Nigeria and palm oil import shame
Nigeria’s palm oil industry represents a classic case of a lost glory in the country’s quest for economic development. The country, which was reputed to be the largest producer of palm oil and kernel worldwide in the pre-independence era was the envy of many nations in this regard. By this, it had attracted significant global attention to itself such that the multinational company, Lever Brothers had profited immensely from the industry and thereby became the toast of the then organised private sector in Nigeria. Along these lines also, investors from across the world, especially from Malaysia and Indonesia, came calling which led to their taking away oil palm seedlings to cultivate in their countries.
Today, the oil palm industry in those countries have developed many by-products and increased the value chain from the palm tree. Against this background, a recent report that Nigeria lost about N270 billion to palm oil imports in three years should be quite disturbing. Alas, the country, which was a net exporter of palm oil and palm kernel has now become a net importer of the same product.
Available data indicate that Nigeria’s yearly local demand for palm oil is about 1.34 million tonnes while it produces about 1.015 million tonnes. This leaves a supply gap or deficit of about 325,000 metric tonnes, which if translated to money, at the current market price of about N769.33 per tonne, stands at about N90 billion per annum or N270 billion in the past three years. This is money gone down the drains, given our potential in this palm oil business.
The decline in oil palm production in Nigeria is clearly linked to the history of the development of the Nigerian economy. The advent of crude oil exports in the 1960s following from the discovery of crude oil in commercial quantity in Oloibiri in current Bayelsa State set the pace for the relegation of oil palm production in particular and the agricultural sector in general in the generation of foreign exchange for national sustenance. The country abandoned agriculture because crude oil money comes in quite easier in contrast to the rigour and stress associated with production and foreign exchange earnings through agriculture. This national attitude towards agriculture led to the relegation of the production of other cash crops such as cocoa, groundnut, rubber and cotton amongst others such that the country now depends to a very large extent on the crude oil sector for its survival. Hence, the current mono-cultural economy has been subjected to periodic shocks as a consequence of the volatility often experienced in the international market for crude oil.
This situation has currently stagnated the growth of the palm produce industry such that many palm oil processing mills across the country have been shut down and others operating at less than full capacity given the availability of easier means of making money and earning a livelihood in other sectors such as information and communication technology (ICT), oil and gas and the financial services more appealing to most young men. With this background, Nigeria currently ranks fifth in oil palm production worldwide falling from its pre-independence first position. It lags behind Indonesia, which in 2019 is recorded to be the largest producer of palm oil with 43 million metric tonnes followed by Malaysia with 21 million metric tonnes. Others are Thailand with 3 million metric tonnes and Colombia with 1.68 million metric tonnes.
Nigeria would have to take some positive steps to regain its lost glory in the production of palm oil globally. This period of economic uncertainty is the best time to do that. With the frequent volatility being experienced in the global crude oil market and the need for the country to find alternative ways of earning foreign exchange and creating jobs for its teeming unemployed youths, the development of increased oil palm production holds the key for increased diversification of the Nigerian economy.
First, government would have to make more land available for the cultivation of oil palm across the oil palm belt of Abia, Akwa Ibom, Delta, Edo, Imo and Ondo states among others. The state governments concerned would need to work closely with the federal authorities to ensure that this industry is revived so that Nigeria can take its rightful place globally in this thriving industry. Second, effort should be made to adopt new breeds of oil palm trees. This involves strong dependence on breakthroughs in oil palm breeding technology where the new oil palm seedlings have higher yields per hectare of cultivation. That is a sure way of enhancing increased production levels. Third, and akin to the second, is the use of modern technology in the processing of palm fruits for higher volume extraction from harvests. This involves having adequate financial investments by both the federal and state governments in modern oil mills.
With these steps, the country can erase this unwholesome loss of about N90 billion per annum and thus meet local palm oil needs. This will also return the country to its previous status of a net exporter of palm oil. These steps are very critical since the fortunes of the crude oil market are dwindling and unless the diversification programme is pursued vigorously, as in this case, the country may experience tougher times ahead.