In the last five years, palm oil producers in Nigeria have been posting record revenues and profits, largely on account of import restrictions that more or less guaranteed their position as suppliers of last resort to diverse commercial and individual users.
Yet, even though Presco, for instance, tripled its profit within one year (2020 to 2021), there is even more potential for Nigerian producers to make more than this, both from the local and international markets.
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With data, as reported by BusinessDay, showing Nigeria importing less palm oil as local producers report expansions, there are also opportunities in the global multibillion-dollar industry, and locally too, where supply has not completely met demand.
When Indonesia, the world’s largest exporter of palm oil, banned exports of the commodity, to safeguard its own domestic consumption on account of increasing uncertainties and disruptions due to the Russia-Ukraine crisis, it put pressure on edible oil prices globally.
For Nigeria, it was a reminder of its lost status as a giant in palm oil production, as it was neither able to step up to meet the needs of a global market nor guarantee domestic supply and avoid erratic price surges. Domestic players, both big and small, would keep reporting profits after all, but there is an even bigger cake to be shared if local producers quit being comfortable with the edge they have, which is: as long as imports are restricted, they need not do more than the bare minimum in pushing productivity.
“This is a further wake-up call,” said Emmanuel Ijewere, vice-president of Nigeria Agribusiness Group (NABG), who added that there need to be concerted efforts to give producers the necessary infrastructural support to become truly productive and globally competitive.
According to him, Presco and Okomu in Nigeria are two of the biggest players in the world, and there are also the smaller producers, many of whom cannot expand their production because they cannot modernise their processing capabilities.
“These are all in states, but the state governments are more interested in just going to Abuja and collecting monthly allocation, instead of encouraging these various individual small plantations in their areas to produce oil from their palm produce, from which the individuals and companies (involved) can pay taxes,” he said.
A BusinessDay analysis shows that Presco’s profit grew to N18.8 billion in 2021 from N5.2 billion in the previous year. The company’s revenue jumped by 97.5 percent to N47.2 billion in the period under review from N23.9 billion in 2020. In 2019, its profit was N3.8 billion, down from N4.3 billion in 2018.
For Okomu Oil, its profit grew by 55.5 percent within nine years, reaching N14 billion in 2021 from N9 billion in 2012. This was the highest profit after tax recorded, based on its financials published on the Nigerian Exchange Limited.
The profit was hinged on the 60 percent increase in revenue to N37.5 billion in the financial year ended December 2021 from N23.4 billion in 2020. The revenue growth was on the back of 85 percent local sales while only 14.9 percent was from exports. Local sales reported N31.9 billion while export sales yielded N5.6 billion.
Yet, as the Indonesian ban is playing out, there is even more money to be made in the export market too. While Ijewere advocates more support and enabling environment for local producers, there are also concerns that interventions in recent years may have gone to unqualified persons.
“If you look at the array of people who are claiming to be participants in the palm oil business, you will find that they are really briefcase farmers,” said Kabir Ibrahim, a former president of the All Farmers Association of Nigeria. “The people who are in the actual production do not even get the opportunity to help them optimise their production.”
According to Ibrahim, while funds through the Central Bank of Nigeria are said to have been invested in the palm oil industry, they have been “invested wrongly,” and the people who are really doing the work are not the ones being subsidised.
He said for the country to take advantage of the opportunities in the palm oil industry, support to players in the industry must be holistic and go to the right people. This, according to him, is the only way to guarantee funds are actually used to expand palm oil production for Nigeria to meet its local needs and even someday, become an export giant again.