Reviving palm oil production to boost exports

The agro-commodities sector, especially palm oil, is widely credited with having the capacity to lead Nigeria’s rapid economic recovery. Indeed, industry operators and experts who hold this belief allude to the fact that since the 60s, oil palm has been a major industry in Nigeria, contributing immensely to foreign exchange earnings and lifting millions of families out of poverty.

For instance, at a time, Nigeria’s oil palm industry accounted for 35 per cent of national Gross Domestic Product (GDP). The industry also accounted for 25 per cent of total exports, contributing significant foreign exchange revenue.

The industry was also said to be worth more than $10 billion and impacted upwards of 100 million Nigerians. Apart from generating a multiplicity of jobs for both men and women, it guaranteed a relatively steady income for various operators across its value chain.

Interestingly, the palm oil industry, globally, is poised for growth over the coming years, driven in large part by surging demand encouraged by its various applications and low cost of product compared to other vegetable oils.

For instance, the global post COVID-19 market size of the palm oil market is expected to grow from $62.30 billion last year to $75.69 billion by 2028, at a common annual growth rate (CAGR) of 3.30 per cent, according to a report by Vantage Market Research.

Now, this sheer size of the global palm oil market, according to industry operators and experts should be a wake-up call for Nigeria to reposition her once vibrant palm oil production industry in order to boost exports and claim a share of this huge market.

This is so because Nigeria’s palm oil supply gap is currently estimated at 1,250,000 metric tonnes. Local demand is put at 3.0 million metric tonnes while local production is 1.28 million metric tonnes.

The Nation learnt that the sector hasn’t been able to stabilise its annual production per year hence, the supply gap, with Nigeria currently spending an average of $500 million importing palm oil to make up for the shortfall annually.

It was against this backdrop that the Agriculture and Rural Development Minister Mohammad Abubakar, in June, tasked stakeholders to reposition Nigeria to its rightful position as top exporter of palm oil.

The minister said that in the early 60s, the agriculture sector was Nigeria’s major source of revenue, but the sector is currently struggling.

He, however, said it is not too late for Nigeria to reposition itself and reclaim its status in the agriculture sector, recalling that Malaysia came to Nigeria some years back, got oil palm seedlings from Nigeria and became number one producers of oil palm in the world.

Abubakar regretted that today, Nigeria is ranked fifth on the list of global palm oil producers, which is worrisome. He, therefore, pledged to work with any organisation to achieve the economic and fiscal diversification policy of the present administration anchored on agriculture.

Stakeholders’ perspectives

Interestingly, the minister’s call has not gone unheeded. For instance, the Chief Executive, Jemas Energy and Construction Limited (Jemas Palmoil), Mr. Jerry Sam Etukapan, has been working with local farmers in Akwa-Ibom, where he buys their oil palm and process to oil.

Etukapan exports and others are integrated into palm oil derivatives including frozen pizzas, chocolate and hazelnut spreads, cookies, and margarine. He, however, said it has been difficult for those involved in growing palm fruit and converting palm fruit into oil.

Palm oil plants, factories and general buyers of crude palm oil purchase crude palm oil from extracting factories. And the extracting factories buy fresh palm at exorbitant prices. Etukapan lamented that those harvesting palm fruits for the farmers are making things difficult for processors and exporters.

Etukapan put the issues and challenges in the business in perspective: “Our palm oil is more expensive than that of countries such as Indonesia and Malaysia. Few days ago, I lost business to Indonesian company because our palm oil was costlier than others.

“After harvesting their palm fruits, they will collect N600 per bunch. It takes 20 bunches to produce 25 litres can of oil. If they collect N600, you will be paying N12, 000 to produce 25 litres can of oil. This makes oil very expensive.”

It is easy to see the implications of this prize difference on the local palm oil industry. Again, Etukapan put it in context: “With this (the prevailing prize structure), we cannot compete with exporters in the international market because they use sophisticated machines that make the process cheaper for them.

“We are using crude methods and ancient machines. Today, we still use those machines that our forefathers were using. The other thing is that the cost of purchasing oil palm processing machines is high. We cannot afford it here. It is one or two companies that have been able to afford such machines in Akwa Ibom.

“If these machines are made available to local farmers, production level will expand and at the end of the day, the oil palm prices will go down. We cannot compete favorably with our counterparts in Indonesia and Malaysia. We should take note of this.”