From Uche Usim, Abuja
When the Central Bank of Nigeria (CBN) excluded 43 hitherto imported goods from accessing foreign exchange at the Nigerian foreign exchange markets in June 2015, many ill-informed analysts tagged it corporate rascality and a veiled plot to run genuine importers out of business.
The CBN governor, Mr. Godwin Emefiele, who was undeterred, said there was no way the apex bank could sustain funding food imports for a population of over 200 million, when there was in-country capacity to grow the food items.
That was how the Anchor Borrower’s Programme (ABP), an intervention scheme aimed at solving the food insufficiency nightmare and creating massive employment, was born.
However, with the twin blight of the COVID-19 pandemic and the Russia-Ukraine war, which have disrupted global supply chains and shrunk food productivity, Emefiele is now being applauded as a visionary leader who saw tomorrow and prepared for it.
This is because many countries have been forced to limit export of food items to meet local demand, having recorded a shaky exit from COVID-19-induced recession and its concomitant shutdowns.
The unsavoury development puts any import-reliant country in dire straits as getting food supplies has become a tough order and obviously more expensive, with a heavy strain on foreign reserves.
So, in line with the incumbent administration’s mantra of growing what the nation consumes and consuming what it grows, the ABP has recorded progress in the local cultivation of over 10 crops, including rice, other grains and oil palm.
Among the nations toeing the path of emergency protectionism is Indonesia, which, last week, announced the suspension of oil palm exports in the face of domestic shortages, which pushed vegetable oil prices to new highs.
The Asian country is a major trade partner with Nigeria in oil palm derivatives and, with the planned cutback on export, the country does not seem jolted as substantive investments have been made to boost palm oil production under the CBN’s ABP.
The palm fruit is used for winemaking and the leaves provide shelter for houses in rural communities. It is also used industrially as a component in manufacturing a wide variety of goods.
Not only does oil palm have commercial value, it has a number of health benefits, thereby making it one of the highly demanded crops in the world. There has been an observed spike in the demand of oil palm and its derivatives commensurate to the growing global population and improvement in standards of living.
Typically found in rainy tropical lowlands, oil palm is cultivated in the South East zone and the Niger Delta areas of Nigeria. The Nigerian oil palm belt consists of 24 states with nine states of the Niger Delta area producing 57 per cent of the total output. There are three varieties of the oil palm commonly found in Nigeria.
They are Dura, Pisifera and Tenera, with Tenera, a crossbreed of the Dura and Pisifera, being the preferred one by farmers because it yields more oil than other varieties available. It also has a low production cost and generates more oil, compared to other sources of oil, thus making it an economical option.
The estimate for oil palm plantations in Nigeria ranges from 169,000 hectares to 360,000 hectares; (72,000 hectares of estate plantations and 97,000 hectares of smallholder plantations). Estimated oil palm yield per hectare in Nigeria is at eight tons per year maximum and profit per hectare is 3.4 tonnes. Between the 1950s and 1960s, Nigeria was the leader in the world oil palm market. From that enviable height of controlling about 40% of the world market, Nigeria slipped to the fifth position, barely producing three percent of the global supply of oil palm.
However, over the past couple of decades, there has been a dismal retrogression, with Nigeria becoming a net importer of oil palm to meet up with the demand gap in the country. There are a myriad of production challenges confronting oil palm production and the consequent low or inadequate yield. These range from the age of palm trees which can affect the overall output: inadequate capital for innovation; limited access to land due to the land tenure system; continuous destruction of wild groves from which the fresh oil palm fruit are harvested and difficulty accessing high value seedlings.
Others include lack of proper scaling of milling technology, which results in sub-optimal output, inefficient synergy between stakeholders in the value chain; inability of the small millers to meet industrial quality, among others.
Oil palm production per annum is at 1.250.000 MT and the current demand is 2,500,OOO MT per annum. To meet domestic demand for technical palm oil (TPO) used in industry and special paim oil (SPO) used by households, the value of imports accounts for about N60 billion per annum to achieve 50 per cent import substitution through production upgrade within the next 10 years, there is a need to bridge demand deficits for domestic production of fresh fruit bunches from 85 million MT recorded in 2010 to about 10 million MT in 2020. The additional 125 million MT of fresh fruit bunches estimated to produce 150,000 MT of oil palm using an average of 12% extraction rate.
According to experts, the narrative is changing with the intervention of the CBN in the sector. In CBN-facilitated meetings wth stakeholders, including state governors and other top government functionaries from the oil palm producing states, Emefiele sougnt their buy-in and set up partnership models that would stimulate investments in oil palm plantations plantations.
Thirteen governors of oil palm producing states pledged to make available a total of 904,624 hectares for development under the ABP. In addition, the bank, working with the fiscal authorities, has matched investor with proven capabilities with states to process necessary documentation and titling requirements. These investors were to follow due process and apply for loans to participate in the oil palm development initiatives of the Bank.
Emefiele said the ultimate goal was to overtake Thailand and Columbia to become the third largest producer of oil palm over the next few years through increased production from 125,000 MT to 2500,000 MT by 2028 through the cultivation of approximately 350,000 hectares (cultivation by 2025). Core objectives of the intervention include; to meet local demand of palm oil and to improve local processing quality and standards; conserve foreign exchange reserves; create jobs and enhance the skills of Nigerian people along the oil palm value chain; faciltate easier access to funding for oil majors, SMEs and smallholders, improve and grow the economy.
Palm oil, which is used heavily in processed food such as instant noodles and baked goods, is also present in other consumer products, such as personal care items, pharmaceuticals and cosmetics.
Lately, the prices of palm oil, soybean, European rapeseed and even its Canadian GMO counterpart, canola oil, have reached historic highs following Indonesia’s announcement.
“We already had problems with soybeans in South America, with canola in Canada,” said Philippe Chalmin, an economics professor at Paris-Dauphine University in France, stating that both crops had been severely affected by extended droughts.
Then came devastation for the “sunflowers in Ukraine” due to Russia’s invasion, he added.
Palm oil is the most consumed vegetable oil in the world, and Indonesia accounts for 35 percent of global exports, according to James Fry, chairman of LMC consulting firm.
Indonesia’s export ban is designed to bring down prices in the country and limit shortages, according to authorities.
But Chalmin said the move “comes at the worst time.
“The rise in prices dates back to last year already and it is exacerbated by the Ukrainian conflict”
Rich Nelson of the agricultural market research and trading firm Allendale said “the industry believes it’ll last maybe for one month, perhaps two.”
But in the meantime, prices are skyrocketing in a market that was “already accelerated,” he said.
Unlike other oilseeds, palm fruit does not keep once picked and has to be processed immediately, Fry said.
Indonesia’s palm oil storage system, which was already holding substantial reserves, is now under further stress, Fry said.
Interestingly, Nigeria has made remarkable progress in oil palm production and may not be hit by the protectionism stance of countries who are looking inwards to meet local demand.
However, analysts are worried about ravaging insecurity and its devastating impact on agriculture in Nigeria.
The CBN Governor has repeatedly called on security agencies to help tackle the challenge that is stalling genuine food production efforts.
Emefiele in a recent forum appreciated the tremendous impact of agriculture and the huge role it has played in revamping the country’s economy in the last six years.
Emefiele, while addressing journalists during an inspection tour of the palm plantation at Odighi village in Ovia North East Local Government Area of Edo State recently wondered what would have happened to Nigeria if the agriculture sector had not been revamped, vis a vis the rising cost of food items across the globe.
The CBN Governor expressed delight that the bank has assumed a pivotal role since 2015 upon the pronouncement by President Muhammadu Buhari that “we produce what we eat and eat what we produce” by coming up with several initiatives aimed repositioning the sector with a view to creating employment opportunities as well as growing the the gross domestic product (GDP) of the country.
On the socio-economic impact of the CBN interventions, Emefiele singled out the
ABP among other interventions schemes, which revolutionised agricultural practice whereby small holder farmers who hitherto could not approach commercial banks for loans, are now being granted credit facilities in the forms of inputs like seedlings, fertilizer and herbicides. Those smallholder farmers can now cultivate and produce enough for their families and sell produce as loan repayment with ease, thereby generating employment, improving living standards and creating wealth simultaneously. Emefiele also commended the efforts of the promoting company, Agri-Allied Resources and Processing Limited and its parent company, Tolaram Limited for heeding to clarion made by the CBN to source their critical raw materials locally. He noted that the company has painstakingly embraced backward integration principle by acquiring farmland to the tune of 18,000 hectares for cultivation of oil palm, cassava and maize which are the critical raw materials used by the group.
In his remarks, the Managing Director of Agri-Allied Resources, Mr Madhukar Khetan, hinted that the company has so far accessed a 10-year loan in the sum of N16 billion at single digit interest rate with two year moratorium, under the Commercial Agricultural Credit Scheme (CACS) for the project. The farm currently has about one thousand workers.
Between November and December 2021, under
ABP, the CBN disbursed N75.99 billion to support the cultivation of over 383,000 hectares of maize, rice and wheat during the 2022 dry season, bringing the cumulative disbursements under the Programme to ₦927.94 billion to over 4.5 million smallholder farmers cultivating 21 commodities across the country. All excess output aggregated from the financed farmers will be released to the Nigeria Commodity Exchange (NCX) to help moderate the prices of food in the market. The Bank also released N1.76 billion to finance two large-scale agricultural projects under the Commercial Agriculture Credit Scheme (CACS).
In addition, the bank disbursed N151.23 billion under the real sector facility to 15 additional projects in agriculture, manufacturing, mining, and services. The funds were utilized for both greenfield and brownfield (expansion) projects under the Covid-19 Intervention for the Manufacturing Sector (CIMS) and the Real Sector Support Facility from Differentiated Cash Reserve Requirement (RSSF-DCRR). Cumulative disbursements under the Real Sector Facility currently stood at ₦1.40 trillion disbursed to 331 projects across the country. As part of its effort to support the resilience of the healthcare sector, the bank also disbursed ₦498.00 million to two healthcare projects under the Healthcare Sector Intervention Facility (HSIF), bringing the cumulative disbursements to ₦108.85 billion for 118 projects, comprising of 31 pharmaceuticals, 82 hospital and 4 other services.
Furthermore, under the 100 for 100 Policy on Production and Productivity (PPP), which was introduced to stimulate the flow of finance and investments to enterprises and projects with potential to kick-start a sustainable economic growth trajectory, accelerate structural transformation, promote diversification, and improve productivity, the bank has received 224 applications, valued at ₦294.91 billion for real sector projects in agriculture, energy, healthcare, manufacturing and services.