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Oil palm producers demand special loans, release of rebates from CBN

By Femi Ibirogba, Head, Agro-Economy (Lagos) and Joke Falaju, Abuja
11 November 2019   |   4:15 am
Sequel to the closure of borders and its impacts on agricultural production and productivity, oil palm and allied stakeholders have called on the Federal Government...

• Label smuggling as economic crime, agree on council
Sequel to the closure of borders and its impacts on agricultural production and productivity, oil palm and allied stakeholders have called on the Federal Government, using the Central Bank of Nigeria’s (CBN’s) various windows, to consider a special interest rate financial facilities to palm oil and allied industries players because of the long-term nature and delayed returns on investments.

The National Palm Produce Association of Nigeria, the Plantation Owners Forum of Nigeria (POFON) and other allied associations made the call during a roundtable to discuss issues affecting the oil palm sector in Abuja, at the weekend.

Executive secretary of POFON, Mr Fatai Afolabi, advocated a special financial scheme for cash crop farmers and investors in the cocoa, palm and cashew production and value chain to maximize the benefits of commercial agriculture.

Afolabie said, “On financing, the CBN through the Anchor Borrowers scheme, has being giving agricultural loans at nine per cent interest rate, but it needs to understand peculiarities of oil palm production. It takes five years for it to mature and start getting returns.

“Once the loans issued out, they start asking for payback after three months and when you are unable to pay back, they will start capitalising. The moratorium does not justify the loan.”

He argued that “We need to customise a special financing scheme for oil palm. A nine-per cent interest rate is not attractive to oil palm producers.”

Now that smuggling of crude palm oil from the neighbouring countries has been somehow decimated, the associations argued that “What stakeholders must do is to encourage normal importation of oil palm into Nigeria provided we will be able to benefit from the levies and channel such towards oil palm development.”

The POFON secretary described setting up of storage facilities in the neighbouring countries for smuggling as a serious economic crime that should be treated so.

“So, more than closing borders, we should be able to tell the government that economic crime is what is involved, and it must invoke a lot of clauses to address those involved in smuggling or economic crimes,” he said while delivering a lecture.

The stakeholders said part of the tariff collected on Crude Palm Oil, comprising 25 per cent levy and 10 per cent duty, should be channeled towards backward integration in the industry, but the government has not accounted for such collection on behalf of the industry.

“The 25 per cent levy should be kept aside for the development of the oil palm industry. Some people still import into the country and a huge sum must have accrued from the levy.

“So, we would like the CBN to show us how much has accrued, although we have data on this. It should also show how much the Republic of Benin has made off Nigeria, there must be an arrangement by the government to ask for refund if possible, but it is a government to government relation,” POFON said.

It will be recalled that there was an outright ban on importation of crude palm oil, but it was suddenly removed and a 35-per cent levy was imposed. The 25 per cent was designed to boost the expansion, development and value chain development of the sector.

However, The Guardian learnt that none of the collection by the government has been channeled towards the industry players for the purposes.

To this end, stakeholders agreed to formation of Nigerian Oil Palm Council as a game changer in the oil palm industry. The council, they argued, would ensure working with government agencies such as the Nigerian Custom Services and the CBN to account for the levies for long-term development of the industry, and by extension, the economy of Nigeria.

Industry players also stressed strengthening the inclusive business model for smallholder farmers, who produce about 80 per cent palm oil outputs yearly.

Palm oil is an important product in Nigeria, used for food and non-food purposes with estimated consumption of 2.1 million metric tonnes every year.

According to available statistics, there is a supply gap of about 1.2 million metric tonnes, currently bridged by imports and the local demand, driven by the huge refining capacities in the country (730,000 MT).

Niger Delta accounts for about 54 per cent of local production (80 per cent by small holders) with an estimate of one million value chain actors – farmers, processors and traders.

Market development plan in the Niger Delta region is implementing interventions in the palm oil sector to address the constraints through boosting access to improved processing and harvesting technologies; improving access to information and quality inputs and promoting the private sector-driven supply of improved oil palm seedlings.

Challenges of the sector
The palm oil sector is riddled with some challenges, and players in the industry identified falling price of palm oil due to influx of smuggled oil which puts local producers at a disadvantaged position, low productivity of small holders due to use of inefficient technologies, services and inputs and exclusion of smallholder farmers from government interventions because focus on big corporates.

Other challenges enumerated in the sector are inadequate planting materials, poor yield of about 3.5 tonnes per hectare while in other climes, the yield is about 13 tonnes per hectare, poor processing technologies, in which smallholders get about 0.5 tonnes while large estate owners are able to get about 1.3 tonnes per hectare (which is also low as they can get up to 4.0 tonnes per hectare.)

The big tasks going forward
The industry players called on the government to strengthen policy on prohibition of smuggling and imported palm oil in the short term and invest in competitiveness of locally produced palm oil in the medium to long term.

They also the government to extend smart subsidies through the Anchor Borrowers scheme and the CBN agriculture funds to smallholder farmers to enable them to have access improved technologies.

And, the government at all levels was charged to encourage oil palm seed nursery enterprises with potentialities to create employment opportunities for women and youths, instead of distributing seeds free to farmers.

“As of 2019, statistics shows Nigerian population is growing at 2.6 per cent while palm oil production is growing at 1-1.6 per cent. With this kind of growth, it means Nigeria still needs to increase palm oil production to meet growth rate,” POFON said, expressing pessimism that, “But in the actual fact in the next 50 years, it is not likely we close the gap.”

The pessimism is not unconnected with incoherent policies and lack of political willpower on the part of the government to create an enabling environment and catalyse the sector through long-term development facilities.

“That is the context of Nigeria, that is the way the rest of the world sees us. We are the market of the world,” Afolabi lamented.

He concluded that “smallholders have been crying for more planting materials and there is need for NIFOR to be connected to the smallholders. They are not also connected with them in terms of primary production and secondary processing.

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