The slump in the Global oil Price has led to a sharp drop in the foreign exchange earnings of the Nigerian Government.This sector accounts for ninety-percent of the government’s revenue.The palm-oil belongs to the Crop Production sub-sector in the Agricultural sector.In the 1960s, Nigeria was top of the chain in the world’s producing list of Crude Palm Oil(CPO).With a robust global market share of an estimated 40% and a major contributor to the revenue base of the Nigerian Government.The years of petrodollars “distracted” attention away from agric business to the money-spinning black gold.
Global Outlook
The Global Palm oil consumption is put at an estimated 58m tonnes in 2015/2016 and is expected to reach around 67m tonnes by the end of 2018. Malaysia and Indonesia surpassed Nigeria as the leading producers and exporters with a total supply of 82% of the total CPO annually.Nigeria’s local production fell to a total 800m tonnes while domestic demand is put at 1.3m tonnes annually thus leaving the country with a supply deficit of 500,000 metric tonnes annually.
Nigeria currently boast of a large arable land suitable for palm oil cultivation.Out of an estimated 24million hectares only a meager 12.4% of this is being utilized.The palm oil production belt is spread across 24 states of the country.
The potential in Oil palm sector is enormous.Recently,the Nigerian Government imposed a ban on importers of CPO from accessing forex at the inter bank market alongside 41 other items.
What this means
This means importers will find it difficult and expensive to import CPO into the country. This partly explains reason why the major players in the industry,Okomu and Presco Plc recorded a healthy growth in revenue. Presco’s turnover for 2016 was at 15.7 billion Naira. 50.2% higher than 2015 of 10.4 billion Naira. While Okomu 2016 revenue increased by 42% to 14.3 billion from 9.7 billion Naira in 2015.
Not Yet Uhuru
The supply-gap of 500,000m tonnes and a rising demand for CPO by both Industrial and retail users has forced some industrial users to backwardly integrate by investigating in palm-oil cultivation though the impact is slow. It is high time major players in the industry took the challenge of supply deficit in domestic production line as a major issue and also restore the country back to the top of the chain in global market.This means more revenue for government and provision of more jobs for unemployed youths. Presco currently cultivates a total land area of 16,650 hectares with 15,356 hectares of mature land area.The target is to have 20,000 hectares by 2020 while Okomu targets 12,000 hectares by 2018.
These expansion drives are commendable, much attention must be paid to investment in palm-oil extraction Technology the current 10-20% extraction efficiency is too low. Also industry expert are of the opinion that seedlings transplanted when they are over 10 months old tend to give higher yield and mature into Fresh Fruit Bunch (FFB) earlier. It is also noteworthy that some industry players have invested in bio-gas plant and this has saved them an estimated $200,000 monthly. The thermopac one of the machines used in palm oil refining process previously utilized about 500-600 liters of fuel daily but now runs 100% on bio-gas.
In conclusion, if the country is to return to a leading position on the CPO market, the current ban on importers from accessing forex must be sustained.
Secondly access to land must be less cumbersome and frequent clashes between investors and locals must be tackled.
Thirdly,the Institute for oil palm research NIFOR must be well funded to fulfil its mandate of research and Development.
Fikayo Owoeye is writing from Lagos
