Nigeria’s palm oil imports decline on backward integration policy

Nigeria has seen its importation of crude palm oil decline steadily in the last three years thanks to rising local production.

In an attempt to regain its lost position in the league of global palm oil producers, Nigeria had introduced the backward integration policy in 2011 but it wasn’t until 2018 that it began to gain traction.

This has spurred massive investments from PZ Wilmar, Dufil Prima Foods, Agric Palm Limited, Presco, and Okomu Oil Palm Company, among others, in developing backward integration projects.

Currently, there are no reliable figures for Nigeria’s palm oil production and imports.

However, Nigeria’s imports from Malaysia – the world’s second-largest producer – declined by 76.5 percent in the first three months of the year from 44,908 metric tonnes (MT) in 2021 to 10,536MT. In 2021, it dropped by 15.8 percent from 368,313MT in 2020 to 309,911MT, according to data from Malaysian Palm Oil Council.

Industry sources attributed the steady drop in the volume of importation to the ongoing massive expansions by existing plantation owners and the entry of new players, which have helped in boosting local production.

Although, the sources stressed that production is still not growing at the same pace as Nigeria’s fast-rising population.

“There is no doubt that Nigeria’s palm oil production is increasing and will continue to be on the rise owing to the backward integration projects by many producers. This is reducing our importation,” said Fatai Afolabi, former executive secretary of the Plantation Owners Forum of Nigeria.

“Existing players like Okomu and Presco have doubled their plantations and increased production by 100 perecent when compared to their status five years ago,” he said.

According to him, the country may be immune to the recent global price rally that has forced Indonesia – the global top producer of the commodity – to halt ongoing shipments in an attempt to keep the price affordable for its citizens.

Palm oil is a key ingredient in packaged foods, detergents, and cosmetics. About 90 percent of palm oil is used in the production of foods, while the remaining 10 percent is used by the non-foods industry in Africa’s most populous country.

Igwe Hilary Uche, national president of the Oil Palm Growers Association of Nigeria, said the recent level of investments in processing mills was bringing a major advancement in the growth of palm oil production in the country.

According to him, the country can further accelerate and sustain local production of the commodity when the government starts giving much attention to smallholder farmers, who account for 80 percent of the country’s palm oil needs.

“There is serious expansion by existing plantation owners and this is impacting our production,” he said. “Production will further increase when the government starts giving much attention to smallholder farmers – that produce 80 percent of the country’s production – in the way it ought to.”

The industry has continued to see new plantations spring up owing to expansion by existing players and new entrants and the Central Bank of Nigeria’s support.

“Right now, we are seeing the kind of planting that we have not seen in Nigeria before and demand for palm oil has also increased as manufacturers who use it as inputs for production are now sourcing locally,” said Henry Olatujoye, former president of Palm Produce Association of Nigeria.

“New entrants of farmers are coming into the sector and the combination of all these have driven production,” he said.

Nigeria imports its crude palm oil from Indonesia, Malaysia, China and India.

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