COVID-19, challenges cripple palm oil sector’s prospects

If the testimonies of value chain actors in the Palm Oil sector are anything to go by, the closure of the country’s land borders seems to have given the sector a major boost and improved its turnover.

Though the closure was not primarily to protect the national oil palm development, but in reality, based on their evidences, the restrictions on palm oil importation has not only favoured them, it has also created a shift in demand and supply curve that adjusted the price of the commodity.However, the challenges plaguing the sector, heightened by the coronavirus pandemic are dampening the promises hold by the sector.

According to the chairman, Board of Trustees, National Palm Produce Association of Nigeria (NPPAN), a conglomeration of farmers, processors, researchers, institutes and other value chain actors, Henry Olatujoye, farmers inability to access land and the difficulties attached to raising fund from banks to establish oil palm plantations, have remained the major challenges troubling the sector.

“The so much publicised Central Bank of Nigeria (CBN) loan at single digit is not helpful for a start-up plantation. Also, the National Agricultural Insurance Corporation (NAIC) is not helping matters as it has failed to provide the needed insurance cover that could protect the farmer in case of failure to repay the loan and similarly failed to provide the necessary confidence-building in the financial sector to enable commercial lenders to lend as it were.

“I have said times without number that the loans being touted by CBN are meant for big players and not for the smallholder farmers who are in the majority. For instance, the risk bearers in this loan matter are the commercial banks who will still subject a would-be loanee to same commercial lending conditions. The issue of single digit interest on loan clearly exposed CBN of not understanding the dynamics of the oil palm industries. For a start-up plantation developer, how will you manage the loan at single digit of five per cent interest rate without burning your fingers?

“Some who accessed the loan under privileged conditions are finding it difficult to pay back with commercial banks on their necks. The issue here is that if you are in a tree crop development start-up in Nigeria, you are in for trouble of redeeming the loan plus interest. CBN should tell Nigerians empirical information to show if the loan has helped farmers in the sector, especially the smallholders.”

Olatujoye lamented that there are no empirical data to determine the country’s consumption level, in terms of how much is meant for industrial use and how much is meant for domestic use. “Giving a figure here will mean promoting what is not verifiable and will further lead to confusion. Countries like Malaysia and Indonesia will forecast production level, price level, and consumption level of their oil palm sector with accurate data because they have the data covering the population of palm trees, plantation owners (both large and small), processing facilities and other related issues. Here, it is contrary as you see government officials releasing figures that are not verifiable.

“Recently, the CBN made a bold statement to promote some agricultural commodities with a figure in the range of N450b. Fantastic as it is, the question then is how did the CBN come to know that the amount of money would be sufficient to cater for the need of those commodities looking at the level of decadence and negligence in those commodities. Assumptions and political policies will not help us in this space. Ask any government policy maker about the nation’s consumption and production level, the figure you will have will clearly underrate the country’s potential in the oil palm sector.”

A development practitioner and Senior Program Manager, the Sustainable Trade Initiative (IDH), Dr. Chris Okafor, said the usual challenges such as access to affordable finance to smallholders, low quality output from community-based processing mills, access to quality planting materials and other inputs, limited application of best management practices by smallholders faced by the sector have remained unaddressed.

He noted that COVID-19 pandemic has compounded the issues by hampering efforts to address the challenges, apart from logistic challenges and health issues faced by actors. 

While adding that he doesn’t have solid data to make any informed comment on the country’s consumption level, in terms of how much is meant for industrial and domestic use, Okafor said: “Some of the value chain actors, such as palm oil processing companies reported improvement in their turnover, suggesting that restrictions on importation of palm oil augured well for them.”