Deep-pocket Sime Darby, Olam eye Nigeria’s oil palm industry

Two deep-pocket global oil palm investors – Sime Darby and Olam International – are planning to invest in Nigeria’s oil palm industry, BusinessDay exclusively gathers.
Sime Darby, Malaysia’s biggest oil palm plantation company, and the Singapore-based Olam, are eyeing Cross River State, where PZ Wilmar already has 26,000 hectares of oil palm plantation.
Sources told BusinessDay that Cross River State was chosen owing to its good soil for oil palm plantation and the existence of abandoned plantations, which are cheaper to acquire.
The sources also said the existence of old plantations in the state meant less interference by environmentalists who were often seen as a clog in the wheel of progress by oil palm companies across the world. Environmentalists and the United Nations often oppose firms’ indiscriminate felling of trees and call it deforestation.
It was not clear how much both intend to invest, but BusinessDay understands PZ Wilmar is pumping $300 million in plantations in Cross River State.
One of the sources, who understand the dynamics of oil palm production, said the decision was informed by huge demand-supply gap in Nigeria’s oil palm industry, adding that setting up plantations in Cross River offered economies of scale.
“Again, you look at the relative peace in the state and the fact that it gives them economies of scale, since you already have PZ Wilmar there,” the source said.
“This will be good news if the state and the Federal Government can seal these deals. Apart from its employment potential, it will once again return Nigeria to its previous place as one of the world’s biggest producers and exporters,” the source said.
Sime Darby has oil palm plantations in Liberia and has introduced a large processing mill in the country to increase its eight million metric tonnes (MT) of Fresh Fruit Bunch (FFB) per hour to 30 MT. In oil palm industry, FFP is the first stage of processing, followed by Crude Palm Oil (CPO) and vegetable oil, according to experts.
Olam, on the other hand, is operating in Gabon and is first in Africa to obtain the Roundtable Sustainable Palm Oil (RSPO), which shows that a company adheres to standards and produces Certified Sustainable Palm Oil (RSPO).
BusinessDay could not immediately get Sime Darby for a comment but got Olam’s vice president for corporate and government relations Ade Adefeko, who neither denied nor confirmed it.
“I am not in a position to confirm or deny,” Adefeko said.
Apart from PZ Wilmar, whose plantations are not fully fruiting, Nigeria has two key players – Okomu and Presco -, both located in Edo State.
However, Reuters reported last week that Sime Darby’s plan to expand operations might be stalled by losses incurred by the firm in Liberia.
Nigeria was largest producer of palm oil in the 1960s but that position has been taken by Malaysia and Indonesia. Nigeria currently produces 970,000 metric tons of CPO, while local consumption is estimated at 2.7 million tons per annum, indicating a demand-supply gap of over 1.7 million MT.
In terms of production volume, Nigeria is the fifth largest palm oil producer, behind Indonesia with 36 million MT, Malaysia with 21 million MT, Thailand with 2.2 million MT and Colombia with 1.3 million MT, data from the global oil palm industry shows.
Data from the National Bureau of Statistics (NBS) shows that Nigeria imported a total of N7 billion worth of CPO in the second quarter of 2017, with Indonesia accounting for 76 percent of the total import within the period.
Nigeria imported about 552,000 metric tons of crude palm oil in 2016, according to data from Solidaridad Network.
Henry Olatujoye, national president, National Palm Produce Association of Nigeria (NIPPAN), said that the country needs over two million hectares of commercial palm oil plantations to meet up with the current demand.
“Small-holder farmers in Malaysia produce 30 tons per hectare, but ours produce two tons per hectare due to poor agronomic practices, lack of training, and dependence on family labour,” Asen Ako, sustainability manager at PZ Wilmar, told BusinessDay.

ODINAKA ANUDU