Onome Amuge
Industry analysts have expressed concerns that prices of palm oil in Nigeria are poised to increase following Indonesia’s decision to raise its export levy on crude palm oil (CPO) from 7.5 per cent to 10 per cent.
The move by the world’s leading producer of the commodity, is considered a strategy to finance domestic biofuel initiatives and the replanting of the country’s ageing palm plantations. The new tax, which took effect on May 17, will also apply to other palm-based products and is intended to support smallholder farmers, biodiesel production, and reforestation efforts.
The policy shift comes at a time when global palm oil prices remain elevated due to tight supply, particularly from Malaysia, the second-largest producer. Palm oil has already lost its position as the cheapest vegetable oil in international markets, contributing to rising food inflation across numerous regions, including Nigeria which relies significantly on imports.
Indonesia, which accounts for approximately 60 per cent of global palm oil demand, is increasingly prioritising the commodity for its domestic energy needs. The government has recently increased the mandatory palm oil blend in biodiesel from 35 per cent to 40 per cent, with further plans to raise it to 50 per cent by 2026.
In addition, a separate initiative to introduce a 3 per cent palm oil blend into jet fuel is under review for potential implementation next year. By the end of April 2025, Indonesia had already consumed 4.44 million kilolitres of biodiesel and aims for a total distribution of 15.6 million kilolitres by the year’s end, further tightening global export availability.
In a parallel effort to address declining yields from its ageing palm oil estates, Indonesia is also exploring innovative solutions such as introducing African weevils to improve pollination and productivity.
Approximately one million weevils sourced from Tanzania are slated for testing in North Sumatra before potential widespread release into selected plantations. Experts believe this biological intervention could offer a sustainable pathway to reverse production stagnation without resorting to further expansion into forested areas – a practice that has drawn significant environmental criticism.
While Indonesian President Prabowo Subianto has recently downplayed the role of oil palm trees in deforestation, environmentalists and researchers argue that improving productivity on existing plantations is the more sustainable approach.
Meanwhile, back in Nigeria, the world’s fifth-largest palm oil producer, policymakers and industry leaders have noted that they are increasingly focused on reducing the country’s reliance on imports, which currently account for nearly half of its two million metric tons of annual palm oil consumption.
In Edo State, Nigeria’s palm oil heartland, major players like Presco and Okomu Oil have reported strong financial performance, posting record after-tax profits in 2024 despite a challenging economic environment.
In another development, the Oil Palm Growers Association of Nigeria (OPGAN) recently launched a five-year development strategy spanning 2024 to 2029, with the aim of replanting 1.5 million hectares of oil palm. This initiative, analysts believe, has the ambitious goal of elevating Nigeria’s global production ranking from fifth to third through a combination of increased investment, technological innovation, adoption of sustainable practices, and a more inclusive growth model.
