Nigeria’s palm oil imports from Malaysia rises 65.3% amid naira weakness

Onome Amuge

Data from the Malaysian Palm Oil Council has shown that despite the devaluation of the naira and increased local production of palm oil, Nigeria’s imports of the commodity from Malaysia surged by 65.3 per cent in the first nine months of 2023.

Analysts believe the increase in imports is a cause for concern, as it could threaten the viability of local palm oil production and hinder efforts to boost the country’s economy. This is also more worrisome given the fact that the devaluation of the naira has not yet had the desired effect of reducing imports and stimulating local production.

Between January and September 2023, Nigeria’s palm oil imports from Malaysia increased to 234,324 metric tons (MT), up from 141,786 MT during the same period in 2022, marking a substantial increase of 92,538 MT.

According to the Malaysian Palm Oil Council,Nigeria’s palm oil imports from the South East Asian country increased significantly in the first nine months of 2023 compared to the same period in 2022. In particular, imports increased by 92,538 metric tonnes, amounting to 234,324 metric tonnes in total.

According to the United States Department of Agriculture (USDA), According to the USDA, palm oil production in Nigeria grew by 9 per cent from 2020/21 to 1.4 million metric tonnes in 2022. However, local production still fell short of demand, with Nigeria consuming two million metric tonnes in 2021, leaving a deficit of 600,000 metric tonnes over the last decade. This indicates that while local production has increased, it has not kept pace with the country’s growing demand for palm oil.

Analysts said the discrepancy between supply and demand is likely to persist in the near future unless the government takes action to promote investment in the sector. There are also indications that the lower cost of imported palm oil could lead to reduced demand for locally produced palm oil, which could hurt the earnings of companies like Presco and Okomu.

Analysts suggest that local producers may need to lower their prices to maintain sales in the face of increased competition from imported palm oil. They also noted that the effect of this shift on the local palm oil industry remains to be seen, but it could have a significant impact on producers and consumers alike.

Henry Olatujoye, the managing director of Palmtrade and Commodities Development Nigeria Ltd, said palm oil imports from Malaysia will continue to increase due to the limited investment in the local industry.

Olatujoye noted that despite the significant contribution of smallholder farmers, local production still falls short of meeting demand. This, he pointed out, suggests that the country needs to make significant investments in the palm oil industry to boost local production and reduce imports.

In order to close the gap between demand and supply, Olatujoye believes that the sector needs to convert forest land into plantation development using best agricultural practices.

According to the palm oil production expert, palm oil is a key ingredient in a wide range of products and it is essential to ensure that its production is done in a sustainable and efficient manner. Olatujoye contends that by converting forest land to plantations, the palm oil industry can boost production and meet the growing demand for this important commodity.

Alphonsus Inyang, the president of the National Palm Produce Association of Nigeria, has attributed the high price of palm oil in the country to the high cost of production and lack of government support for the sector. Inyang noted that other countries have lower palm oil prices due to lower production costs and greater support from their governments. These factors, he explained, have left the Nigerian palm oil industry neglected and underdeveloped, making it more expensive and less competitive than its counterparts in other countries.

According to the United Food Agency’s September global food price report, palm oil prices declined in August due to increased seasonal production and abundant global export supplies.

Though  the decline in palm oil prices in August was not necessarily due to problems within the Nigerian palm oil industry, but rather a result of market forces and global supplies, analysts said the future of the palm oil sector in Nigeria is hard to predict, given the various challenges it faces.