Amid a mounting movement against deforestation by environmentalists to fight climate change, the future of the palm oil industry stands threatened. The European Union passed an act earlier this year to phase out palm oil from renewable fuel by 2030 due to environmental concerns. Palm oil production is said to have been responsible for about 8% of the world’s deforestation between 1990 and 2008. The crop has also contributed towards pollution and climate change as land, including carbon-rich peatlands, have been converted to plantations.
While demand for palm oil used in EU biofuel accounts for a fraction of global supply, industry heavyweights – Malaysia and Indonesia – worry the law could spur calls for regulation in its usage in food, which accounts for nearly 70% of global palm oil consumption. A global upheaval against the use of palm oil in processed food could further hurt Nigeria’s ailing palm oil industry.
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In our opinion, growing concerns about the environmental damages that come with cultivating oil palm could limit the end-markets for the crop in the long term. Although the Nigerian authorities are implementing policies to increase local production of palm oil, we believe the emphasis should also be placed on the sustainability of production by focusing on increasing yields rather than expanding plantations. In our view, this can be achieved through collaboration between the government and the private sector in providing financial and technical support to small-hold farmers.
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