Nigeria’s path to revamping oil palm sector
Nigeria may be on its way to reclaim its dominant position in the oil palm industry going by recent activities in the sector. Already, investors are upwardly reviewing their stakes in the sector in a bid to sustain the implementation of government’s backward integration plan. If properly implemented, Nigeria may be making an inroad to becoming sufficient in oil production once more. FEMI ADEKOYA writes.
Hitherto, stakeholders had blamed past failures of previous initiatives in the sector on the dearth of improved oil palm nuts/seedlings, lack of fertiliser, stifling government control and low adherence to good field maintenance practices.
However, with new entrants initiating investments in the sector, the tide seems to be changing as competition has become intensive necessitating the prospect that the supply gap in the nation’s oil pam sector may soon be addressed if the federal government remains committed to its backward integration plan.
Having lost its global competitiveness as the world’s largest producer of palm oil, Nigeria has begun to make efforts towards reclaiming its position through a backward integration exercise to drive the production of Crude Palm Oil.
For some stakeholders, the contraction in the global economy amid fluctuations in the global oil markets, may have spurred efforts by developing economies like Nigeria to improve their non-oil export and sectors as part of measures to sustain their economy.
With a teeming population that has continued to be fed through heavy food imports, the need to encourage value-addition of many commodities has become very important. Official figures in the oil palm sector show an estimated supply gap of about 1.7 million metric tonnes yearly, therefore posing a very precarious situation for the manufacturing sector that depends largely on CPO as a major source of raw material.
Already key players have begun to unveil their backward integration plans while some are undergoing expansion phases to make bride the demand-supply gap for the commodity in the country.
For instance, PZ Wilmar Limited, having staked about $80 million on its crude palm oil refinery in Nigeria, has unveiled its backward integration plan in the sector with a view to assisting the nation become self sufficient in Palm oil production within the next decade.
According to the company, the plan, which is being implemented, would save the country some foreign exchange by eliminating yearly imports of $300 million spent on Palm oil importation, while bringing back the nation’s glory as a primary exporter of oil palm.
With yields from plantation expected within the next five years, the company is optimistic of bridging the demand-supply gap in the nation’s oil palm industry by at least 60 per cent.
The company’s Managing Director, West Africa, Santosh Pillai noted that the company’s investment in the country offers an integrated process of growing and milling crude oil palm with an expansion exercise that sees PZ harnessing the competitive and comparative advantage Nigeria possesses in the sector.
Similarly, DUFIL Prima Foods Plc, a key player in the Nigeria Culinary industry has equally embarked on strategic backward integration to ensure 100 per cent local content in most of the products being produced by the company.
This move includes the establishment of a seasoning plant, flourmills, an oil refinery and a palm tree plantation under the Edo State Government Agribusiness revolution scheme.
In its effort to boost the local production of Palm Oil, the company has also acquired and signed a memorandum of understanding with the Edo State government for 60,000hectares of land for cultivation of Palm trees, which will help in boosting local production for palm oil, thereby bridging the supply gap of palm oil within the country.
Also, Presco Oil Palm Plc has unveiled plans to expand its production capacity by building a new refinery. Indeed, under the expansion plan, the company is expected to stake $30 million on the project to boost oil palm production in the country.
Similarly, the company noted that its investment profile in the country has grown beyond $1 billion within the last decade. With the company bringing in a minimum of $100 million investment into the country yearly for the past ten years, the company’s total investment in the country has risen over a billion dollars during the period.
The Chairman of the company, Pierre Vandebeeck, explained that the investment which includes procuring high quality state-of-the-art equipment, automated steam turbines and a biogas plant for power generation, oil palm processing mills, refineries and plants and machineries is the first of its kind in West Africa.
In his words: “I have not done the feasibility study yet but the cost estimate for the oil mill is about $20 million and the refinery is $10 million summing up to a $30 million investment.
A hectare of new plantation is about $6000 so multiply that to know how much we are investing every year. We are not stopping. “We are like a vehicle driving very fast all the time, although I do say should we slow down a bit but there are so many opportunities that come up that we do not want to miss and therefore you are more or less pushed to continue investing”. With renewed interests in the sector, Nigeria may soon harness the benefits offered in the non-oil sector.