Charcoal Business: Startup Strategy [May 2020]

Charcoal is a very valuable fuel for household and industrial uses, it has been in use since man started cooking food. It is the product of an incomplete or partial combustion of carbon mainly from wood. Traditionally it is prepared by burning wood from some particular kinds of trees. The burning process is carried out in a controlled environment with little supply of air and for some calculated amount of time determined by the producer. Most of the wood used for this purpose are gotten from trees which of the general category called hardwoods, predominantly found in the North-Central states of Nigeria. Its demand in Nigeria as a source of fuel over time has remained almost constant, this is because of the following reasons.

1. It is cheaper to buy when compared with other household fuels like kerosene and cooking gas.
2. It cooks food faster than kerosene.
3. It does not stain cooking pots with black carbon soot.
4. Its supply is consistent unlike the supply of other fuels which have inconsistent supplies arising from factors like importation delays or strike actions by the local marketers.
5. It can be sourced locally and almost everywhere in Nigeria unlike kerosene and gas which require special stations or plants to store and sell them.
6. It can be prepared locally unlike kerosene and gas which go through complex refining process.
7. There are some special types of cooking which cannot be done properly and traditionally without the use of charcoal. This include traditional outdoor grilling and barbecue or roasting of corn and plantain.

Charcoal is a fuel which has high demands especially in big cities like Abuja, Lagos, Port Harcourt and Kano. This is because a lot of people in this cities consume a lot of roasted foods like roasted fish, corn, plantain and all other forms of barbecues. Most foreigners in these cities especially Italians find the use of charcoal very important because they use it in preparing most of their local recipes.

Business Opportunity

The business opportunity in selling Charcoal comes from the fact that despite its high demand in the cities, its availability is always limited because its production is almost  impossible in the cites. In cites, there are practically no tress to cut or burn down, this means almost all charcoal highly consumed in cites are brought in from neighboring rural areas. Looking at this, one can already see a business opportunity in supplying charcoal and basically involves going to the rural areas, buying it and selling in the cities.

How to go about Buying and Selling Charcoal to make Money.

The following are the necessary steps to take into consideration when thinking of starting the charcoal business:

1. Find Interested Buyers by

• Visiting hotels to find out what their needs for charcoal are.
• Visiting big stores and shopping malls like ShopRite, Amigo (Now 4U supermarket) to find ways of becoming their supplier.
• Visiting several restaurants especially foreign ones like Chinese and Italian restaurants.

1. Get a stand or shop in the market where you can offload and sell directly to customers.
2. Carry out general marketing of your business.
3. Locate areas where corn, plantain and fish are roasted and ask them if you could supply them with charcoal.
4. Package your product in small sizes properly sealed because of its dirtying nature and need to keep away from moisture.

Business Summary

This business in summary is all about buying, transporting and selling of charcoal. A trader buys the charcoal from rural areas close to Cities, make’s arrangements to transport them to the City where he/she sells to customers. The basic steps for carryout the business are:

1. Making inquiries on where to buy, preferably rural areas within a 200 km radius form the City. This can be carried out by making a visit to those areas and making necessary inquiries. If you are in Abuja and want to do this business, Nasarawa a town located approximately 55 km from Abuja should be the right place to buy.
2. Making inquiries from the producers/sellers to know the appropriate time to buy.
3. Making available sufficient startup capital. The sellers don’t sell on credit and most likely you will be buying from many sellers to make up the total quantity you require. It is a cash n carry transaction.
4. Scouting for quality and cheap charcoal to buy. By eye inspection, you can choose the ones which are lighter in colour because they have a higher carbon content. Also knowledge of the type of tree it was prepared from is also very important.
5. Making payments is not usually a problem because a lot of money is not normally involved in this business so payments can be made on the spot immediately after purchase.
6. Making arrangements for transporting the charcoal involves hiring a suitable truck or pickup from the nearest location to the point of purchase. Most of the sellers are located along the major roads so it is easy to pick up the bags of charcoal as you drive along.
7. Supplying to customers who have earlier registered their interest.
8. Storage away from water.

Who can do this business?

Government workers, students, youths, school leavers, bankers, investors, supply-chain managers, people in paid employment, retirees, entrepreneurs, anyone interested in achieving a financial break through by establishing a successful business.

When to do this business

Anytime of the year.

Where to do this business

The business can be done anywhere but preferably in Big Cities and on a large scale.

Who to know

Buyers, Sellers Transporters, and Local Producers

Start-Up Capital

N 50,000 – N1, 000, 000.

You can start up at any financial level you are currently.

Returns on Investment

100%-600% (Depending on the initial capital and the type of buyer). The price of a bag of charcoal in the rural area is about ₦ 2, 000. A bag can be repackaged into 7 smaller bags which are sold for ₦ 2, 000 each. So practically a bag which was bought for is sold for ₦ 14, 000. That’s a gain of ₦ 12, 000 from each bag without transportation and other logistics.

Business registration/company name

Not required for this business but you can learn more about registering a company by reading our step-by-step guide

Where to stay

You can stay in a hotel in the town where you traveled to make purchase. But most times buying and transporting can be concluded in one day so there is little or no need to stay in a hotel.

Demand

The demand for charcoal is always high all year round especially during festive periods and periods when kerosene and cooking gas are scarce. Generally the demand remains constant over a long period of time.

Price Negotiation

Price negotiations can be reached depending on current market price and the buyer’s bargaining power. There are no imposed fixed prices.

Transaction completion period

Buying: this takes an average of 1 day, depending on the buyer’s buying-price limit and proximity to the sellers or producers. If he/she traveled from a far distance, he/she may not want to stay for too long where he/she is putting up, so it all depends to a large extent on buyer. It is advisable to find buyers closer to the cities (less than 200 km)

Selling: takes about 1-2 days depending on the Trader’s market price target and quantity of charcoal initially purchased.

Where best to buy/Location of Charcoal Producers

Rural areas with a 200 km radius to the major City or visit.

Storage

Charcoal is a fuel and so should be stored away from any form of moisture or other fuels and anything that can ignite it.

Business risks

Business is a risk they say, all businesses have risks but the ability to identify them am avoid the ones that need to be avoided or take calculated risks makes one successful. Here are some identified risks:

1. Be careful not to be scammed in any way.
2. Make sure the charcoal is of good quality with a high carbon content, from a good type of hardwood and is properly prepared.
3. Please don’t make any transactions over the internet or phone, simply visit the sellers or producers to make your purchase.

Security and safety tips.

1. Avoid traveling at night as much as possible.
2. Don’t travel with cash other than that needed for the transaction.
3. These days, hotels are available almost everywhere in the country.
4. Where possible, try to make payments inside the banking hall.

You can also check other business ideas here