Nigeria’s palm oil sector to reap from global market in H1

As Nigeria’s Naira appears stable, analysts say local palm oil producers are expected to benefit from a bullish global crude palm oil (CPO) market in the first half of 2025.

A recent report by CardinalStone Research highlights a rise in global CPO supply to 79.5 million metric tons (MMt) in 2024/25, up from 76.2 MMt in 2023/24, largely driven by favorable weather conditions.

Despite this supply increase, the report noted that the growth will remain modest due to Indonesia’s biodiesel mandate and a weaker output forecast from Malaysia.

“The oil palm market this year is expected to maintain elevated CPO prices, particularly in the first half, driven by robust demand from biodiesel mandates, festive seasons, and geopolitical factors affecting some substitute oils.”

“While supply improvements may temper prices in the latter half of the year, Nigeria’s local CPO prices are expected to remain high due to rising demand and sustained foreign exchange (FX) rates” the report stated.

Nigeria remains one of the world’s largest palm oil producers, yet it still imports more than half of its domestic demand. This heavy reliance on imports makes the local market highly sensitive to currency fluctuations, as importers play a significant role in determining prices.

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According to data from the Central Bank of Nigeria (CBN), the naira appreciated by 0.86 percent on March 17, closing at N1,528.03 per dollar, marking a gain from N1,541.36 recorded on January 2.

CardinalStone said listed players in Nigeria’s palm oil sector who contribute less than 10 percent of total supply—are anticipated to see modest production increases this year. Okomu Oil and Presco Plc are expected to benefit from improved Fresh Fruit Bunch (FFB) yields and expansion efforts.

However, cost pressures remain a key concern, with input, crushing, and milling costs rising due to higher fertilizer and energy prices. In 2024, Okomu’s general expenses surged by 76.5 percent while Presco recorded a 58.1 percent increase. Despite these cost hikes, both companies maintained strong profitability, supported by robust revenue growth.

According to BusinessDay report, Okomu Oil and Presco Plc, two agro-based companies listed on the Nigerian Exchange Group have achieved their highest after-tax profit in a decade in 2024 despite a challenging business environment.

These two agro-based companies were able to weather the storm of inflation and Naira devaluation to record the highest after-tax profit in a decade where Presco recorded 4088.7 percent growth and Okomu oil recorded 1188.3 percent growth from 2015.

“A high base effect of cost and a more stable foreign exchange environment are expected to ease cost pressures for both companies. We forecast an average EBITDA margin of 53.8 percent in 2025, with a five-year average of 54.59 percent, compared to a historical five-year mean of 50.0 percent, “ CardinalStone said.