With the current ban on importation of refined Palm/Vegetable oil, there is a business opportunity here to invest in local processing
In the 1960s, Nigeria was one of the leading exporters of crude palm oil but has now lost the position to become a net importer to bridge a growing domestic demand gap.
At the moment, the country has deficit of palm oil of about 900,000 metric tonnes estimated at $800 million. Conversely, trade statistics for international business development says legal import falls within the range of $224 to $546 million.
However, import of refined palm oil/vegetable oil is prohibited and 35% duty is charged on the import of crude palm oil and crude vegetable oil.
The nation’s demand is driven by two factors: increased household consumption of the Technical Palm Oil (TPO) because of its taste, and increased demand for the Special Palm Oil (SPO) that is processed into refined, bleached and deodorized (RBD) for industrial purposes.
The food industry consumes 90% whereas 10% is used by the non-food industry.
With an estimated population of 193 million, the country’s household consumption has dramatically gone up, along with the fast food industry where products like noodles, margarines, vegetable oil, biscuits, bakery, frying, fat in snack and many other items use palm oil.
The cosmetics industries thrive on palm oil too as manufacturers of soaps, creams and detergents use it as raw materials.
Besides, other non-food uses include the production of greases, lubricants, candles, feeds, and more recently, biofuels and water-treatment items.
The Nigerian Institute for Oil Palm Research (NIFOR) estimates that upstream palm oil production is 0.98 million tons far from the nation’s demand of over 1.6 million tones.
According to the Global Palm Oil Conference, in 2013 Nigeria was the fourth largest producer of palm oil in the world at 1,350,000 tonnes (about 3% of global production) after Indonesia 21.4 million (44%), Malaysia 18.9 million (39%) and Thailand 1.5 million (3%).
However, statistics from Palm Oil Analytics show a decline in production to 970,000 tonnes in 2016 making the country now rank fifth in the world as Colombia now sits on the country’s 2013 position; whereas global production of palm oil in 2016 hit 6.6 million tonnes with Indonesia increasing production to 34.5 million tonnes.
Though domestic production is above 900,000 tons, there is an estimated overall gap of over 900,000 tonnes, which is imported to bridge the demand gap particularly in the allied industries.
A report on Palm Oil Value Chain Analysis in the Niger Delta by the Foundation for Partnership Initiatives in the Niger Delta (PIND) 2011 noted that the main forces driving the increased demand for TPO palm oil in Nigeria include the increasing household consumption and the increased income which leads to changing consumer consumption patterns to purchase more fast foods, and increasing demand from the primary food processing industry.
Recently, senators on a motion titled “Urgent Need to Halt the Importation of Palm Oil and its Allied Products to Protect Palm Oil Industry in Nigeria,’’ called on The Federal Government to ban the importation of palm oil into the country.
Sen. Francis Alimikhena (Edo-APC) who sponsored the motion expressed worry that the importation if allowed to continue, will discourage farmers and halt the diversification drive of the Federal Government.
According to him, about 450,000 tonnes of palm oil worth N116.3 billion was imported into the country in 2017.
“The government must reverse this trend with copious investments in the local palm industry and the protection of local producers from unnecessary imports.
“This is also threatening the viability of the industry into which many Nigerians have sunk huge sums of money in support of the government’s export promotion drive,” Alimikhena said.
Supporting his claims, Senator Theodore Orji (Abia-PDP) wants the Federal Government to establish a special fund that will help boost local production.
To close the supply-demand gap, the government through agencies like the Raw Material Research and Development Council has a project that will develop one million hectares of oil palm in five years, out of which 900,000 hectares are earmarked for smallholders, while 100,000 hectares are for large estates.
Igwe Hilary Uche, the National President of Oil Palm Growers Association of Nigeria (OPGAN), said during a presentation that the government gesture was a welcome development for oil palm production in the country, adding that the industry could create 10 million jobs in the country.
On his part, the President, National Palm Produce Association of Nigeria, Engineer Henry Olatujoye, appealed to government to make seedling distribution a yearly affair, adding that data of farmers in the country should be captured to track success.