annum, an average economic growth rate of 2.5% per annum in the past ten (10) years, Nigeria has a large and growing market for soybean cooking oil and its by-products.

The demand is high but local supply low hence the need for importation in the past. Industry data suggests that Nigerian consumers use more than one million (1,000,000) tons of cooking oil annually. Study shows that there is still a shortfall in supply of cooking oil in the country. The shortfall in supply is estimated at about 300, 000 tons per year.

As the edible oil market has grown into a multi billion naira industry, so has the opportunity for small and medium oil mills/refineries to produce and supply products to the ever demanding and growing market.

3. Raw Materials Requirement

The basic raw material for the production of the cooking oil is soybean. Soybean, soybean, or soya bean is a species of legume native to East Asia, widely grown for its edible bean, which has numerous uses, including cooking oil production.

Nigeria remains the largest producer of soybean in sub-Saharan Africa (SSA), followed by South Africa. Nigerian soybean production in marketing year 2021-22, which begins July 1, is projected to reach 1.25 million tonnes, a 43% increase from the most recent 2020-21 USDA estimate. Area harvested is projected at 1.2 million hectares, up 20% from the 2020-21 estimate.

Other raw materials that will be needed in the cooking oil production business are water, caustic soda, bleaching earth, vitamin supplements and packaging materials.

4. Machinery & Equipment Requirements

The major equipment needed in a small scale cooking oil production plant are: Seed toaster, Oil Expeller, Filter Press, Oil Refiner, Bag sewing machine and Weighing Scales.

Equipment	Function	Picture	Price
Seed Toaster(2 Units)	The function of this machine is to toast the soybean seeds. This process heats up the soybean seeds, thereby exciting the oil molecule content of the nuts.		N600,000 per Unit
Oil Expeller	Press the heated seeds and expel the oil content of the nuts via the oil exit chamber, while the cake is collected via the cake exit chamber.		N1,600,000
Filter Press	The function of this machine is to filtrate the oil and remove impurities such as cake residue from the oil		N850,000per unit
Oil Refiner	Refines the oil		N10,800,000
Automatic Filling Machine(This machine is optional as manual filling is possible)	For packaging		N7,000,000
Weighing Scale	For weighing products		N100,000
Sealing Machine	For sealing final products in bags.		N50,000

Notes: The above prices are applicable as at the time of writing this report.

5. Production Process

Typically, when raw soybean comes into the mill, it goes through the following steps:

A. Toasting

The seeds are heated up with a toasting machine so as to excite the oil molecule content of the nuts and make oil extraction more efficient.

B. Oil Expelling

Toasted seeds are transferred to the oil expeller machine, which presses the seeds and expels crude soybean oil through the oil exit chamber, while the by-product, called soybean cake is expelled through the cake exit chamber. The oil is further pumped to the filter press machine, while the cake is packaged in sacks and moved to storage.

Note: The cake produced is of high value. It is used in the production of a wide range of livestock feeds such as poultry feeds, fish feeds, cattle feeds, etc.

C. Filtering

Crude soybean oil is filtered using the filter press machine. This process removes impurities such as cake residue, etc from the oil. The oil is then pumped to a collection tank to await refining.

D. Refining

The filtered crude soybean oil is pumped to a refining machine. The machine refines the oil to produce an edible oil with characteristics that consumers desire such as bland flavour and odour, clear appearance, light colour, stability to oxidation and suitability for frying. Chemicals such as caustic soda, soda ash and bleaching earth are used to aid the refining process. Finally, additives such as vitamin supplements are added to the oil.

6. Profitability

The profitability of soybean oil production largely depends on the cost of the primary raw material, soyabean.

• As of the time of writing this report, the average cost of soyabean is N360,000 per ton. Depending on the quality of soybean, an average of 170 litres of oil and 800Kg of soybean cake is obtainable from processing 1 ton of soybean.

• The average factory price for soybean oil is nine hundred naira (N1000) per liter while that of soybean cake is three hundred naira (N310) per kilogram.

This implies that a revenue of (N1000 X 170) + (N310 X 800) = N418,000 is obtainable from processing 1 ton of soybean into oil and cake..

Gross Profit is calculated by subtracting the cost of production from the sales.

Gross Profit = N418,000 – N360,000 = N58,000

Assuming operating expenses (including cost of packaging) takes 20% of profits, profit realisable from processing 1 ton of soybean will be forty thousand, eight hundred naira (N46,400).

If your factory has the capacity of processing 4 tons of soybean per day. This will translate to a profit of N46,400 X 4 = N185,600 per day.

If the factory works for 25 days per month and at 50% of the installed capacity, this will translate to a profit of N2,320,000 per month.

7. Capital Requirements

Depending on the scale and sophistication of the rice mill you want to setup, you can get started with budget of about twenty million naira (N20,000,000) upto about one hundred and fifty million naira (N150,000,000). This includes the cost of factory building, machinery procurement and installation, staff training, and working capital. 

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