Palm oil makers are ramping up investments and capacities to tap local supply gaps amid challenges of smuggling and poor patronage.
Okomu recorded losses in the first half of 2019 as its turnover declined by 34 percent from N12.9 billion in 2018 to 8.5 billion in 2019. This is a reflection of the state of the industry, but the company is unrelenting in its expansion journey.
Okomu recently made moves to cultivate 5,000 hectares of oil palm in Edo State majorly to boost job creation and enhance modern agricultural techniques to raise productivity in the sector.
In 2018, the company disclosed that it was planting 11,400 hectares at a new Extension 2 Plantation in Ovia North East Local Government Area in Edo State. This was after acquiring two additional machines that produce 30 metric tons per hour mills, valued at $50 million.
Nigeria has a demand-supply gap of 800,000 metric tons in the palm oil market, which translates to over $400 million.
This opportunity is forcing the key players to expand plantations and acquire new facilities needed in new frontiers.
With approximately $150 million, PZ Wilmar, a subsidiary of PZ Cussons, has bought 26,500 hectares of palm oil plantations in Cross River State. About 5,549 hectares (ha) of oil palm plantation are located in Calaro Estate, while 2,369 ha are in an area known as Calaro Extension. The firm also acquired Ibiae plantations with 5,595 ha; Ibad plantations in Akampa with 7,805 ha; Kwa Falls in Akampa Akpabuyo with 2,014 ha, and Oban plantations, also in Akampa, with 2,986 ha.
PZ Wilmar has acquired palm oil mill (POM) and kernel crushing plant (KCP), investing around N20 billion in an oil palm refinery in Lagos.
“We are determined to continue with these investments and looking for opportunities to expand our plantations in the state. We have also invested around N20 billion in an oil palm refinery in Lagos,” Santosh Pillai, managing director of PZ Wilmar, told BusinessDay.
Located in Edo State, the firm has total land bank of 40,000 hectares of which planted areas are 20,136 hectares of oil palm and 138 hectares for rubber.
Presco’s investment is valued at N75 billion. Its capacity is 63 percent in the peak season and 24 percent in the lean season.
Earlier in 2016, the Central Bank of Nigeria (CBN) restricted some items from accessing foreign exchange— including palm oil. The action was in a bid to enhance local productivity in the country, experts say.
The action boosted production and production initially, but it later heightened smuggling in the industry.
The demand for palm oil is predominantly propelled by household consumption as 90 percent of consumption comes from the food industry while the non-food industry accounts for 10 percent.
Data from the United State Department of Agriculture (USDA) shows that in 2018, Nigeria’s oil palm industry could only contribute 1.40 percent to the oil palm global market as against 45 percent which it achieved earlier in the 1960s.
Since losing its position as one of the world’s largest palm oil producers, Nigeria is yet to recover as a giant in the crude palm oil-producing nations owing to the discovery of crude oil, which changed the country’s palm oil narrative of the ’60s.
As a result, Indonesia and Malaysia have now exceeded Nigeria’s production becoming the global leaders in oil palm production as research shows that on a yearly basis, Nigeria’s CPO import from Malaysia increased to 112,480 metric tons (MT) in the first three months of 2019 from 47,974MT in the corresponding period in 2018.
Smuggling has continued to hurt the firms with porous borders aiding the illegal business.
Gbemi Faminu
