Indonesia, the world’s top palm oil producer, has raised its export tax on crude palm oil (CPO) from 7.5% to 10%, effective May 17.

The policy, the Indonesian government said, is aimed at bolstering its domestic biofuel program and supporting smallholder replanting schemes.

The Indonesian Ministry of Finance said additional taxes on a range of palm oil products would help finance replanting activities and fund the production of both biodiesel and palm oil, a key commodity that contributes 4.5% to the country’s GDP and employs about 3 million people.

The new levy comes as Indonesia pushes ahead with an ambitious plan to raise the palm content in its biodiesel from 35% to 40% this year, with a target of 50% by 2026.

A 3% jet fuel blend is also under consideration for 2026. Indonesia supplies around 60% of the world’s palm oil, a staple ingredient found in roughly half of all packaged food items globally, according to UNDP data.

However, Reuters reports that the Indonesian Palm Oil Association, GAPKI, urged the government to delay a planned hike in the palm oil export levy, warning it could harm competitiveness amid global trade uncertainties due to the U.S. tariffs and geopolitical tension.

GAPKI said in a letter addressed to Finance Minister Sri Mulyani Indrawati:

"The situation is full of uncertainties and it is a big risk to launch a policy that will impact competitiveness of Indonesia's palm oil exports."

Nigeria to be affected by palm oil price hike

Although, Nigeria is the world’s fifth-largest palm oil producer if the new changes is fully implemented it will affect local market.

Nigeria still relies on imports for nearly half of the two million metric tons consumed locally each year.

Traders who spoke to Legit.ng revealed that a 5 litres of palm oil has been on the increase.

Chinedu Eze, a palm oil seller at Ikotun market, said:

"It depends on the type of palm oil you’re buying. I sell branded palm oil for N36,000 per 5 litres, while the unbranded one costs N10,000 for the same quantity. "

A 25kg container of palm oil goes for N55,000, while some unadulterated ones of the same size can go as high as N60,000."

These prices could change if global palm oil prices rise further.

Palm oil producers in Nigeria record high profit

In Edo State, considered Nigeria’s palm oil heartland, listed firms Okomu Oil and Presco posted record after-tax profits in 2024, buoyed by strong global prices despite a storm of inflation and naira devaluation.

Okomu Oil’s after-tax profit grew to N34.3 billion in 2024 from N21.2 billion in 2023 while Presco’s after-tax profit grew to N104.3 billion from N32.9 billion.