CBN and the oil palm rescucitation
The empirical evidence of the persistent, gross leadership deficit that Nigeria has suffered over the decades is characterized by an income-dependent economy that has both the public and private sectors refusing to add the needed technological value to the immense raw materials available to the country. Instead, there has been an undue focus on the importation of their processed, finished products. Amongst these are oil and gas, solid minerals and several agricultural products. These include cocoa beans, groundnut, cotton, cashew nuts, soybeans, coffee, cassava and of course, palm oil.
Kudos therefore, goes to the Buhari-led administration for exhibiting the political will to reverse this drift to economic enslavement through new initiatives on pragmatic intervention for local farmers of tomatoes, yam, groundnut, cotton and the recent fillip by the Central Bank of Nigeria (CBN) to resuscitate the long-neglected palm oil sector.
The noble aim is to generate employment and eventually generate more foreign exchange as the economy diversifies from the oil sector. It is good enough that the out going CBN Governor, Mr. Godwin Emefiele, has had a robust interaction with the governors of the South-South and South-East states, where the oil palms grow more towards breathing a new lease of life to the oil palm sector. He said: “We are determined to change this narrative. We intend to support improved production of palm oil to meet not only the domestic needs of the market, but to also increase our exports in order to improve our forex earnings”.
According to Peter Kilby, then the assistant professor of economics at Wesleyan University, who carried out field work in Nigeria during 1959-62 and 1964 the processing of palm fruit was the most important processing activity carried out back then in the country. The end products, palm oil and palm kernels, were responsible for 15 to 20 per cent of Nigeria’s exports in 1965 with their combined value put at £40 million. In its heyday, West Africa produced up to 75 percent of all the palm oil consumed worldwide..
But that was then, when countries such as Malaysia and Indonesia came to Nigeria, to obtain palm oil seedlings with the assistance of the British colonialists.
While in the early 1960s, Nigeria’s palm oil production accounted for 43% of the world production, it currently only stands at 7% of total global output. As at 2012, Angola’s production of 57,000 metric tones compared with Nigeria’s production of 1,0800,000 mt but its consumption of 129,00mt was outstripped by Nigeria’s consumption of 1,865,000mt.
In fact, as at March 2017 about 450,000 tonnes of palm oil worth N116.3 billion was imported into the country in 2017. And in 2018, statistics from the CBN revealed the import scandal that has Nigeria spending (or worse still, wasting) humungous sum of about $500 million annually on the importation of palm oil! What a paradox of penury in the midst of plenty as statistics show the huge sums the top five producers make. For instance, Indonesia: makes US$18.5 billion (55.5percent of exported palm oil), Malaysia: $9.7 billion (29%), Netherlands: $1.4 billion (4.1%), Papua New Guinea: $512.8 million (1.5%), Guatemala: $446.5 million (1.3%),Colombia: $381.7 million (1.1%).
Notably, although West Africa is privileged to be located right in the center of the world’s oil palm belt, it produces less than 5 percent of the palm oil consumed worldwide. Malaysia and Indonesia have become the dominant powers in palm oil production and presently supply more than 70 percent of the palm oil consumed worldwide. Currently, no African country, except Cote D’Ivoire, produces enough palm oil to meet the demand of its local market.
The challenge for Nigeria therefore, is to become more inward looking as the oil palm sector stands tall to change the economic narrative. Its uses are compelling. Palm oil is “a hugely versatile vegetable oil” and an important item in the Nigerian diet (as part of the traditional soup or sauce) and based on its consistency and ability to resist high temperatures, it is commonly used as cooking oil and is considered one of the best oils for frying. It is also an essential ingredient for the food industry, used as a cooking oil or in the production of processed foods (such as many types of chocolates, biscuits, chewing gum). In food, palm oil is used as a substitute for fat in making condensed milk, coffee cream, ice cream and margarine.
As a non-food product, palm oil makes an important raw material in the production of soaps, detergents, greases, lubricants and candles. used as an illuminant, and soap ingredient. With the growing profile of the biofuels market, palm oil has also proven to be valuable as a lubricant in industrial production or for the energy sector for the production of biodiesel. It is used for the manufacture of cosmetic and hygiene products (soaps, lipstick, washing powder).
It is also a valuable feedstock for biodiesel and serves as an alternative to mineral oils used in power stations. Palm oil derivatives are widely used in the pharmaceuticals and cosmet
According to experts, the business opportunities in red palm oil production, especially in Africa are truly enormous. It is estimated to make up nearly 50 percent of edible oils consumed worldwide. The global palm oil market is worth hundreds of millions of dollars every year. So, Nigeria has to borrow a fresh leaf from Indonesia and Malaysia that have built giant and productive refineries including PT Astra Agro Lestari Terbuka (150,000 tpa biodiesel refinery),PT Bakrie Group (a biodiesel factory and new plantations), Surya Dumai Group (biodiesel refinery). Also, Cargill (sometimes operating through CTP Holdings of Singapore) is building new refineries and mills in Malaysia and Indonesia, expanding its Rotterdam refinery to handle 300,000 tpa of palm oil, acquiring plantations in Sumatra, Kalimantan, and Papua New Guinea.
To succeed, there should be the full involvement of the relevant stakeholders including the research institutes, the Export Promotion Council, Association of Oil Palm producers, the private sector and it must not be politicized. It is a right step taken in the right direction that should be allowed to succeed.