Oil palm: Forging strategic partnership between Nigeria, Malaysia

I want more than $1.1bn trade between us, by Malaysia’s trade envoy

The Trade Office of the High Commission of Malaysia in Nigeria, the Nigeria-Malaysia Business Council and the Plantation Owners Forum of Nigeria (POFON), among other industry stakeholders, have advocated deeper partnership and strategic alliance in the country’s oil palm sector.

Beyond trade, strategic partnership should bring Malaysian oil palm investments, expertise and machinery to complement Nigeria’s conducive environment for cultivation, affordable and abundant workforce and large market through the African Continental Free Trade Area (AfCTA), stakeholders said.

Malaysia’s palm oil production from 2015 to 2020 respectively included 17,700,000 metric tonnes (MTs); 18,858,000MTs; 19,683,000MTs; 20,800,000MTs; 19,255,000MTs and 17,854,000MTs.

While, from 2015 to 2020, Nigeria’s production, according to Oil World, are 940,000MTs; 960,000MTs; 1,040,000MTs; 1,130,000MTs; 1,220,000MTs and 1,280,000MTs respectively.

Meanwhile, Nigeria’s oil palm consumption from 2015 to 2020 were 2,517,000 metric tonnes; 2,480,000MTs; 2,490,000MTs; 2,523,000MTs; 2,573,000MTs and 2,591,000MTs.

Currently, production deficit for Nigeria stands at about 1,311,000MTs. Hence, closing the gap and taming smuggling of crude palm oil in the face of the current 35 per cent tariff and duty imposed by the Federal Government require strategic production partnership that would mobilise investors and other industry resources from Malaysia while deepening employment, gross domestic products, industrialisation, expertise and knowledge transfer in Nigeria.

But investors have raised concerns about insecurity and land issues, while Nigerian counterparts and some existing foreign investors have cleared the air, while identifying state governments assisting foreign investors, such as Edo, Ondo and Cross River States.

Managing Director, Foremost Development Services Limited and Advisor to Plantation Owners Forum of Nigeria (POFON), Mr Fatai Afolabi, while speaking at a forum organised by Malaysia External Trade Development Corporation (MATRADE) Lagos, which is the Trade Office of the High Commission of Malaysia in Lagos.

He disclosed that “40 per cent of all palm oil plantations in Malaysia are owned or farmed by small-scale farmers, whereas, it is over 70 per cent small-scale owned in Nigeria.

As palm oil has been a major factor in Malaysia, reducing poverty from 50 per cent in the 1960s, down to less than five per cent now, Nigeria can also achieve poverty alleviation through the industry, he said.

“The palm oil industry directly employs more than 570,000 people, with another 290,000 people employed downstream” in Malaysia, he added.

Cultivating over six million hectares with improved oil palm seedlings and techniques with well-established oil palm industry, Malaysia has what it takes to be a dependable ally in oil palm industry.

Afolabi affirmed that the Nigerian Institute for Oil Palm Research (NIFOR) developed the Tenera hybrid, which is a globally accepted oil palm type, but despite that, Nigeria remained for too long on the wild variety, utilising poorly coordinated processing mechanisms and dominated (about 80 per cent of the country’s oil palm production is done) by smallholders at both planting and processing levels, resulting in low output in terms of Fresh Fruit Bunch (FFB) per hectare and palm oil extraction.

He said unlike Malaysia, Nigeria has just a little over 600,000 hectares under improved oil palm planting, with a less-established oil palm industry.

He said: “There are four common perspectives that will be analysed, namely competition, alliance, foreign direct investment, and partnership.”

Afolabi added: “The relationship between Malaysia and Nigeria in terms of the above cannot be described as a competition because Nigeria is absent in the global palm oil trade. However, in order for Malaysia to increase her share of the palm oil trade with Nigeria, it is imperative to initiate moves towards FDI, Alliance and strategic partnership so that both countries can fully maximise their potential and make the most of the opportunities that abound within the industry.”

MEANWHILE, the Trade Commissioner of Malaysia External Trade Development Corporation, Lagos office, Mohd Khairy Maidin, said he was convinced that there were investment opportunities in Nigeria’s oil palm industry and there is enabling environment.

“Since 2016, I saw the potential of Nigeria to not just become our trade partner but also a hub for Malaysian products and services in Africa, especially in our strength area, that is, palm oil.

“This forum or dialogue session is our first approach to create partnership in palm oil industry between Malaysia and Nigeria, from upstream to downstream sectors because we see the advantages that Nigeria has, and Malaysia as the powerhouse of palm oil industry in the world, has the world-class expertise and technologies and we have all it takes to be the partner for Nigeria in this industry,” Maidin said.

He added that the trade figure between Nigeria and Malaysia, as of October 31, 2021, was $1.1billion, saying, “but I want more. I believe if we have partnership with industries, the figure will become more.”

“The message I want to take is to make it clear that Nigeria is next destination for palm oil investment from Malaysia because Nigeria has a lot to offer, like large-scale land, abundance of workforce and also, palm oil industry in Nigeria receives attention and support from the government,” he told The Guardian.

He said if Malaysian palm oil industry players were ready to have their presence physically in Nigeria, it would be easier to maximise Nigeria’s strength in the African Continental Free Trade Agreement (AfCTA). 

“Optimistically speaking, I do not see any competition between both countries in this industry, but in fact, a potential win-win situation through a smart partnership,” Maidin added.

President of Nigeria-Malaysia Business Council, Dr Michael Aderohunmu, said Nigeria is known to be the largest economy in Africa and with the population, the country is the right place investment destination.

“The market economy puts emphasis on satisfying the consumers because that is where the money comes from. So, Nigeria has to take its position as one of the leading economy in Africa because of the population and the capacity to absorb, to consume and to pay,” he explained. 

He said Nigeria-Malaysia Business Council’s primarily assignment is to facilitate, encourage, stimulate business relationship between the two countries, and that “Nigeria is the destination because of the conducive environment, and we have been able to discuss palm oil, which is specific to Malaysia and that has a lot of contribution to our economy.”

He emphasised the need to build capacity, saying this could be achieved by working hand-in-hand at business-to-business and government-to-government levels.

“There is hope. Some states are doing very well. For instance, we heard from Ondo State that the governor is giving a lot of land for that. This also happens in Edo State and some part of Cross Rivers. So, Nigeria can actually become the hope for West Africa,” Aderohunmu said.

He agreed with Central Bank of Nigeria’s belief that oil palm sector has a lot of multiplier effects more than the crude oil industry “because primarily, palm oil is agriculture and agriculture is the backbone of Nigeria’s economy.”

Afolabi also emphasized that opportunities abound at all the levels of the palm oil value chain.

He added that “Malaysia is a foremost global player in the production and trade in palm oil, and Nigeria is the largest importer of palm oil in Africa due to its large population and inability of local production to satisfy both the domestic food consumption and industrial uses of palm oil.”

He said the Malaysia-Nigeria Palm Oil Relation is envisioned to achieve complementarity of trade and investment for both countries, saying, “Malaysian investment in Nigeria in the upstream, mid-stream and downstream palm oil value chain will stimulate increasing demand for crude palm oil, thus increasing and securing the Malaysian share of imports into the Nigerian market.”

Nigeria would also benefit from enhanced industrial capacity utilisation, value addition, employment opportunities plus other economic and social benefits, Afolabi said.