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Saturday, March 11, 2017

How to Start a Cassava Processing Mill and Processed Cassava Exportation Business in Nigeria


Cassava processing is a very lucrative and versatile venture to do in Nigeria but it is also one of the most untapped opportunities many Nigerians are not looking at maybe because it’s too common to be viewed locally as a goldmine.

The cassava crop can yield up to 15 different products when processed and each of these products has relatively large markets. In Brazil for instance Cassava is processed into ethanol which can be used for powering automobile vehicles whereas China purchases Cassava pellets from Nigeria for use in producing industrial Caramel, glucose and High quality cassava flour for the food processing industry.

Cassava flour is a good substitute for wheat flour and it alone generated over N25 billion from 125,000 tons to the Nigerian economy in 2014 mostly serving the domestic food market whereas Nigeria imported over N635 billion worth of wheat flour in 2014 from the USA we lose at least $2 billion per annum in foreign exchange (FAO, 2014) to our local preference for wheat flour over cassava flour. Even the N25 billion realized  from Cassava flour processing in 2014 is a far cry from the over $28 million that Costa Rica which produces far less Cassava as Nigeria generated in the same year from exports to Europe and India. So the Cassava processing industry can offer Nigeria a lot of income and wealth if well harnessed in addition, one large scale cassava processing mill can employ over 280 people and if Nigeria has at least 1,000 mills we are talking of creating at least  over 280,000 jobs.

What is the Market size of Cassava Processing and exportation opportunities in Nigeria?
From the 35 million tons of cassava we produce we can process 20 million tons into various products such as 2 million tons of animal feeds which can potentially generate N160 billion, 3 million tons of industrial starch which can generate N150 billion and 4 million tons of ethanol which can generate over N320 billion that’s over N620 billion per annum from 3 products only, the drawback is that garri could become more expensive for the local market. From exportation Nigeria can generate $400 per ton from 50,000 tons of cassava pellets exported to China which is $20 million per annum.

Who are the likely customers for Processed Cassava products and where can they be found?
Locally our cottage industries could purchase products derived from cassava. For instance, manufacturers of perfumes and insecticides, pharmaceutical companies, breweries, Noodles and Pasta companies, poultry and livestock farms among others, internationally trading companies that supply overseas food processing companies would order for Cassava Pellets.

Where is the money in Cassava Processing? Is it the domestic market or the exports market?
The domestic market is far more lucrative than the exports market except if you want to specialize in processing cassava pellets then there is a good market for it in China however most products that can be derived from cassava processing are more profitable for the local market, Garri alone has a huge local market that can guarantee year round sales  and industrial starch also has a huge market.

What is the Future of Cassava Processing in Nigeria?
  • Production of Industrial starch is expected to continue increasing due to increased local demand from factories and rising cost of importation
  • Bakery industry will continue to demand for HQCF as the alternative is becoming too expensive for them to purchase
  • The cost of purchasing animal feeds is ever on the rise thus cassava processing can offer cheaper alternatives to existing animal feeds sources
  • Nigeria’ population is increasing by over 3% per annum which means there will be a large market for Garri, starch and other cassava products

List of Products that can be derived from Cassava Processing

  • High quality Cassava Flour which can be used in baking bread, cakes etc
  • Industrial Starch – is used in production of custards, salad dressing, food additives, making noodles and pasta and also as food thickeners and stabilizers.
  • Industrial Caramel – which can serve as colouring to drinks and used in flavoring popcorn among other edibles
  • Ethanol and bio fuel – Cassava can be processed to produce ethanol and other bio fuels which can be used in powering automobile machines and some industrial machines. Ethanol is also used in producing perfumes, spirits, drugs, insecticides  and varnishes
  • Garri – is a popular staple in Nigeria consumed by more than 80 million people on a daily basis
  • Glucose syrup – it can also be processed into sweeteners like glucose syrup which is an alternative for sugar and saccharine. Large manufacturers like beverage and food processing companies need glucose as sweeteners and additives to their products
  • Animal feeds – cassava can be processed into livestock feeds for pigs, goats and poultry animals and the local market for this product is over N800 billion as of 2016
  • Canned Juice and Jams cassava can be processed into juice and can be combined with other ingredients to make jam

When I start what are the likely Challenges and Threats I’ll have to deal with?

  • Cheap and/or preferred Substitutes in high demand: Many of the cassava derivatives have cheaper or more preferred substitutes which the local market is attracted to. For instance Wheat flour and is still largely preferred to cassava flour and cassava starch is not the number one source of stabilizers and thickeners in food processing industry
  • Processing Challenges: The processing of cassava into its derivatives requires appropriate technology and techniques and both are in very short supply as the locally fabricated machines are at best average and some of the processing techniques are labour intensive. An optimum processing facility that can produce quality cassava products is also very expensive to acquire.
  • Marketing Challenges: Locating buyers especially if you’re into exportation is not easy, first many international buyers prefer to buy from Costa Rica and Brazil because of superior processing and storage of cassava roots. Secondly, the price of cassava per ton is relatively low compared to other cash crops and doesn’t encourage large scale cultivation
  • Finance and Credit facilities: Cassava processing needs adequate funding to grow and only the bank of agriculture and bank of industry are disposed towards this industry and both have limited funds available.

How much Investment do I need to make in order to start a Cassava Processing Mill in Nigeria?

Capital Investments
Factory Building
N6,000,000
Auto Fryer
N1,500,000
Peeler
N1,000,000
Presser
N850,000
Grater
N600,000
Hammer Cyclone
N500,000
Sieve
N450,000
Scales and Sealing machine
N290,000
Cabinet Dryer
550,000.00
Manual Fryer
200,000.00
Cassava Chipper
200,000.00
25 KVA generator
N400,000
Installation costs
N757,000
Logistics
N200,000
Subtotal
N13,294,000
Admin Startup Expenses
Contingency
N3,200,000
Others
N9,400,000
Subtotal
N13,600,000
Grand total
N27,594,000

What is the return on investment, payback period and expected first year sales?
An investment of N28 million can yield N6 million plus in net profit after tax from Garri and Flour processing alone. This means you can recoup your investment in 4.5 to 5 years based on projected first year sales of N164 million and 15% average year on year sales within same period.

For more information on how to start a cassava processing mill in Nigeria or to have a professionally written business plan for you give me a call: 0803 206 4106 or email me at: paulonwueme@gmail.com

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