What are your company’s products?
Our products are rubber, which we export. The other is crude palm oil, which we sell into the local market, 100 percent. We also have another product that we call Banga cooking oil, a specialty product that we sell in Jerry cans. However, we don’t do refining.
Do you look outside the country?
We don’t have to look outside the country because there is a big market here. Even if I double the crude palm oil, I will still not have enough to sell into the market. Most of the companies, especially the tyre companies, who can use our rubber have all closed down, so we currently sell it to various identified markets overseas.
Your stock performed exceptionally well in the market, what have you done differently?
We employed discipline, especially with regards to how we spend and what we spend on. We looked at our production strategy to ensure that our tree crops were in good condition in order to increase the yield. We also ensured that our costs were strictly controlled. We are price takers, which means we do not have power to control the prices of our products. What we can control, however, is how we produce it and at what cost. We made sure we did not spend in the wrong places. We have also concentrated on training and good corporate social responsibility to ensure a stable environment for us to work in. We have tried to build a common strategy that resonates with our employees, shareholders and stakeholders. These have led to an appreciation in the share price of the company.
What is your reaction to the recent calls by some Nigerians that crude palm oil tariff be reduced?
Some people are calling for the reduction of the tariff from 35 percent to 5 percent. If lowered, it will have a marked effect on the ability of the country to establish its own oil palm industry, and will certainly have a negative impact on our company. It will hurt the smallholders even more. Currently, imported CPO, inclusive of the tariff, is more expensive than locally produced CPO, so why would one want to import if this is the case? Our company has CPO available, so there is certainly product available to buy locally.
We know that CPO can be brought in from ECOWAS countries at 5 percent CET. But those ECOWAS countries seem to be producing more CPO than they have area locally under production, and yet they are exporting more to Nigeria than they are currently producing! The fact that the borders are difficult to control may mean that customs are not able to manage the excess CPO coming in and, so the government coffer is losing millions in revenue. This needs to be urgently addressed.
Our company doesn’t refine, but sells only CPO which the companies can utilise in their refineries. We have the CPO available, so it is not necessary for them to have to import all of their CPO requirements. Our company has good quality, low FFA, CPO and sells into the market at lower prices than if the CPO has to be imported. Thus, the recent push by some end users to ask for a reduction in this tariff, came as a surprise, since their argument that there was not enough CPO locally is untrue and the argument that they were unable to get CPO from outside of the country, seemed strange since we know that there is currently a large quantity of CPO in Asia looking for a home at discounted prices. Those that wish to import CPO can do so, without any problem, as long as they pay the tariff.
Our company will continue to resist the lowering of this tariff and will continue to lobby government to actually ban any imports for the medium to long term, as they have recently done with sugar, as this will ensure the growth of upstream industries and small farmers locally. This will also, undoubtedly, make the local industry more secure and sustainable which is to the benefit of the country and saves millions in foreign exchange annually.
What influence do you have on the market considering your production size?
We have a highly consistent and qualitative CPO and that’s what is giving Okomu Oil its good name and influence, albeit small, in the market. For that reason, on average, we generally obtain premium prices on our products. Unfortunately, smallholders don’t have the cash flow, because they need money to be liquid, and so they are forced to offer end users a discounted price in the market. Our situation is different because we have regular cash flows, and so we are not at the mercy of users to this extent.
Are you looking at diversifying?
No. Our core business is CPO and rubber. So, we are content with what we are doing. We are essentially farmers and so we concentrate on ensuring that we farm in a good way, otherwise we won’t have raw materials to sell to downstream industries. Also, we do not refine as we feel that the margin on refining is very thin. There are also at least 25 refining plants in Nigeria, the majority of which are operating currently at about 35 percent to 40 percent of their capacity. That is why we do not see it as a viable business in our own context at the moment.
A firm is about to set up CPO refining plant at Lekki Free Trade Zone in Lagos State, what could have informed their decision?
I believe Indomie is the company that you are referring to? I don’t know what their strategy is, or why they wish to put up a refinery, but I would guess that they feel that the market warrants it in order to ensure that they can produce and sell more of their products into this market and they get certain incentives, being a free trade zone. Other companies, such as PZ Cussons and Wilmar are doing the same thing, I think.
What is your production capacity?
Well, last year we produced about 28,000 tons of CPO.
What is your estimate of local demand and supply?
There is no accurate data but relying on the industry experience, CPO demand should be about 1.2 million to 1.5 million tons annually, while local supply is about 800,000 tons to 900,000 tons. So, there is a shortage of about 300,000 and 500,000 tons, which is not highly significant. Importation should be able to bridge that supply gap adequately in this regard..
We expect more firms to require CPO as raw materials as the economy expands, are you considering capacity expansion?
Last year, an Edo State agric summit was held, and there is a plan on ground to organise a palm oil summit this year. We are looking at ways to boost the production of oil palm in Edo State and the summit is for investors who want to be involved in oil palm production here. Our company would like to expand, but we prefer land closer to our current plantation so that management is not diluted or over committed, and this is not easy to come by.
How do banks treat your requests for facilities?
Our company has no problem in obtaining facilities from bankers. We have recently, in fact, finalised a loan for the expansion of our oil mill to the value of N2 billion. This will allow us to double the capacity of the oil mill to 60t/hr.
How about the Bank of Industry facilities?
Commercial banks are currently prepared to offer our company single-digit loans. Hence, we have not approached the likes of BoI, but it is not to say that we won’t do so in the future if the need arises.
In February, the president of Indonesia, an agric-oriented country, led a trade delegation to Nigeria, what is your reaction to that visit?
Any foreign investor that comes to Nigeria is good for this country because that makes the terrain more competitive. It will also make the industry practitioners work together and become stronger. We know Indonesia very well, because most of the research that we bring into Nigeria comes from that part of the world. When Indonesian companies come to Nigeria, they will come with new technologies and that will make us better. Also, our managing agent has about 70,000 hectares of land in Indonesia.
What is your outlook for the agric sector in 2013?
The prices of commodities, I think, will be volatile and prices will probably not significantly increase in 2013. This is mainly due to the current poor state of the world, economically, especially for commodities. Consumption is dropping and this is mirrored in the statistics, with negative prices being seen in the marketplace at this time.
What is your advice to local agric businessmen?
They need to do things right, not to compromise on quality and principles and to be united, irrespective of the industry they may be operating in. Everybody is trying to get along on their own, but we need associations that are well managed, add value and protect the interests of their stakeholders, a strong, unified association that will influence government and the likes, and lobby on behalf of all of their members.