Nigerians hit as demand pushes up palm oil prices by over 100%

Many homes in Nigeria can hardly afford to buy palm oil today, as the price of the commodity which is commonly used in cooking, rises by more than 100 percent, on account of extremely high demand.
Households are contending for palm oil with industries which deploy the product in the manufacture of ice cream, margarine, cosmetics and confectioneries among others.
These manufacturers, who used to import palm oil, can no longer do so because the commodity is among the 41 items restricted from accessing foreign exchange in the local market by the Central Bank of Nigeria (CBN).
“With the dollar scarcity and restriction of palm oil from the foreign exchange market, a lot of companies that are importing palm oil for industrial use are now sourcing locally. This has increased the demand for the product in the market, while production is still the same,” Celestine Ikuenobe, director of research, Nigerian Institute for Oil Palm Research (NIFOR), told BusinessDay.
BusinessDay analysis of the Novus Agro Commodity Index, shows that a 25-litre can of palm oil which sold for N6,500 in January 2016, now sells for N25,000 ( a 284 percent price increase) at major markets across the country.
A bottle of palm oil which sold for N220 in January last year, now sells for N720 ( a 227 percent increase), while a five-litre keg of palm oilwhich sold for N1,300 last year, is now N5,000 (a 284 percent increase).
There are conflicting data on the demand and supply gap in the palm oil industry. Data from the Manufacturers Association of Nigeria (MAN) shows that there is a demand-supply gap of about 700,000 metric tonnes in palm oil.
The National Oil Palm Association says the country produces one million metric tonnes of palm oil per annum, with local consumption estimated at 2.7 million MT and demand-supply gap put at 1.7 million metric tonnes yearly.
The oil palm belt covers 24 states, including all nine states of the Niger Delta and 80 percent of production comes from dispersed smallholders who harvest semi-wild plants and use manual processing techniques.
Another research by BudgIT Research, Indexmundi, the United States Department of Agriculture (USDA) and Vetiva Research, says that Nigeria currently exports 900,000 metric tonnes of palm oil annually, earning only $594.9 million at today’s price of $661 per ton. This represents 1.5 percent of the global 58.84 million metric tonnes output.
“Palm oil production cannot just increase like that. It requires at least three to four years before production can increase, even if we start making huge investment in plantations now,” Ikuenobe added.
Tunde Oyelola, chairman of the Manufacturers Association of Nigeria Export Group and vice chair of PZ Cusssons, with oil palm plantations worth $300 million in Cross River State, told BusinessDay that the problem is that the country’s population is increasing, while palm oil production is not rising.
“The foreign exchange situation is having an impact on the prices. Even smugglers themselves cannot find dollars to buy. Again, the yields of our palm trees are small, but industrial demand is high,” Oyelola said.
He observed that there must be a deliberate strategy in the South -East and South-South to grow palm plantations.
PZ Wilmar, Okomu, and Presco have embarked on backward integration by cultivating palm tree plantations.
PZ Wilmar, which is a subsidiary of PZ Cussons, bought over the 5,500-hectares, and previously defunct Calaro Oil Palm Estate, formerly owned by the Cross River State Government. It also acquired the 12,805-hectare Kwa Falls oil palm plantation, formerly owned by Obasanjo Farms, including the 5,450-hectare Ibiae Oil Palm Estate and another 8,000 hectares estate in Biase. Overall, the company owns over 50,000 hectares of oil palm plantation in the state.
Henry Olatujoye, national president, National Palm Produce Association of Nigeria, told BusinessDay in a telephone response to questions that the price rise is good for local producers of the commodity.
“About 50,000 hectares of plantation were added last year. This is what we need as a country if truly we want to attain self-sufficiency in palm oil production,” said Olatujoye.
He stated that the price would soon drop a bit, and that the palm oil producing season is fast approaching .

 

ODINAKA ANUDU & JOSEPHINE OKOJIE