The Oil Palm Revolution


The on-going initiative by the Central Bank of Nigeria to reposition the oil palm industry will be a major catalyst for economic diversification and the ability to subdue the threats of dumping and smuggling, should agreements with critical stakeholders sail through, writes James Emejo

The story has often been recounted how the Malaysians visited Nigeria and went back with some seed samples of the country’s oil palm.

The resultant scenario was that Malaysia is today one of the powerhouses of palm oil producers, earning significant foreign exchange from the commodity.

Nigeria used to be a major producer of palm oil when agriculture was still the mainstay of the economy, but the discovery of oil and obvious lack of foresight by the country’s successive leadership particularly the military era led to the relegation of the sector to the background.

The resulting implications had put the country in difficult economic terrain with attendant mass unemployment, poverty and fiscal constraints for government and given the fact that crude oil is predicted to unsustainable in the near future.

Nevertheless, the current administration has stepped up its intervention programmes in key sectors of the economy in a determined effort to diversify the economy from oil through the implementation of the Economic Recovery and Growth Plan (ERGP).

This is why the latest move by the CBN to seek to address the challenges, which had stifled the growth of the palm oil industry continues to be celebrated by stakeholders in the value chain.

The move, which is in furtherance of its intervention programmes in the agricultural sector of the economy towards economic diversification aims to identify “promising approaches” to revitalise the sector and enable the country regain its position as one of the leading global producers of palm oil.

If anything, the apex bank has demonstrated its capacity and willingness to intervene in key sectors with massive employment potentials, including its recent activities in the cotton, textile and garment industry, rice production among other initiatives that have had salutary effect on the economy.

The CBN Governor, Mr. Godwin Emefiele, had at a meeting with the governors of the South-south and South-east states, including other critical stakeholders in the palm oil industry, expressed displeasure over the fact that Nigeria still expended close to $500 million on oil palm importation annually.

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.”

The governor’s plan to encourage viable off-taker agreements between farmers and large-scale palm producing companies, by providing loans through the Anchor Borrower Programme (ABP) and the Commercial Agriculture Credit Scheme (CACS) initiatives at not more than 9 per cent per annum to identified core borrowers, will be a game-changer for operators in the oil palm sector

According to him, with an estimated three million hectares of land under cultivation, abundance of suitable arable land, the cooperation of state governments in the oil palm producing zone is desired to make land available to investors with proven financial and technical capabilities, who will be able to support developments of large scale palm oil plantations in the country.

He, however, disclosed that all the states in the South-south and South-east regions had already agreed to provide at least 100,000 hectares for the initiative, which is also designed to accommodate the smallholder farmers.

Emefiele also emphasised that the renewed focus by the CBN to support improved growth in the agriculture and manufacturing sectors was “clearly in line with the federal government’s determination to diversify the base of Nigeria’s economy away from reliance on crude oil, so as to insulate our economy from the vagaries and shocks associated with volatility in crude oil prices.”

He assured that, “soon every region of our beloved country will feel the positive impact of our intervention in the agricultural sector.

“These efforts we hope will not only enable us to conserve our foreign exchange, but also create jobs on a mass scale. As these measures begin to bear fruits, we are very optimistic that our states will become more economically viable, given the massive economic activities that will occur from catalysing activities in our agricultural and manufacturing sectors.

“Although the economy has recorded some investments in the oil palm value chain over the last three years, these investments fall short of our expectations, and our expected target of self-sufficiency in oil palm production is far from being achieved.

“Prospective investors, both local and foreign, have at different fora identified the factors preventing investments in the sector to include, among others, difficulty in acquiring farmlands and the dearth of long-term funding sources at affordable costs.”

According to him, the stakeholders’ engagement had been expanded to include executive governors and other top government functionaries from the oil palm producing states to elicit their buy-in and set a partnership model that would, with immediate effect, stimulate investments in the palm oil plantations, such that within the next three to five years, the global share of the country’s oil palm production would more than double.

The governor said the vision in the oil palm segment is for Nigeria to overtake Thailand and Columbia to become the 3rd largest producer over the next few years.

Lamenting the shortcomings of the oil palm value chain, he said: “As some of you may recall, in the late 50’s and 60’s, Nigeria was not only the world’s leading producer of palm oil, it was also the largest exporter of palm oil, with close to 40 per cent of the global market share.

“Today we are a distant 5th among leading producers of palm oil; we barely produce up to three per cent of the global supply of palm oil, with estimated production of 800,000 MT of palm oil, while countries like Malaysia and Indonesia produce 25million and 41 million tonnes of palm oil respectively.”

Continuing, he added: “We have also become a net importer of palm oil, importing between 400,000 – 600,000 MT of palm oil in order to meet local demand for this commodity. Despite the availability of over 3 million hectares of farmland for palm oil cultivation, production remains low at close to 2 tonnes per hectare, relative to a global benchmark of 25 tonnes per hectare.

“This is as a result of the maturation of existing palm trees, as some of these trees were planted in the 50’s, as well as low investment in replanting high yielding palm oil seeds. As some of you may know, the usual life cycle for optimum palm production is 25 years.

“Ladies and gentlemen, if we had kept pace with our peers in supporting improved cultivation of palm oil, at the current global market price of $600 per tonne, and an assumed production level of 16m tonnes, Nigeria could have generated close to $10 billion worth of foreign exchange for the country. This analysis does not take into consideration the amount of jobs that could have been created in our rural communities from large scale smallholder developments.”

“This conversation is indeed important as it forms part of our overall strategy to reduce our reliance on crude oil imports, diversify the productive base of our economy, create jobs and conserve our foreign exchange. Despite placing oil palm in the forex exclusion list, official figures indicate that importation of palm oil had declined by about 40 per cent from the peak of 506,000 MTs in 2014 to 302,000 MT in 2017.”

However, notwithstanding the lofty initiatives, smuggling and dumping remained a threat to the success of the intervention programmes.

The concern was aptly expressed by the Monetary Policy Committee of the apex bank during its two-day meeting last week.

The committee, which saw the dumping and smuggling as greater danger to the economy, had prevailed on all relevant institutions of the government to “address the menace of smuggling and dumping of goods into Nigeria, and encourage the apex bank to continue to explore available scenarios to deal with the activities of economic and policy saboteurs, including those involved in dumping and smuggling, in a bid to accelerate domestic production of goods in the country.”

Emefiele particularly assured stakeholders in the oil palm industry that the CBN was determined to deal with unrepentant smugglers, who are bent on frustrating its efforts to revive key sectors of the economy as well as create jobs for Nigerians.

He said: “Let me stress that we are not unmindful that our current focus to make life difficult for smugglers of the products being targeted under our intervention will be resisted by unpatriotic and recalcitrant beneficiaries of the status quo.

“We will not be deterred by their criticisms, but will appeal to Nigerians to support these initiatives. No doubt, there will be initial pain caused by this new focus, but the medium and long-run benefits remain unassailable and glorious for our dear country.”

Also, in his views on reviving the oil palm sector, Governor of Edo State, Mr. Godwin Obaseki, expressed concern over the state of the research institutions that were critical to the progress in the sector.

He further sought for provision of incentives to operators in the value chain to make the segment attractive for investment.

He said there was also need to evolve a clear execution plan for the intervention.

According to Obaseki, where are we going to get the planting materials from? Our research institutes, which were created for this purpose are almost moribund.

“I want to thank you Mr. Governor for providing low-cost financing for this programme, which requires long gestation period…,” said the governor.

“Like what (CBN) you are doing in the cotton business, we have to understand that for meaningful investment into the oil palm, we have to think of other incentives because we can’t create that gap.

“People have to manufacture soaps and all the things that they require oil palm for. We must also think of how to create incentives for those that are currently in the business, for those who are going to be committing money, resources for growing palm estates. Let’s also think through how to provide incentives for them.

“I hope that from this session, we should have a very clear plan that details what we need to do by who and when. Because we found working in my state, that the issues are not really the ideas. The problem and challenge we have is how to execute and with this gathering. I will we can come up with a clear execution plan so that we can grow our palm in this country and become as competitive as the Malaysians and Indonesians.”