The Nigerian palm oil industry is fast picking up steam as the backward integration policy in the industry has continued to spur massive investments in the subsector.
Africa’s largest economy has seen a steady increase in its palm oil production in the last five years as PZ Wilmar, Dufil Prima Foods, Agri Palm Limited, Presco, and Okomu, among others, are investing massively and developing backward integration projects in the industry.
For example, PZ Wilmar, a subsidiary of PZ Cussons, has almost 26,500 hectares of palm oil plantations in Cross River State. About 5,549 hectares (ha) of oil palm plantation are located in Calaro Estate, while 2,369ha are in an area known as Calaro Extension. The firm also acquired Ibiae plantations with 5,595ha; Ibad plantations in Akampa with 7,805ha; Kwa Falls in Akampa Akpabuyo with 2,014ha, and Oban plantations, also in Akampa, with 2,986ha. PZ Cussons has completed two palm oil processing plants in the Calaro Estate.
Agri Palm Limited, a subsidiary of Flour Mills Nigeria Limited, has plantations at Ugogui and Iguiye near Benin City in Edo State, and has expanded to 4,000ha of established palm in the first phase of local palm oil production needed to support the upstream needs of the group’s oil refining operations in Ibadan.
In 2019, Dufil Prima Foods, maker of Power Oil, was given a concession of 17,954.71ha in Edo State to develop two projects. The company says it would plant 2.3 million palm seedlings on 15,000ha of the acquired land.
The increase in production has helped reduce the country’s palm oil imports, drive local demand, and forestall constant pressure on the Nigerian foreign exchange market.
“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 policy,” notes Fatai Afolabi, former executive secretary of the Plantation Owners Forum of Nigeria (POFON).
Data from the Food and Agricultural Organisation (FAO) show that Nigeria’s oil palm fruit production has risen from 8.5 million metric tons in 2016 to 10 million metric tons in 2019, an indication that the country is increasing its local production, but not as fast as its population growth rate.
Similarly, Malaysian Palm Oil Council (MPOC) data show that the country’s imports from global top producer – Malaysia have declined by 20.6 percent year-on-year.
Nigeria crude palm oil (CPO) import from Malaysia declined from 95,621mt in the first four months in 2020 to 75,948mt in the same period in 2021.
“Most top palm producers today started by refining but are now investing and developing large plantations owing to the backward integration policy,” Afolabi who is also the managing consultant of Foremost Development Services Limited, says.
He notes further that existing players like Okomu and Presco have also doubled their plantations and increase production by 100 percent when compared with their status five years ago.
This is evident in both companies’ financial statement as numbers released by the two listed firms in the first quarter of 2021 show that Okomu’s revenue nearly doubled to N12.6 billion in Q1 2021 from N6.9 billion in Q1 2020, an indication of a 79.9 percent increase.
For Presco, revenue increased by 47.5 percent to N7.9 billion in Q1 2021 from N5.4 billion in Q1 2020.
Palm oil producers benefited from the blacklisting of some 41 items including oil palm by the Central Bank of Nigeria in 2016, when dollar shortage fostered local demand of the agro-product and the fifteen months border closure policy.
More so, the industry has continued to see new plantations spring up owing to expansion by existing players and new entrants as well as the CBN’s support to smallholder farmers to boost local production.
“Right now, we have seen 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,” Henry Olatujoye, former president, Palm Produce Association of Nigeria, states.
“New entrant of farmers are coming into the sector and the combination of all these have driven production,” Olatujoye says.
Furthermore, states like Edo have boosted local production by investing in new plantations. Governor Godwin Obaseki of Edo State said the state had signed a pact of nearly N100 billion with seven oil palm investors to rejuvenate palm oil production in the country.
Also, the CBN has provided financial support to smallholder oil palm farmers to boost local production.
The CBN through its intervention programmes said in April 2020 that the bank had disbursed a total of N34.3 billion to major oil palm companies to support the industry with a plan to plant 100,000ha of palm oil trees by 2025, from 20,000ha in 2020.
However, the National Palm Produce Association of Nigeria (NPPAN) says the CBN has not given much attention to the industry the way it ought to have giving its economic importance to the country.
“CBN should set aside fund to develop oil palm and other tree crops just like it has done with rice, because the business is highly capital intensive,” Alphonsus Inyang, national president, NPPAN, says.
“The government should establish a National Oil Palm Development Council to regulate and incentivise oil palm and drive investment just like it is done in Malaysia and Indonesia,” Inyang said.
