Manufacturers canvass consistent policy to spur palm oil industry

Manufacturers say only a consistent government policy can revive the palm oil industry and make the sub-sector a reliable foreign exchange earner.

They say the country must close its borders against smuggling if it is willing to slug it out with Indonesia and Malaysia in the highly competitive palm oil market.

Santosh Pillai, managing director of PZ Wilmar, a palm oil refiner, told BusinessDay that there are illegal and questionable imports into the country, which prevent genuine investors from having a level playing field.

“Visit any supermarket or traditional market in Nigeria and you will see that plenty of imported vegetable oil, which is banned in the country, is easily available. The current policies are only aiding cross-border trade and smuggling. The leading domestic refineries in Nigeria are facing a crisis and many in the country are not operational,” Pillai said.

International data show that palm oil worth 400,000 tonnes per annum are smuggled into the country annually. Palm oil is currently one of the commodities restricted by the Central Bank of Nigeria (CBN) from accessing the foreign exchange market, but smuggling from Malaysia to Ghana, down to Kano, is rife and hurts local investors.

“This discourages further huge investment by investors like us and creates unhealthy competition in the market,” Felix Nwabuko, managing director of Presco, told BusinessDay.

Romanus Oguegbu, managing director of a medium-scale palm oil mill in Uburu, a community in Imo State, said he is cutting down production as purchases from Kano, Abuja and Lagos oil traders have dropped significantly because they prefer to buy smuggled brands that are relatively cheaper.

“I normally produce 400 gallons (of 25 litres) each week. But this has dropped by half. This affects the number of workers we employ. The number of workers has fallen to eight, from over 15 during peak demand,” Oguegbu said.

“This is too bad to us, and no one knows the type of palm oil smuggled into Nigeria. It could be hazardous to health,” he added.

Nigeria produces 900,000 to 1.3 million metric tonnes (MT) of palm oil, with national demand standing at 2.1 million MT. The huge gap provides an opportunity for smugglers and importers evading duties.

Large and established firms such as PZ Wilmar, Okomu and Presco cultivate about 400,000 hectares of land, while smallholders farm above 900,000, according to Henry Olatujoye, national president, National PalmProduce Association of Nigeria (NIPPAN).

“The only viable means of bridging that gap now is develop the domestic plantation industry and to support the local refineries.

“However, critical long terms goals should aim at supporting development of palm oil plantations within Nigeria by providing time-bound critical infrastructural and policy support, developing the palm oil supply chain by implementing a robust smallholder scheme,” Pilai stated.