Local Palm-oil Producers' Share Prices Sustain Positive Momentum on FX Policy

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Obinna Chima

Despite the uninspiring performance of most equities listed on the Nigerian Stock Exchange (NSE), the share prices of the two palm-oil producers quoted on the bourse have sustained their upswing as the country’s foreign exchange (FX) policy that saw the restriction of access to the greenback on the interbank market continues to favour local manufacturers.

Checks by THISDAY showed that the share price of Presco Plc, a Benin City-based manufacturer of edible oil, has appreciated significantly by 33 per cent since the beginning of the year, to N43.85 per share as at November 7, compared with the N33 per share it closed on the first trading session of 2016 (January 4th)
In the same vein, the share price of its peer, Okomu Oil has recorded remarkable gain since this year, as it has appreciated by 48 per cent to close at N47 per share on Monday, as against the N31.78 per share it was at the beginning of the month.

The Central Bank of Nigeria (CBN) stopped importers of 41 items, including palm-oil and textiles, from accessing official foreign-exchange markets in June 2015. The measure was part of a plan to prop up the naira after it plunged against the dollar following a drop in the price of crude.

Presco’ second quarter 2016 results had shown that its sales grew by 71 per cent year-on-year to N4.3 billion; just as its profit before tax and profit before tax also grew by 233 per cent year-on-year to N2.3 billio and 154 per cent year-on-year to N1.6billion respectively.

Aside from the fact that Presco continued to expand its plantations to increase volumes, the company also enjoyed increased demand for palm oil from local consumer goods companies which have been adversely affected by the scarcity of FX for imports in Nigeria.

The outlook for Presco in the next four years is a 10 percent annual profit growth, its Managing Director, Felix Nwabuko said recently.
He said the FX policy “is bringing a boost to us in the sense that people who would ordinarily have imported, using government foreign exchange, are not doing that anymore.”

Presco doesn’t plan to export palm-oil as “it has enough market locally and price comparison-wise, there is no real advantage in exporting palm-oil out of Nigeria,” Nwabuko had also said.
The company plans to increase oil-palm plantation to 31,400 hectares by 2021 from 16,900 while it targets to raise palm-oil mills capacity to 120 tons per hour from 60 tons, Nwabuko said.

It will start work on a 500 tons per day palm-oil refinery and fractionation plant next year, which will be completed by 2018 to increase current capacity of 100 tons, he said.
CBN Governor, Mr. Godwin Ifeanyi Emefiele, recently said the FX confronting the country was good riddance, saying local production of various essential goods are now being given top priority.

The central bank governor wondered why Nigeria, despite its vast arable land would continue to import agricultural produce that the country has the comparative advantage to produce locally.
He said 26 states that have shown in

terest in the Anchor Borrowers’ Programme, which according to him would be used to enhance the cultivation of major crops in the country.
He also said the Ministry of Finance as well as officials of the central bank are currently on assessment tour of the state that had shown interest in the project which is aimed at ensuring that Nigeria becomes self-sufficient in food.
Emefiele explained: “We have been importing milk for over 60 years. There is a company that has been producing milk for 60 years, and I say it is time those kind of companies begin to produce our diary in Nigeria.”