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My Hustle: How I make money from operating a cold room business

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Cold Room Business in Nigeria - nairametrics

Cold room business is one of the most lucrative in the SME sector. Every day, some businessmen and women across Nigeria work hard to take advantage of the ever-present need for seafood, poultry products, and beef. Talk about meeting people’s basic needs whilst making cool cash in the process!

Mr Muraina Mobolaji is one of those businessmen involved in the cold room business. In his office located somewhere in the Iyana-Ipaja area of Lagos, he disclosed how much the business is booming. According to him, livestock products are regulars on most Nigerians’ dinner plates. And since the commodities are often perishable, there is the need to preserve them.

But Mr Muraina, 34, has not always been a businessman; much less a cold room operator. He was once a secondary school teacher who became frustrated by the “poverty-pay” and the unpleasant conditions of employment he was subjected to. According to him, he realised at some point that he could no longer take it. As a result, he began putting plans together to start his business.

Not surprisingly, starting a new business was not an easy decision for the man. But he didn’t it anyway, finally taking the leap about four yes ago by first resigning from his teaching position, and then establishing the cold room. Today, he sells assorted fish, prawns, chicken, turkey, etc.

What is the cold room business about?

Basically, this business entails the preservation and distribution of perishable (livestock) food items; direct from the farms to people’s dinner tables. As you may well know, animal farm produce (such as chicken, turkey, and seafood) typically passes through a long distribution channel before they end up in people’s pots of soups and stews. During this long distribution process, a lot of business activities occur. It is here that SME business owners such as Muraina come in by making sure that your chicken is available for consumption at all times; albeit fresh and with all the nutrients intact.

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Please note that the cold room business also involves the sale of other commodities such as frozen yogurt, ice block, ice cream, soya milk, etc. But for the purpose of this article, a clear focus is on the preservation and sale of meat products.

Frozen chicken

Frozen chicken removed from the carton and ready to be cut.

Cold room operation is a multi-billion naira business

Nigerians consume about 1.2 billion birds (mainly chicken and turkey) every year. In the same vein, they consume some 3.32 million metric tonnes of fish annually, according to statistics by the Fishery Committee for the West Central Gulf of Guinea. These stats are indicative of a huge business environment where both farmers and marketers have the potential to make billions in revenues. But just as it is a profitable venture, cold room business also costs quite a lot to go into.

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How much is needed to start a cold room business?

After quitting his teaching job, Mr Muraina had to combine his life savings with a bank loan in order to finance his cold room business. According to him, he realised after completing the feasibility study that in order to start and scale the business, he would need at least ₦8 million.

In his own words-

“You know, in every business, you have to either start small or big. I categorise myself as a wholesaler, in the sense that I sell mostly to retailers who in turn sell to consumers. Therefore, to succeed as a wholesaler in this business, one would definitely need to have more seed capital than those starting as retailers.

After conducting my research, I realised that I needed at least ₦8 million before I could start and favourably compete in the business. So I had to get the money by all means.”

 What is the money needed for?

As an intending cold room owner, there are two important things that must be sorted out from the onset. These are your equipment- the cold room storage facility, and your power generator. According to Mr Muraina, there are many companies in Nigeria that specialise in the manufacturing, installation, and maintenance of these facilities.

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Interestingly, a bulk of his seed capital went into having a large cold room panel purchased, shipped and installed at his present location. He spent about ₦4 million for that alone. He also has a Mikano power generator right beside the cold room which he said was purchased for some ₦1.5 million; second-hand price.

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He also needed to spend money to lease the small patch of land on which his business is situated. In the same vein, Mr Muraina had to register his business with the appropriate government agencies, particularly the National Food and Drug Administration and Control (NAFDAC) which gave him the necessary accreditation he needed to operate his business.

Cold room business in Nigeria

A picture of the power generating set beside Muraina’s cold room. This generator powers the facility when PHCN’s electricity is not available.

How does the business work?

Most of the birds and fish sold in Nigerian cold rooms are imported from outside the country. This increases the cost of doing business for Mr Muraina. Unfortunately, he has no choice but to establish relationships with importers of the products who supply to him at subsidised rates. He, in turn, sells to retailers within the Iyana-Ipaja environs. These retailers include fish sellers at popular markets, women who walk around neighbourhoods singing and attracting people’s attention to come and buy fish, and those who have stores with deep freezers where customers come to buy fish, chicken, or turkey.

Prices differ, depending on what produce and quantity of produce a customer are buying. According to Muraina, “a carton of chicken can sell for up to ₦14,000, depending on the season. Turkey is typically the most expensive, with a carton selling for nearly ₦16, 000. Fish is the least expensive. There are different types of fish, and their prices vary. But for Titus which is mostly demanded by customers, a carton is between ₦11, 000, and ₦10, 000.

“Now because I do sell to end-users sometimes, and some people prefer to buy either half a carton or a quarter of a carton, what I do is to simply divide the price of a particular product by the size a customer wants to buy. However, I do not sell anything less than a quarter of a carton.”

Please note that these prices were confirmed by a roadside fish seller at Iyana-Ipaja bus garage who said that although she goes to Ijora (where the commodities are supposedly cheaper) to buy her goods, the prices are still relatively the same.

Meanwhile, speaking about how much he earns, Muraina disclosed that he can make as much as ₦100,000 in sales on a good day. This, therefore, translates to approximately ₦2,000,000 in monthly sales. This is the kind of money he could never have dreamt of seeing in a month as a public school teacher.

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Cold room business in Nigeria

A picture depicting roadside fish sellers somewhere at Iyana-Ipaja bus garage. These are the example of retailers who buy from wholesalers like Muraina, and resell to the end users.

But there are some challenges…

According to the businessman, the cost of running his business is a big challenge. Electricity is the biggest challenge for him, he said. Without an adequate power supply, a whole stock of products could get wasted and result in loss. Unfortunately, the epileptic nature of power supply in the country has not helped his business at all.

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“Power supply in Nigeria is in such a very bad state. And it particularly affects people like me who are in this kind of business. I need to ensure that in a day, this facility has an average of fifteen hours of power supply. But where in Nigeria can you get that? Consequently, I have to depend on the generator most of the time. And it is expensive. On average, I spend about ₦20, 000 on diesel every month. I also spend nearly ₦35,000 monthly on electricity bills, payable to the authorities. The unfortunate thing is that most times, they just bring the bills even without giving us enough light through the month. But then I would have no choice than to pay.”

Other challenges include the cost of maintaining both the cold room and the generator. According to him, compulsory maintenance work is always done on the cold room panel once in every three months. This costs about ₦30,000 each time.

Muraina is also “heavily taxed by the Lagos State Government”. Although he refused to disclose exactly how much he pays in monthly taxes, he believes the money is too much and should be reduced to encourage the growth of small businesses like his.

“There are many challenges facing this business. Electricity is the main one. The government needs to focus on solving the electricity problem in order to encourage the growth of small businesses. I always wonder why any government should be so concerned about collecting taxes by the end of every month without even thinking about whether or not businesses are making money.

Also, they should make loans easier for people to access. I had a lot of trouble trying to access a loan when I first started. You see all these organisations parading themselves as “saviours” of entrepreneurship and promising to provide financial facilities to SMEs, sometimes they really don’t. Their conditions are too much to fulfill. And I think it discourages some aspiring entrepreneurs.”

Cold room business in Nigeria

Another view of Muraina’s cold room and generator.

On the brighter side, it is easy to start making a profit in the cold room business. This is due to the fact that many Nigerians are constantly in need of this foodstuff. In Muraina’s case, even though he initially faced competition in the business, it was not long before he broke even; thanks to his established contacts, customer base, and the strategic location of his shop.

In conclusion, cold rooms are playing a huge role in meeting needs, solving the unemployment problem, and stimulating economic growth. In this light, therefore, governments at all levels should work assiduously towards creating a conducive environment for these businesses to operate, particularly by making adequate power supply available. In the same vein, investment in the agriculture sector should be increased in order to reduce the cost of importation of these livestock products which contributes to the hike in their prices.

Emmanuel is a professional writer and business journalist, with interests covering Banking & Finance, Mergers and Acquisitions, Corporate Profiles, Brand Communication, Fintech, and MSMEs. He initially joined Nairametrics as an all-round Business Analyst, but later began focusing on and covering the financial services sector. He has also held various leadership roles, including Senior Editor, QAQC Lead, and Deputy Managing Editor. Emmanuel holds an M.Sc in International Relations from the University of Ibadan, graduating with Distinction. He also graduated with a Second Class Honours (Upper Division) from the Department of Philosophy & Logic, University of Ibadan. If you have a scoop for him, you may contact him via his email- [email protected] You may also contact him through various social media platforms, preferably LinkedIn and Twitter.

2 Comments

2 Comments

  1. dayo

    April 3, 2018 at 3:30 pm

    insightful!!!

  2. Anonymous

    December 15, 2019 at 9:16 pm

    nice

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MSME

432,000 business applied for FG payroll support, 70,000 shortlisted 

70,000 Nigerian businesses have been shortlisted for the Payroll Support of FG’s Survival Fund Grant Scheme.

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Companies Allied Matters Act (CAMA)

70,000 businesses in Nigeria have been shortlisted from the 432,000 businesses that applied for the Payroll Support of the Federal Government’s Survival Fund Grant Scheme. Many states did not meet their quota and plans are ongoing to seek an extension after the portal closed 5 days ago.

Mr. Tola Johnson, the Project Coordinator of PDO and Special Assistant to the President on Micro, Small and Medium Enterprises (MSMEs), confirmed this to the DailyTrust.

READ: CBN disburses N50 billion loans through MFBs’ IT platform

Back story

Nairametrics had earlier reported plans by the FGN to roll out a N2.3 trillion stimulus package and survival fund for Micro, Small, and Medium Enterprises (MSMEs) to stay afloat amid the economic challenges imposed by the pandemic.

The survival fund includes payroll support for three months and a guaranteed off-take scheme among others, all under the National Economic Sustainability Plan (NESP).

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READ: PenCom should pay 50% of workers’ pension at retirement – TUC

What they are saying

Commenting on the latest development, Mr. Johnson said, “As at the day the portal closed to applicants for Payroll Support Scheme, we had 432,000 businesses that applied. However, we have shortlisted 70,000 that met the requirements. These businesses have uploaded over 400,000 staff for us to pay for three months.’’

Mr. Johnson pleaded for an extension, noting that though the portal closed on the 15th of October, 2020, many states did not meet their quota

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READ: CBN reserves 60% of N220 billion MSMEs fund for women

“The Project Delivery Office, which I head, is taking this plea for an extension to the Steering Committee headed by the Minister of State for Industry, Trade and Investment, Ambassador Mariam Katagum.

“To know whether to extend the date for online application into the payroll support scheme will be based on the data available to us.’’

He concluded by emphasizing the need for BVN and digitalizing the process, noting that business owners will not be paid directly. Only their staff will be paid subject to the provision of BVN.

READ: CBN reserves 60% of N220 billion MSMEs fund for women

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Why it matters

The support is a kind gesture by the FG, aimed at alleviating the impact of the pandemic on MSMEs. It is a way of averting massive job loss, creating income for the staff, and stimulating the economy, as the impact of MSMEs in developing the economy can not be overemphasized.

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Business

AGSMEIS: CBN expands beneficiaries to 14,638

The CBN has extended the number of beneficiaries under the AGSMEIS to 14,638 applicants.

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P&ID dispute: UK Court orders $200 million guarantee to FG, Leaked letter by Poultry Farmers Association triggered CBN emergency approval to import maize, nImplications of CBN's latest devaluation and FX unification, current account deficit, IMF, COVID-19, CBN OMO ban could give stocks a much-needed boost , CBN’s N132.56 billion T-bills auction records oversubscription by 327% , Nigeria pays $1.09 billion to service external debt in 9 months , Implications of the new CBN stance on treasury bill sale to individuals, Digital technology and blockchain altering conventional banking models - Emefiele  , Increasing food prices might erase chances of CBN cutting interest rate   , Customer complaint against excess/unauthorized charges hits 1, 612 - CBN , CBN moves to reduce cassava derivatives import worth $600 million  , Invest in infrastructural development - CBN Governor admonishes investors , Credit to government declines, as Credit to private sector hits N25.8 trillion, CBN sets N10 billion minimum capital for Mortgage firms, CBN sets N10 billion minimum capital for Mortgage firms , Why you should be worried about the latest drop in external reserves, CBN, Alert: CBN issues N847.4 billion treasury bills for Q1 2020 , PMI: Nigeria’s manufacturing sector gains momentum in November, CBN warns high foreign credits could collapse Nigeria’s economy, predicts high poverty, MPC Member, BVN, Fitch, Foreign excchange (Forex), Overnight rates crash after CBN’s N1.4 trillion deduction, Nigeria’s foreign reserves hit $36.57 billion; Emefiele keeps his word on defending the naira, CBN to support maize farmers, projects 12.5 million metric tons in 18 months, BREAKING: CBN Upscales Greenwich Trust Limited, grants it's operational license for merchant banking, AGSMEIS: CBN expand beneficiaries to 14,638.

The Central Bank of Nigeria has extended the number of beneficiaries under the Agri-Business Small and Medium Enterprise Investment Scheme (AGSMEIS) Loans to 14,638 applicants.

This information is contained in a communique from the last MPC report of CBN verified by Nairametrics. The communique also revealed that 250 SME businesses, predominantly the youths, have also benefited from the Creative Industry Financing Initiative.

READ: FG, Labour agree cut in electricity tariff for 3 months, to distribute 6 million free meters

In addition to these initiatives, the CBN is set to contribute over N1.8 trillion of the total sum of N2.30 trillion needed for the Federal Government’s 1-year Economic Sustainability Plan (ESP), through its various financing interventions using the channels of Participating Financial Institutions (PFIs).

Backstory

A few months ago, the CBN announced that it has unveiled a framework that will integrate a non-interest window in all its intervention programmes aimed at supporting businesses and households that have been impacted negatively by the COVID-19 pandemic. Nairametrics had earlier reported on how to access the AGSMEIS fund.

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READ: Landlords offer incentives to counter “work from home” induced vacancy rates

Why it matters

Given the impact and accompanying harsh consequences of the pandemic, coupled with the present regime’s focus on diversification of the economy, this intervention is therefore aimed at achieving the diversification goal, reflating the economy, creating more jobs and income, managing inflation, and setting the economy on the path of recovery.

READ: Nigeria records lowest remittances from abroad since 2008

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CBN in the latest communique of its last MPC meetings also revealed that it has disbursed a total of N3.5 trillion in interventions in the wake of the COVID-19 pandemic as of September 22, 2020. The breakdown of the disbursement includes:

  • Real Sector Funds: N216.87 billion
  • Targeted Credit Facility: N73.69 billion
  • AGSMEIS: N54.66 billion
  • Pharmaceutical and Health Care Support Fund: N44.47 billion
  • Creative Industry Financing Initiative: N2.93 billion

READ: CBN discloses how much has been disbursed from N50 billion COVID-19 intervention fund

In terms of project distribution, a total of 128 projects that comprises 87 real sector funds project and 41 health-related projects have been funded. In like manner, about 120,074 have received funding under the Targeted Credit Facility.

READ: CBN disburses N50 billion loans through MFBs’ IT platform

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Economy & Politics

N75 billion Nigerian Youth Investment Fund to be rolled out before end of October – Minister

Youths are expected to come up with brilliant ideas that will enable them to access between N250,000 and N50 million each.

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Youth Investment Fund:  Ministry of Finance and CBN to launch provision of funds- Minister

The N75 billion worth Nigerian Youth Investment Fund (NYIF) will be rolled out before the end of October 2020. This was disclosed by the Minister of Youth and Sports Development, Mr Sunday Dare, in a statement on Wednesday, according to NAN.

The statement, which was issued by the Minister’s Assistant Chief Information Officer, Olatunji John, explained that the ministry challenged youths to come up with brilliant ideas that would enable them to access between N250,000 and N50 million of the N75 billion Nigerian Youth Investment Fund for sustainability.

READ: Gains of MTN listing on the Capital Market – NCC

He stated, “The programme is about to be rolled out before the end of this month. President Muhammadu Buhari approved N75 billion in three years because he believes in the dream of youths, aimed at lifting 10 million Nigerians, including youths out of poverty before 2023.”

READ: FG may soon subsidize phone data cost– Sunday Dare

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What you must possess

While urging the youths to take advantage of the opportunity, Dare stated that prospective applicants must show clearly that they have the market, resources and manpower to access the fund.

“The process for accessing the fund would be fair to all youths aged 18 to 35, regardless of their ethnicity or social status,” he added.

READ: NECA seeks unemployed Nigerians’ data to effect FG’s stipend payment  

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According to him, the move became imperative “because building a youthful population that is empowered and successful, is one of the cardinal objectives of this administration.

“For the first time, this country is investing directly in youths. So, government is taking a good risk on our youths, which it hopes will awaken their creative and genius innovative ideas.”

READ: Large BTC entity transfers over $100 million worth of Crypto

The Minister recalled that apart from the Federal Government investment fund, the ministry had initiated other youth-centered opportunities such as the Digital Literacy, Entrepreneurship, Employability and Leadership Skills (D.E.E.L) and Work Experience Programme (W.E.P).

Others, he said, included the Digital Youth Nigeria (DY.ng) and Nigeria Online Youth Assembly (NOYA) programme, all carefully crafted to address unemployment and employability of youths.

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READ: Total E&P Nigeria appoints Bandele as new Deputy Managing Director

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Back story: On October 1, 2020, Nairametrics reported that the Central Bank of Nigeria (CBN) announced that the NYIF would soon be disbursed.

The apex bank made the announcement via its Twitter handle on Thursday, while the nation marked its 60th Independence anniversary.

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