Indonesia, the world’s largest producer of palm oil, increased the export tax on crude palm oil (CPO) from 7.5% to 10% on May 17.
This policy shift is aimed at financing biofuel initiatives and replanting activities within the country.
Nigeria, the world’s fifth-largest palm oil producer, still imports almost half of the two million tons consumed domestically each year.
Palm oil has lost its status as the most reasonably priced vegetable oil globally due to supply shortages — including from Malaysia, the world’s second-largest producer.
The Indonesian Ministry of Finance also raised taxes on other palm oil products. The levies will support smallholder farmer programs, replanting efforts, and the production of both palm oil and biodiesel.
The country recently increased the mandatory proportion of palm oil in biodiesel from 35% to 40%, with plans to raise it to 50% by 2026. A 3% jet fuel blend is also under consideration for next year.
Indonesia had utilized 4.44 million kiloliters of biodiesel by the end of April and plans to distribute 15.6 million kiloliters in 2025 — up from an estimated 13 million kiloliters last year.
Indonesia supplies around 60% of the world’s palm oil. The product is a basic agricultural commodity found in about 50% of packaged goods in supermarkets. According to UNDP data, Indonesia produces more than 30 million tons of palm oil annually, contributing 4.5% to its GDP and employing approximately 3 million people.
The sector has become central to the country’s economy, experiencing consistent double-digit growth rates.
Meanwhile, Indonesia is turning to tiny insects from Africa in a bid to boost palm oil production, which has been struggling due to declining yields — a trend that could keep prices high and contribute to food inflation.
The world’s top grower plans to introduce about one million weevils to select plantations this year, hoping to enhance pollination and fruit development.
Three weevil species collected from Tanzania will arrive at a facility in North Sumatra next month for a series of tests before being released into plantations.
It is believed that African weevils will help revive production growth, which has been stagnant due to aging trees. Many growers have been reluctant to replant because of the long time it takes for new trees to mature.
Indonesian President Prabowo Subianto recently argued that oil palms are trees, and therefore, oil palm plantations should not be considered a cause of deforestation. However, critics point out that this contradicts extensive research linking palm oil cultivation to increased carbon emissions, biodiversity loss, and widespread forest clearance.
Experts have recommended that the industry focus on improving yields at existing plantations rather than expanding into forests and ecologically sensitive areas.
Nigeria Takes Aggressive Approach to Boost Palm Oil Production
Edo State, often referred to as Nigeria’s palm oil capital, is home to some of the country’s most valued agro-based supply chains, including Presco and Okomu Oil, both of which are listed on the Nigerian Stock Exchange.
Okomu Oil and Presco reported their highest-ever after-tax profits in 2024, despite operating in a challenging business environment.
- The Oil Palm Growers Association of Nigeria (OPGAN) aims to revive the industry by replanting 1.5 million hectares of oil palm over the next five years.
- This effort is part of the Oil Palm Development Strategy for Nigeria (2024–2029), developed by OPGAN to elevate the country’s global ranking from fifth to third in palm oil production.
- The strategy also seeks to restore and advance Nigeria’s palm oil industry through better planning, increased investment, sustainable ecological practices, modern technology, and inclusive growth models.
The first-ever Nigerian Oil Palm Development Strategy Plan is being prepared by an industry association to address the specific needs of this critical subsector.
