FEASIBILITY STUDY

ON
PALM OIL DISTRIBUTION BUSINESS
IN
CROSS RIVER STATE

By
ANABA, SYLVESTER ANANI
 Feasibility Study on Palm Oil Distribution in Cross River State

Introduction
This feasibility study on palm oil distribution in Cross River State is my
original research and it is based on the survey and thorough research
made by Anaba, Sylvester Anani. The business will be a sole
entrepreneurship business, wholly owned by Anaba, Sylvester Anani.

From the research carried out, it was discovered that the demand for
palm oil in Cross River State is not fully satisfied; though there are
existing palm oil distributing outlets in the state, but oil is supplied on a
small scale by petty traders.

Premium upon the supply gap, and the high demand for palm oil in
Cross River State, I decided to bridge the gap by venturing into this
business so as to meet the high demand of palm oil in Cross River State.

The legal requirement for this business such as local government

revenue tax, business premises, vigilante and other requirements had
been considered, and will be complied to.

This business will provide employment opportunity for at least fifty

people. More so, the problem of scarcity and high cost of palm oil in
Cross River State will be a thing of the past.

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 Feasibility Study on Palm Oil Distribution in Cross River State

Business Description
Palm oil is an economic product. It is in high demand for domestic and
industrial use. It can be used for soap making, creams, lubricants,
medicine, and cooking etc.

The venture to be established is palm oil distribution business. Palm oil

will be purchased directly from the local producers in Akampa,
Odukpani, Awi, Mbarakom, Biase, Ediba, Yakurr, Afafanyi and Ebom
areas of Cross River State. The target market is Cross River State. 60%
of the product will be stored in the ware house, and 40% will be
distributed to the immediate market. Palm oil production in Nigeria has
peak and off-peak seasons. The product in the warehouse will be sold
during off-peak seasons.

This venture is a new firm to be started from the scratch. The firm will
be located in a rented building at Urua-wat market, Calabar. Urua-wat
market is the hub of business activities in Calabar, hence, the best
location for this business.

The necessary equipment that will be used for this business include, oil
drums, funnels, gallons, scoopers, bowls, and basins etc.

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 Feasibility Study on Palm Oil Distribution in Cross River State

Business Environment Analysis

A visit was made to Ministry of Trade and Investments, and Nigerian
Chambers of Commerce to ensure that legal clearance is obtained.
Business permit, local government fees, Levis, taxes and sanitation fees
will accordingly be paid.

Competition in palm oil distribution will be surmounted through the

strategies we will adopt. Local distributors of palm oil in Cross River
State are purely into retailing of the product. Hence, we plan to sale at
whole sale prices to local distributors, in other words, these distributors
will buy from us, and thereafter, retail to the final consumers.

Due to high interest rate in the commercial banks, the business will
source for finance from micro finance banks, friends and relations.

Market Analysis
Palm oil are sold in drums, gallons of different sizes, kegs, bottles and
cups. The under listed are the current market prices of palm oil:
=N=
Drum of palm oil …………………………………….. 20, 000.00
25 liters of palm oil ………………………………….. 5, 000.00

One bottle of palm oil ……………………………….. 400.00

Half bottle of palm oil ……………………………….. 200.00

Milk cup of palm oil …………………………………. 50.00

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 Feasibility Study on Palm Oil Distribution in Cross River State

However, palm oil is in high demand both domestically, nationally and

internationally. Individual households need palm oil for domestics,
business enterprises need palm oil for the production of soaps, creams
and other goods. Industrial firms also need palm oil for lubrication and
other activities.

Marketing Plans
Cross River State is our target. The business will kick off in Calabar, and
we will establish our satellite shops at Ugep, Ikom, Ogoja, Obubra and
Ediba.
Since, the business will make use of palm oil retailers, we will directly
lure these retailers with 10% discount, in order to entice them to buy
from us. Marketing letters will be sent to industrial users, and aggressive
follow-ups will be employed.

Operation Plans
The business will require full time labour. The services of purchasing
officers, drivers, warehouse officers, store officers, sales representatives,
security personnel, and accountant will be needed.
Ten trucks will be reserved for the transportation of the product from
point of production to the warehouse. Twenty vehicles will be used for

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 Feasibility Study on Palm Oil Distribution in Cross River State

marketing and distribution purposes and two vehicles would be used for
administrative commitments.

Our drums, gallons and bottles will be encrypt with the company’s
name. This is to quickly give us an identification name that would make
us a household name in Cross River State. Our drivers would be given
unique uniforms that would differentiate them from other drivers. Our
vehicles would be painted green and red. The sales representatives will
be seasoned marketers with unequalled marketing skills. This people
will be given a befitting uniform that would portray the company’s
image.

Work resumes every 8’0 clock in the morning and closes 6’0 clock in
the evening. We will open from Mondays to Saturdays every week. Our
workers will be allowed to enjoy public holidays like Christmas, and
Easter breaks. Annual leaves would be granted after one year.

Management and Organization

The business will employ a manager, who will see to the day to day
running of the business. This person must possess a bachelor degree in
either Marketing or Business Management. We will also employ the
services of an accountant, to manage all our finances. This officer must
possess a bachelor degree in Finance or Accounting. Marketers, sales
representatives and distributors must possess a minimum of OND. The

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 Feasibility Study on Palm Oil Distribution in Cross River State

drivers must possess a minimum of SSCE. The services of agriculturist

to test the quality of the product will be highly needed, and this fellow
must possess a bachelor degree in agriculture related courses or in
biochemistry.
The hierarchical structure of organization would be communicated to all
staff, immediately after recruitment. The manager, accountant, product
analyst will form the management team. The team will report to the
board. The board will comprise of creditable personalities that are well
vested in the business of palm oil distribution.

Staff appraisal system will be installed. This will help us identify staff
that should be promoted, and amount to be added to their salaries.
Confirmation of appointment will be given to qualified workers
immediately after probation period of 6 months. Staff handbooks, rules
and regulations, identity cards and staff number will be issued after
confirmation of appointment.

Salaries and wages would be based on experience and academic

qualifications. Attractive fringe benefits will be given to our workers.
13th month salaries, Christmas allowance, leave allowance, hazard
allowance would be given to our staff. Free medical treatment and
welfare packages will be made available.

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 Feasibility Study on Palm Oil Distribution in Cross River State

Staff training and development will be given utmost attention. Each staff
is entitled to at least one training each year. This training will be based
on business needs and field of expertise.

Financial Plans
The initial outlay for starting this business is =N= 15, 000, 000. 00 for
acquiring 250 drums of palm oil product, rent a spacious office space,
warehouse, gallons, trucks, official vehicles, office equipment and

Project Initial Outlay

Items =N=

Office space ………………………………………..………. 800, 000.00

300 drums of palm oil (20,000 x 300) ……………..……. 6, 000, 000.00

5 vehicles (3 trucks & 2 cars) …………………………..... 5,000, 000.00

Office equipment ……………………………………...….1, 200, 000.00

Logistics ………………………………………..…………1,000, 000. 00

Total Outlay …………………..……………………..… 14, 000, 000.00

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 Feasibility Study on Palm Oil Distribution in Cross River State

Five Years Projected Statement of Income and Expense

(=N=’000) (=N=’000) (=N=’000) (=N=’000) (=N=’000)

1 2 3 4 5
Sales 30, 000 45, 000 67,500 101, 250 151, 875

Cost of sales (14, 000) (19, 600) (27, 440) (38, 416) (53, 782)

Gross Profit 16, 000 25, 400 40, 060 62, 834 98, 093

Operating Exp. (4, 500) (5, 400) (6, 480) (7, 776) (9, 331)

PBT 11, 500 20, 000 33, 580 55, 058 88, 762

Tax (3, 450) (6, 000) (10, 074) (16, 517) (26, 629)

PAT 8, 050 14, 000 23, 506 38, 541 62, 133

Analysis:

Sales will grow by 50%

Cost of sales will increase by 40%

Operating Expenses will increase by 20%

Corporate tax of 30%

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 Feasibility Study on Palm Oil Distribution in Cross River State

Pay Back Period

(=N=’000) (=N=’000) (=N=’000)

Year Outlay Cash flow Pay-back

0 (14, 000) - -

1 8, 050 (5, 950)

2 14, 000 8, 050

3 23, 506 31, 556

4 38, 541 70, 097

5 62, 133 132,230

N/B:

This project will pay back one year six months.

This shows that the project is viable.

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 Feasibility Study on Palm Oil Distribution in Cross River State

Project Net Present Value

(=N=’000) (=N=’000) (=N=’000) (=N=’000)

Year Outlay Cash flow Interest Rate Present Value

0 (14, 000.00) - - (14, 000.00)

1 8, 050 0.909090 7, 318.18

2 14, 000 0.826446 11, 570.25

3 23, 506 0.751315 17, 660.41

4 38, 541 0.683013 26, 324.02

5 62, 133 0.620921 38, 579.70

Net Present Value (NPV) of the project 87, 452.56

Assumption:
Interest rate was assumed at 10%

Conclusion
From the survey and projections carried out, we can see that the project
is a viable one and is worthwhile, hence it should be undertaken. The
project has the ability to payback within one year six months, and has
and NPV of =N=87, 452.56.

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 Feasibility Study on Palm Oil Distribution in Cross River State

Difference between Feasibility Study and Business Plan

Feasibility study is an analysis of the viability of a business idea.

Feasibility study is also defined as an assessment of the practicality of a

proposed plan or method.

Wikipedia defines feasibility study as an evaluation and analysis of the

potential of a proposed project. It is based on extensive investigation and
research to support the process of decision making.

However, investopedia defines business plan as a description of a

business services/products and how the business will achieve its goals.
The plan includes overall budgets, current and projected financing,
market analysis and marketing approach. In a business plan, a business
owner projects revenues and expenses for a certain period of time and
describes operational activity and costs related to the business.

Reference:
Okorie Ifeoma (2012): Business Plan on the establishment of Poultry
Farm/Feasibility Study.
www.investopedia.com. Definition of Business Plan.
www.Wikipedia.org/feasibilitystudy

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