Four things Nigeria can learn from top palm oil countries

Nigeria has one of the largest land areas dedicated to oil palm cultivation globally, but it still lags in palm oil production.

According to a report by Vestance entitled, ‘Reclaiming Lost Glory: Nigeria’s Palm Oil Renaissance,’ Nigeria used to be a major producer of palm oil between the 1950s and 1960s, with states like Calabar, and Rivers State being some of the top distributors.

However, while other countries like Malaysia and Indonesia have found a way to grow the plant, becoming major exporters today, Nigeria has fallen in rank.

“The Nigerian oil palm industry stands at a crossroads, as it remains at the embryonic stage of an industry cycle, with high susceptibility to external shocks and a sustainability outlook that might deter expansionary plans for increased growth and production,” the report said.

“However, Nigeria can position itself as a responsible and competitive player in the global palm oil market by capitalising on emerging opportunities (like increasing demand and potential slow growth with national competitors), addressing sustainability concerns, and prioritising value addition,” it added.

BusinessDay has identified four things Nigeria can learn from the success stories of Malaysia and Indonesia which are top palm oil producers and flourishing in its export.

Establishment of Estate Plantation Systems

The Vestance report notes that the governments of Indonesia and Malaysia played a crucial role in boosting palm oil production in their respective countries by establishing large state-owned estate plantations.

Central organisations drove these efforts – Perusahaan N’égara Perkebunan (PNP) in Indonesia and the Federal Land Development Authority (FELDA) in Malaysia.

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“These entities provided land, financing, and training to smallholder farmers, organising them into clusters around large, centrally managed estates,” the report said.

This clustering approach integrated smallholder plasma farms with larger estates, creating economies of scale, improving access to resources, and ensuring market access.

For Africa’s most populous nation to achieve similar success, it should prioritise cluster farming among the farming population.

Trade policies and market reforms

Growth in palm oil production in leading countries is closely tied to effective trade policies and reforms that promote investment and development.

The Vestance report says that substantial tax incentives such as import duty exemptions on machinery, reduced tax rates on palm oil profits, and subsidies on fertilisers and pesticides, coupled with deregulated land acquisition in Indonesia, made the palm oil sector highly attractive for foreign investment.

These policies, introduced in the mid-1970s to early 1980s, attracted significant capital from the World Bank and the Asian Development Bank, dramatically increasing production and expanding cultivated land.

This should be copied by Nigeria.

Research and development

Findings by BusinessDay reveal that Nigeria has spent N266 billion on agricultural research institutes in the last five years, yet farmers’ output remains low due to poor utilisation of research results.

The Vestance report cites Guatemala as an example of a country which employs improved palm oil varieties, developed through research and implements rigorous seedling selection processes to ensure optimal productivity.

It stresses that this focus on seedling quality is crucial for determining the success, yield, and sustainability of plantations.

Establishment of a national palm oil development authority

The Vestance report further notes that creating a dedicated body to oversee and regulate the industry can address issues such as smuggling, counterfeiting, and quality control.

It emphasised that, “This authority could also promote sustainable and environmentally responsible practices.”