Nigeria struggling to attain palm oil sufficiency as importation lingers

Nigeria has recently recorded a decline in oil palm importation, with trade inflow data showing that importation dropped 46.9 percent to $186.7 million in 2021. The dip, according to industry analysts, is a significant step towards self-sufficiency considering that Nigeria imported $351 million worth of the commodity in 2020.

The development has been attributed to the federal government’s leash on importation through the Central Bank of Nigeria’s forex restriction policy, surging price of the commodity to over $1,100 per tonne, and supply crunch in the global market.

Despite the drop in annual import, indigenous oil palm producers and stakeholders have registered disappointment that the country still spends over N60 billion on palm oil import annually, noting that the high figure is an indication that Nigeria is still a long way from attaining self-sufficiency unless far-reaching actions are taken to boost local production.

Their displeasure was further fuelled by data from the National Bureau of Statistics (NBS), which showed that oil importation from Malaysia was valued at N13.5 billion in the first quarter of 2022, a 72.1 percent increase compared to the previous quarter.

Speaking at a forum organised by Malaysia External Trade Development Corporation (MATRADE) in Lagos, Fatai Afolabi, advisor to Plantation Owners Forum of Nigeria (POFON), noted that the Nigerian palm oil industry has enough capacity to actualise self-sufficiency and generate more sustainable employment compared to what it is currently offering.

In a comparative analysis of Nigeria’s palm oil production against that of Malaysia, Afolabi, who is also the managing director of Foremost Development Services Limited observed that 40 percent of palm oil plantations in Malaysia were owned or farmed by small-scale farmers, whereas it was over 70 percent small-scale owned in Nigeria.

He further disclosed that unlike Malaysia that has over 5 million hectares of oil palm yield and a galloping industry, Nigeria has just a little over 600,000 hectares under improved oil palm planting, with a less-established oil palm industry.

Afolabi pointed out that palm oil had been a major factor in Malaysia’s economy, reducing poverty from 50 percent in the 1960s to less than 5 percent. According to him, Nigeria can also achieve poverty alleviation and generate massive employment through the industry of which Nigeria was one of the world’s largest export earners before the discovery of crude oil in the 1960s.

A 2021 market data collated by the United States Department of Agriculture (USDA) showed that Nigeria consumes an estimated 2 million metric tonnes against a production volume of 1.4 million metric tonnes. It also disclosed that the highest palm oil consuming country in Africa imported about 4.1 million tonnes of palm oil between 2012 and 2021, over one-third of the country’s production within the period. This, according to the USDA, is a far cry from the 1950s and 1960s when oil palm farming was a key sector of the Nigerian economy and the country accounted for about 43 percent of global output.

Industry reports also showed that Nigeria was considered the leader in the world palm oil market as the country’s output flourished beyond domestic consumption to a globalised commodity. In what has often been cited as one of the most miserably misappropriated economic opportunities in Africa, the past decades have seen the country focus largely on crude oil production/exportation at the detriment of oil palm production. This has consequently relegated Nigeria to fifth position on the list of global producers, behind Indonesia, Malaysia, Thailand, and Colombia.

To address the situation, the  federal government launched a $500 million initiative in 2019, aimed at increasing funding to oil palm producers through low interest loans and raising domestic production 700 percent higher by 2027.

Godwin Emefiele, who reiterated the government’s commitment to improved oil palm production at a stakeholders’ meeting held in Abuja, noted that the plan was designed to support improved production of palm oil to meet not only the domestic needs of the market, but to also increase exports to improve forex earnings.

Emefiele assured that the “half a billion dollar” plan would make Nigeria self-sufficient in palm oil between 2022 and 2024. He also raised optimism that with the support of the state governments, Nigeria could ultimately overtake Thailand and Columbia to become the third largest producer over the next few years.

Commenting on the initiative, stakeholders in the oil palm industry said it has resulted in improved production albeit at a slow growth. They further argued that though production increased from an average of 1.1 million tonnes in 2019 to 1.4 million tonnes in 2021, the country’s production capacity remained meagre compared to volumes recorded by Indonesia and Malaysia in the period under review.

Analysts also emphasised that despite having 80 percent of market share, an estimated 4 million smallholder farmers in Nigeria’s oil palm sector are unable to maximise the opportunity available to them due to relatively low yields, limited access to adequate processing equipment and affordable financing, continued reliance on ageing palm trees, low quality seedlings, and poor expertise. They added that oil palm production has remained heavily under-exploited in Nigeria with outdated processing methods majorly practiced in the country resulting in high production deficits and supply gaps.

Iyare Harrison, an oil palm producer based in Benin, Edo State, opined that land ownership is a major constraint as oil palm cultivation occupies large hectares of land and it is getting difficult to get these lands as residential areas and industries are gradually encroaching on available spaces leaving little space for oil palm production.

Harrison added that the majority of these parcels of land are communally owned, which makes it difficult to acquire them on lease for a more extended period of time during which the plants would have matured and started yielding.

He noted further that operators at the processing phase suffer infrastructural challenges such as poor road networks, dilapidated nature of some of the oil processing mills which makes milling unsustainable in many cases owing to frequent breakdowns, as well as the epileptic power supply from the national grid which affects some of the oil-processing machines (millers) that depend on electricity.

Alphonsus Inyang, president, National Palm Produce Association of Nigeria (NPPAN), who weighed in on how the country can better exploit its oil palm production potentials, recommended that the government invest in the development of at least 500,000 hectares of oil palm plantations annually.

According to Inyang, the oil palm industry is one of the most lucrative agricultural commodities with the ability to add $15 billion revenue to the country’s GDP annually. As such, he advised the CBN to set aside a special fund of at least N200 billion, specifically for the development of the oil palm sector.

The NNPAN president called on local palm oil producers to restrategise their efforts at both production and organisation to be able to attract the necessary funding needed for improved and increased production.

The over 200,000 members of the association were encouraged to promote formation of cooperatives and clusters for easy access to loans from financial institutions, while also collaborating with the Nigerian Institute for Oil Palm Research (NIFOR) to boost quality production.

CSL Stockbrokers Limited (CSLS), a wholly owned subsidiary of FCMB Group Plc, in its assessment of the domestic palm oil industry, noted that opportunities abound in the Nigerian palm oil market supported by the growing population, making it important for the government to implement sustainable practices such as avoiding deforestation for oil palm cultivation and reducing the impact of production waste on the environment.

To enhance significant production, CSL encouraged large producers, including Presco and Okomu, to intensify production, noting that they are well positioned to benefit from government support.