• Saturday, July 13, 2024
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Oil palm industry beckons to private investors

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The Nigeria oil palm industry is beckoning to private investors as investment gap of about N2 trillion needed over a 20-year period has been identified for the country to attain self-sufficiency in oil palm production.

This was the finding of a research carried out in 2014 by independent researchers and sponsored by private companies in Nigeria that utilise vegetable oil as raw material in their production processes. The research indicates that apart from establishing of plantations, the capital investments require upgrade in the machinery and plant equipment for the industry to attain world-level standards of processing crude palm oil to refined vegetable oils, which countries such as Indonesia and Malaysia have attained.

According to Samuel Adetoba, an investment analyst in palm oil supply, Nigeria currently produces a meagre 1.7 percent of total world production while its domestic consumption of vegetable oil is about 2.7 percent of this world supply. Adetoba says, “Malaysia and Indonesia produce 83 percent of total world production of palm oil. From being the largest producer of oil palm, Nigeria is now a net importer of palm oil.”

IndexMundi, a data portal, states that the domestic palm oil produced in Nigeria totalled 930,000 metric tons in 2014. The Food and Agriculture Organisation (FAO) in a 2013 report stated that around the world, vegetable oil production was approximately 150 million metric tons per year, of which approximately one-third (50m metric tons) was palm oil. Palm oil is used in producing products such as margarine, cereals, sweets, noodles, baked foods, soaps, washing powders, cosmetics and so on. It is also being used as bio-fuel in Asia.

The manufacturing sector depends largely on CPO as a major source of raw material, hence the meeting of this shortage in the meantime with importation of high quality food grade palm oil through legal channels by industries in order for the economy not to lose further investment in the manufacturing sector, according to Adetoba.

Currently, palm oil, which sells for $639.5 per ton in the international market, goes for about $800 per ton in Nigeria, indicating the huge demand-supply gap. Though official reports show that Nigeria consumes about 1.35 million metric tons annually, which is 2.7 percent of total world supplies, there are indications that actual consumption is up to 2 million metric tons, a difference apparently being filled by smuggling.

Therefore, some state governments such as Edo are inviting private investors to establish oil palm plantations and processing plants. Abdul Oroh, Edo State commissioner for agriculture, recently said in Benin City in a media parley that “so, we designed a system to attract the private sector to be partners in progress. The partnership will be between us, the communities and the private sector sharing that sense of ownership of the process of creating those industries.”

Henry Olatujoye, president, National Palm Produce Association of Nigeria (NPPAN), stating that N1.5 trillion and not N2 trillion would be enough over 20 years for self-sufficiency in oil palm production, agrees that this funding would have to come from the private sector. Olatujoye says these investors include already existing companies in the country, Nigerians in the Diaspora and new foreign investors. He, however, adds that “policy change is the bane of underdevelopment in Africa. A business plan is supposed to live for about 20 years before it is changed, but in Nigeria, policies are changed every year, or every three years. There is also instability of political structure, investors are afraid to invest in a country where there is impunity to the rule of law.”

Speaking also on the relative high cost of palm oil in Nigeria, he says “if you remove the high cost of power generation, cost of production would go down by as much as 30 percent or more.”

 

OLUYINKA ALAWODE