Nigeria’s descent from being the largest producer of crude palm oil (CPO) in the world to a net importer seems to have defied all solutions, following the continuous drop in the country’s share in the global production of CPO. With an annual production of 1.4 million metric tonnes (MT), Nigeria’s share of 1.9 percent in the global CPO production pales into insignificance when compared with countries such as Indonesia and Malaysia that control the global CPO market.
Analysis from the data sourced from Our World in Data and the United States Department of Agriculture (USDA) shows that the declining trend began shortly after Independence and got to the climax in 1971 when Malaysia’s production surpassed Nigeria’s, and in 1980 when Indonesia became the second-largest producer of CPO in the world.
In 1961, out of the 1.479 million tonnes of CPO produced across the world, Africa produced 76.5 percent, or 1.13 million tonnes. The same year, Nigeria produced 669,000MT, representing 59.1 percent of Africa’s CPO production and 45.2 percent of the global CPO production. Indonesia and Malaysia only accounted for 9.85 percent and 6.41 percent of the global CPO production in 1961.
Sixty-one years after, specifically as of 2018, the reverse was the case. Indonesia accounted for 56.8 percent of the global CPO production; Malaysia, 27.3 percent; Africa, 3.6 percent, while Nigeria only produced just 1.5 percent of the CPO consumed globally.
At a compounded annual growth rate of 6 percent, the global palm oil market, according to CISION PR Newswire, is expected to increase to $92.3 billion in 2026 from $74.9 billion in 2022. Industry stakeholders say that the increasing size of the global CPO market has established that the problem with Nigeria’s palm oil production is not that there is no demand for the product, but rather its inability to position the industry as a major revenue earner, denying it of the much-needed foreign exchanges.
“If Nigeria had maintained its market dominance in the palm oil industry, the country would have been earning approximately $20 billion annually from cultivation and processing of palm oil as at today”, PwC Nigeria said in its 2019 report, titled ‘X-raying the Nigerian palm oil sector’.
According to a stakeholder, Nigeria’s descent into a net importer of CPO was caused by a number of factors, of which the preeminent ones are Nigeria’s Civil War, oil boom, and lack of government support for smallholder farmers.
Fidelis Olise, corporate communications, Okomu Oil, said: “With the discovery of crude oil in commercial quantity in 1959 and the emergence of crude oil as the dominant source of revenue for the government, government attention was focused on the petroleum industry at the detriment of other sectors such as the agricultural sector.
“The consequence of this was that there was no new investment in the palm oil sector, and even existing oil palm plantations were not given the necessary financial support.”
According to him, the oil palm sector requires a lot of financial capital to be effectively managed and in the absence of the needed funding, the existing plantations were producing less than their projected yields.
Olise said: “The ban of export of crude oil by Indonesia does not necessarily create opportunities for companies like us. I say this because, before the ban, we have always sold all our palm oil products. However, the ban and the contingent increase in the price of CPO may attract new investors into the palm oil sector, but then, investment in this sector will take up to six years to recoup.
“So, in the short run, the ban may be more adversarial to the Nigerian economy. Opportunities will only be reaped if there are sufficient investment in this sector and this needs government encouragement.”
Nigeria’s South-South, South-West and South-East geopolitical zones are responsible for 94 percent of CPO produced in this country, according to the data sourced from the USDA. The South-South belt accounts for about 42 percent; South-West, 27 percent, while the South-East accounts for 25 percent, and altogether producing 1.4 million tonnes annually, according to USDA.
The Nigeria Civil War that was fought between 1967 and 1970 in the South-East and South-South geopolitical zones caused serious devastation to the palm oil belts responsible for 67 percent of Nigeria’s CPO production. The destruction of farm settlements occasioned the dispersal of farming communities in those regions, and these challenges remain till the present day.
Consequently, the first time Malaysia surpassed Nigeria in CPO production globally was in 1971, when it accounted for 26.9 percent of the global CPO production in contrast to Nigeria’s 23.2 percent.
Nigeria’s oil palm industry also displays some characteristics that hinder productivity, according to Leke Dada, who as at the time of his research was at the Food and Agriculture Organization of the United Nations.
Some of the characteristics that hinder higher productivity in Nigeria include traditional processing method, lack of modern input, decentralised management, processing and marketing system, negligible government mills or plantation, as well as little use of modern inputs and extension services.
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According to him, Malaysia’s CPO extraction produces 90 percent as against 20 to 50 percent in Nigeria; intensive monoculture and high degree of specialisation, and large scale technology and modern mills. Other features that have helped Malaysia stand out include single management control, presence of large-scale plantation, and high export quality.
Experts have also identified underfunding and lack of subsidies for farmers as major factors. For instance, between January and October 2020, the Central Bank of Nigeria disbursed N3.6 billion loans under the Agricultural Credit Guaranty Scheme Fund. Cash crops received N345.46 million, representing 9.6 percent of the total disbursement.
Within the cash crop segment, oil palm received N98.69 million, representing 28.6 percent of the total loans disbursed to cash crops, and 2.74 percent of the total loans disbursed under the scheme.
“There is need for significant investment in research and development activities. There is underfunding of research by the government in the agricultural sector, which is the largest contributor to the country’s GDP and a strategic component of the Economic Recovery and Growth Plan,” PwC added.
