Despite reported positive trend, palm oil industry still struggling

With less than a year to the 2024 target for Nigeria to attain self-sufficiency in palm oil, it is becoming unrealistic for a country, which once occupied the vantage position as the leading exporter of the produce to return to that enviable position it relinquished, going by the current production capacity.

Even stakeholders in the industry have expressed reservations that the projection is a mere political statement, academic and unrealistic, considering factors surrounding oil palm development in the country.

The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, who made the policy statement in 2019, at a stakeholders’ meeting on the Palm Oil Value Chain, in Abuja, pointed towards the possibility of making the country self-sufficient in palm oil between 2022 and 2024 and ultimately overtake Thailand and Columbia to become the third largest producer.

He promised support for improved production of palm oil to meet not only the needs of the domestic market, but to also increase exports to improve Forex earnings.

Currently, Nigeria occupies the fifth position in the league of palm oil producing countries, with 1.5 per cent or 1.03 million metric tonnes of the world’s total output, according to the United States Department of Agriculture (USDA).

Nigeria was overthrown as the world’s largest palm oil producer by Malaysia and Indonesia in 1966. From its vantage position as the leading exporter of the produce, the country is now a net importer, depending largely on other countries to meet the huge sup ly gap over the years.

Currently, Nigeria is the largest consumer of the produce in the continent, consuming approximately 2.5 million metric tonnes yearly, while domestic production stands at less than 1.3 million metric tonnes, leaving a deficit of over 1.2 million metric tonnes, according to the President of the National Palm Oil Produce Association of Nigeria (NPPAN), Alphonsus Inyang.

“Some statistics will say we are consuming over three million metric tonnes, but all we know is that oil palm import is hovering between $500 to $600m yearly,” Inyang told The Guardian.

If the current signal concerning the domestic production capacity is anything to go by, there are indications that the narration seems to be changing as the country’s palm oil production is on the rise owing to the backward integration policy.

Investigations revealed that most top palm producers, who started by refining, are now investing and developing large plantations, taking advantage of backward integration policy.

According to the former executive secretary, Plantation Owners Forum of Nigeria (POFON), Fatai Afolabi, existing players in the industry have also doubled their plantations and increase production by 100 per cent when compared with their status five years ago.

What gives hope to fresh expectations was a report that the country’s crude palm oil imports from Malaysia – the second top grower of the crop have declined by 34.7 per cent, as local production rises on increased investments.

According to data from the Malaysian Palm oil Council (MPOC), Nigeria’s crude palm oil (CPO) import from Malaysia declined from 262,065 metric tonnes in the first nine months in 2021 to 171,011 metric tonnes in the same period in 2022.

The immediate past National President of NPPAN, Henry Olatujoye, who confirmed the positive trend to The Guardian, said the current state of the industry is positive.

He attributed the development to the advent of Federal Government’s policy geared at reversing the country’s economy from heavy reliance on oil export to non-oil.

“Nigeria has seen the need to grow more plantations. Currently, the rate at which forests are being converted to oil palm plantations has grown astronomically and I can say authoritatively we have added up to another 100,000 hectares to the forest conversion to plantation, most especially in Edo and Ondo states.

“Ondo has given out close to 75,000 hectares of deforested area for plantation development in its Red Gold policy. Edo State has equally done the same, about 50,000 hectares of land has been released for plantation development. So, by and large, the rate at which plantation is being developed in Nigeria is high and that will increase the oil palm production. So, if we get our data correctly, we will be moving to two million tonnes of oil palm production in Nigeria soon.”

Aside Edo and Ondo States, palm oil is found predominantly in southern Nigeria, especially Rivers, Cross River, Akwa Ibom, Imo, Anambra, Ebonyi, Abia, Enugu, Ebonyi, Delta and Savanna Belt states, among others.

It also exists in the wet parts of North Central Nigeria, in areas like Southern Kaduna, Kogi, Kwara, Benue, Niger, Plateau, Taraba and Nasarawa, as well as the Federal Capital Territory.

But while much has not been heard from the northern states, their southern counterparts, especially the Southeast governors and stakeholders have stepped up their games, to make the produce their source of revenue and a dominant player in foreign exchange earnings.

For instance, in Ebonyi State, the farmers, millers and processors from the 13 palm oil producing local councils have intensified efforts at boosting palm processing activities ranging from nursery, plantation, oil milling, marketing and other related palm value chains.

Reports have it that other states in the region are also toeing that line, especially now that majority of the states are looking away from total reliance on allocation from the Federal Government.

But despite this positive trend in the sector, the price of the commodity has risen astronomically, to the extent that several households are currently finding it difficult to afford it.

Based on The Guardian market survey in Lagos, Ogun, Oyo and Osun states, the price of a litre of palm oil is currently higher than a litre of Premium Motor Spirit (PMS). While a litre of PMS is between N184 and N350, a litre of plam oil hovers around N1, 160 and N1, 200.

At the popular Ile-Epo Market, Oke-Odo, Agege, Lagos, a bottle of 75cl is now between N1, 000 and N1, 200 as against N400 and N500 in 2018. Also, a five-litre gallon currently sells for between N5, 800 and N6, 600 against its previous price of N2, 500 and N3, 000. It was the same price tag at Mile 12, Agege, Ojuwoye and Oja Oba markets.

In Ogun State, from Ifo, Arigbajo, Itori, Wasinmi, Lafenwa to Kuto markets, a bottle is currently pegged at N1, 000, while a gallon is between N5, 800 and N6, 000, same as in markets in Oyo and Osun states.

The Lead, IDH NISCOPS Oil Palm Programme Nigeria, Dr. Chris Okafor, who said the balance between the demand and supply is responsible for the price hike, noted that the huge gap between supply and demand is a big issue, adding that as long as demand outweighs supply, there will be need for it to still reflect on price.

On his part, Olatujoye also attributed the development to supply deficit, aggravated by population explosion, as well as increase in industrial utilisation. “Palm oil has always been higher in price when compared to petroleum products; this is because of population, which leads to increase in industrial utilisation and consumption.

“Looking at the Ukraine-Russian war and the COVID-19 pandemic era, which distorted the supply chain of so many commodities and dropped the value of naira to dollar, it is clear why we have price increase. What we are enjoying today is home advantage, which is not sustainable.

“If production increases, definitely price will go down. As at now, it is not like that, there is disparity between population and consumption. Right now, production is low, consumption is high. Definitely supply will be low and that will increase the price of the product.”

To Inyang, the cost of the essential commodity is high because palm oil is highly needed in the country for domestic consumption and industrial use.

“There’s no Unilever without palm oil, there can never be noodles without palm oil – there are over 10 brands of noodles in the country today, palm oil forms more than 45 per cent of raw materials that is needed for the noodles industry.

“Everybody needs palm oil including the President, but when it comes to making policy about the produce, it sounds to them like one village commodity, but they consume it every day. No chocolate can be on the shelf without palm oil, even the make ups, all these companies are being supplied from Indonesia, Malaysia and Columbia, the gap is there, about 50 per cent is being imported into the country.”

To forcefully bridge the deficit gap, The Guardian research showed that some palm oil dealers have resorted to adulteration. The adulterated oil is reportedly cheaper. It was learnt that the culprits have taken to diluting original palm oil with substances to maximise profit, at the expense of health of unsuspecting buyers.

As gathered, when the colourant is mixed with water and added to
original palm oil, it increases its redness, creating the impression that it is better in quality than other oil in the market. It was further learnt that the demand for the ‘killer oil’ is increasing due to its rich colour and attractiveness, as buyers prefer it to the original oil.

The former NPPAN president said at least 60 per cent of the palm oil in markets across the country is adulterated.

“The adulteration of palm oil is still persistent all over Nigeria. They have even gone beyond mixing magenta – a deep red-like dye, with the palm oil to improve its coloration. People have now improved by mixing chemicals and pouring it into the palm oil to look more oily.

“There are some levels of adulteration whereby people mix sludge – an industrial oil use in making soap. It’s not made for consumption but people still mix it and blend it with palm oil to increase their volume. So, if you don’t know, you’ll just buy it and start to eat. So, the level of its adoption and usage currently is very high.”

In 2017, the Nigeria Security and Civil Defence Corps (NCDSC) arrested some palm oil suppliers in Potiskum and Jos, Yobe and Plateau states, respectively, for allegedly adulterating palm oil with dye. Their arrests led to more revelations and the confiscation of samples, which after lab tests conducted by the National Agency for Food Drug Administration and Control (NAFDAC), showed traces of high acid, high saponification and high relative density.

Then, the state’s coordinator of NAFDAC, Lawal Musa Dadingelma, confirmed that the adulterated palm oil samples tested contained dye, which is capable of causing cancer when deposited in human body.

Continuing, Olatujoye said: “You know in every business environment, there is always the dark side of it. The only thing we can do is to create more awareness among consumers and do more training for people to understand that when looking for high-grade palm oil, these are the parameters.

“Firstly, one of the parameters is to look at the bottle, if it’s a pet bottle, once you shake it very well and allow it to settle, if it’s a good palm oil, it will have a free flow down without stains of residue on the body, but if it’s fake, you’ll see some patches on the bottle, showing that it’s actually a bad palm oil. So, we need to increase awareness, training and retraining of people and then get more information across to consumers for them to understand how to discover fake and good palm oil.”

While regretting the dwindling fortune of the industry over the years, Inyang blamed the Federal Government and the CBN for under-developing the industry. “Those of us that have seriously exposed our capitals, resources and dynamics to develop the sector are not being encouraged by policy makers, the CBN and the Federal Government, in making palm oil priority crop in the country.

“Whenever government gathers people, they gather them to talk about Malaysia and Indonesia; they have forgotten that these countries developed their palm oil industries. There, palm oil is an economy but here, palm oil is for some village women industry, who process and sell in the market. So, the industry needs to be focused on by government. It is a tree crop.

“On January 2, 2023, Ghana launched the Tree Crop Development Authority (TCDA) – promoted by government, but largely operated or implemented by the private sector. The TCDA is to cater for five tree crops – Coconut, oil palm, shea butter, cashew nut and rubber. This came after the success of the Cocoa Development Authority.

“In Nigeria, all the ones we have only takes care of food crops – Rice Council Bill may be signed by the president before he leaves office. There’s Sugar Development Council Bill, we don’t really understand the importance of palm oil as a global market. It is a global economy, that is the backbone of the economy of Indonesia – the largest economy in Southeast Asia, that is the backbone of the economy of Malaysia, another top economy, and they constitute the largest employers of labour in these countries.

“You’ll be surprised to know that the two countries no longer lay much emphasis on palm oil; they are now laying emphasis on palm Biomas – the waste that comes out from the palm trees – the palm fronts itself, the fibre, palm kernel shell, and many other parts of the palm tree that have been turned into commodities, because the palm tree is 90 per cent biomas and then 10 per cent palm oil.”

He lamented that while Nigerians are still talking about palm oil, those countries have moved on. “If you go to ministries, they behave as if they have planted one palm tree and will be talking about the commodities that have not been planted. They’ll organise themselves and go to Malaysia, the CBN will do the same thing and none of us – the stakeholders are involved in what they are doing.

“The CBN has never extended any funding assistance or development intervention to the oil palm sector, despite various representation and meetings with them. They seem to be comparing oil palm with rice, sorghum, cowpea and the rest of them, saying our gestation period is too high.

“We learnt that the Bankers Committee say they cannot leave their money outside for up to six to seven years. I am leading over 300 smallholder palm oil farmers and we have never seen any support from the CBN. As part of self help, we have come up with one family, one palm tree initiative, to have something to take to the market; we need encouragement to achieve the desired success.”

On the way forward, Olatujoye said the country needs to double its efforts in converting idle forests to economic gains, such as developing more plantations and increase production and yield.

“It’s an economic theory, once there is enough supply in the market, prices will filter around the capacity of the purchasing power of people. The only thing we can do is to ensure that we increase our production capacity.”

On his part, Inyang called for the establishment of National Oil Palm Development Council and a policy to drive the industry. “Currently, we have been trying to meet with the Federal Ministry of Industry, Trade & Investment on developing a policy on this. So, we need the cooperation of government to get a policy direction to revive this industry.

“We are not saying don’t import, yes import, but place a levy, a surcharge of a minimum of 25 per cent on importation of palm oil and let that money be channelled to us to use to develop at least 250,000 hectares of oil palm, so that the money will be ploughed back into backward integration.”

Okafor said the fortune of the industry is dependent on investment. “Are we investing in oil palm production development? The country’s palm oil farming is still dominated by smallholder farmers, what are they getting to develop what they are doing? They can’t get loans to replant their ageing farms, they can’t get microfinance loan for maintenance, both for new establishment, and replanting, most of them have huge challenges because no bank is willing to give loan of 18 years.

“When your bank manager doesn’t even want to give a loan of five years; so, there has to be a deliberate effort from the government to develop the sector, by providing incentives to smallholder farmers to replant and of course when they replant the yield will increase, production will increase.

“Two, I have been talking about yield increase and production increase, what about the processing to get the CPO. Our farmers are still using old mills that are giving them less than 10 per cent of oil and the rest is wasted. So, it’s an issue of investment. It’s not a question of price increase; it’s a matter in which the market forces will continue to apply,” he said.

A former Chairman of Agriculture, Lagos State Chamber of Commerce and Industry (LCCI), Prince Wale Oyekoya, advised the government at all levels to assist farmers and stakeholders by providing an enabling environment with better infrastructure.

“With our exploding population, we need to go into mechanised farming, else, we will keep on deceiving ourselves that all is well, when it’s not.

“More research institutes with better funding will increase our production. More farmlands to the farmers will increase our production backed by modern tools and bulldozers to clear the land.”