Follow Us on Google
By Ayo Oyoze Baje
“Nigeria’s oil palm imports from Malaysia will continue to increase for the time being because our investment in the industry is still very insignificant”
– Henry Olatujoye( Managing Director, Palmtrade and Commodities Development Nigeria Ltd).
The persisting, painful paradox of Nigeria importing the finished products of natural items God has abundantly blessed the country with has not only deepened the preventable poverty conundrum but is symptomatic of gross leadership failure, over the decades. It should therefore, serve as a wake-up call to our creative and concerned economists, investors and entrepreneurs to do the needful. Amongst these products are, paper and paperboard, animal and vegetable fats and oils, cleavage products, dairy products, eggs, honey and Premium Motor Spirit (PMS), of which we are richly blessed. Others include milling products, malt, starches, wheat gluten and of course, oil palm. This is inexcusable! Palm oil production averaged 1.3 million MT in 2020, and for 2021 and 2022, it averaged 1.4 million metric tonnes. Despite the improvement in production, Nigeria has fallen from its position as world leader to the fifth largest producer, a spot it has stood for more than five years now.
Though for 2022, Nigerian palm oil producers grew their revenue by 68 per cent to N142. 31 billion from N84. 82 billion in 2021, thereby bringing total profit for the year to N38. 81 billion, a 26 per cent increase, it still falls far below that of Indonesia and Malaysia. For instance, in 2022, the value of Indonesia’s total palm oil exports amounted to around 29.66 million U.S. dollars, equivalent of N222.45 bn. These are countries that reportedly obtained their oil palm seedlings from Nigeria back in the ‘60s. The country which then boasted of 40 per cent of the global supply is currently on its begging knees on importation, piling immense pressure on foreign exchange reserves. As widely reported, in 2020 alone, Nigeria imported $351million, of it, making it the 23rd largest importer of palm oil in the world as imports from Malaysia was $242 million or 69 per cent. In 2022, the country imported 227,035 metric tons of palm oil from the same country. An instance is that Governor Charles Soludo announced that his government has initiated the importation of one million palm oil seedlings and one million coconuts from Malaysia. Though the objective is to generate annual revenue of N160 billion for the state of Anambra, there are some issues being raised by the palm oil industry players. Their complaint is that though there is olein, which is a refined product emanating from crude palm oil, it is banned from being imported by any company in Nigeria. The bitter truth, as made known by the manufacturers, is that some companies bypass this ban, in an alleged collaboration with Customs Services, by stating that it is crude palm olein (not oil) and so it can be imported into Nigeria.
With this in place, whether they pay the 35% on the crude palm olein, or not, since the Customs have as alleged by the manufacturers allowed this olein to be imported, under the crude palm oil HS import code, it is open to investigation. That is an international customs code without which it cannot be exported out of its country of origin. Only crude palm oil, not olein or crude palm olein, is permitted to be imported at a 35% duty for non- ECOWAS- derived crude palm oil. That means that if crude palm iol is is imported from an ECOWAS country with proof of origin there is no need to pay the 25% duty. But payment of 10% levy and 5% ETLS fee. Payment of ECOWAS Trade Liberalisation Scheme, ETLS is only on crude palm oil from ECOWAS countries that can prove the source of it. No olein is permitted from any ECOWAS country, either. Apart from this explanation, the bitter truth to be known is that the Indonesian government is subsidizing the export of palm oil to Africa in general, and Nigeria in particular. This is tantamount to dumping their oil palm products, driving oil palm companies in Nigeria out of business! The local manufacturers art therefore, not smiling to the bank, as many Nigerians think. In fact, they are bedeviled by some uphill hurdles.Amongst the challenges of smallholder oil palm production are high cost of land, lack of access to credit facilities and lack of improved planting materials- seeds/seedlings. Others include lack of storage facilities, and lack of processing facilities. Intervention measures are required and speedily too.
One inspiring move in the right direction is that taken by the Edo State Governor, Mr. Godwin Obaseki. He reiterated that the state in line with his campaign promise to generate jobs for the people, the government was poised to bridge at least 20 per cent supply gap in Nigeria’s oil palm market. This is being done with the inflow of investment into the state through the Edo State Oil Palm Programme (ESOPP). As he rightly noted, the state government has prioritized development of oil palm plantations because it has a comparative advantage in the cash crop. This is predicated from the economic background of years of hosting two companies listed on the Nigerian Stock Exchange. These are Okomu Plc and Presco Plc. In his words: “There is a supply gap of about 650,000mt, which can be closed by cultivating about 350,000 hectares of oil palm plantation. In Edo, through ESOPP, we have already commenced cultivation of 70,000 hectares and will add another 20,000 hectares soon. That means we are closing the gap by 20 percent, with about 100,000 hectares.”
Perhaps, if such laudable initiative has been adopted by other state governors, that have similar comparative advantage in oil palm production, it would have saved local manufacturers in Nigeria the hardship of placing order for 455,000 tonnes of palm oil worth $409.5 million (N241 billion) in recent time. That would explain the rationale behind the decision by the Cross River government to build palm oil market. Also, the country would have been earning approximately $20 billion annually from processing of palm oil, equivalent to half of the 2022 federal budget, yet over $500 million was being spent annually on the importation of palm oil. That is according to the CBN. For now, the production level has drastically reduced such that local price of the produce is 55 per cent higher than imported palm oil. While a litre of the commodity has gone up from N1,000 to N1,500, 20 litres that used to sell for N19,500 has reached N30,000. The way out of the wood involves a broad-based look at the issues raised by the palm oil producers and manufacturers. For instance, the Tinubu-led federal government should consider setting up a committee through the Ministry of Agriculture and Natural Resources in partnership with the state governors of the palm oil producing states.
Such a committee should try to answer the relevant questions: Do the farmers have access to fertile land at affordable costs? Do they also have access to improved hybrid seedlings that are disease-resistant, high-yielding with early maturations? Do they have accessibility and affordability to getting the relevant machines for processing and preservation? But that is not all.
Is it true, as alleged by some manufacturers that their local oil palms are being neglected due to the importation of the banned crude palm olien while the customs officers look the other way?
Credible answers to these burning questions will go a long way towards re-positioning Nigeria to reclaim its potential rank as one of the world’s largest oil palm producers and processors. That will drastically reduce the importation of the processed products of the raw materials God has graciously blessed the country with.
