Palm oil prices are trending higher, primarily driven by supply concerns in Indonesia.
While early 2026 forecasts suggest a softening market, current prices have surged past those expectations due to environmental and geopolitical factors.
The global benchmark prices for Crude Palm Oil (CPO) on the Bursa Malaysia Derivatives Exchange are trading between $1,135 and $1,160 per metric ton because Nigeria relies on imports to fill its annual supply deficit of more than 500,000 metric tons.
Indonesia will increase its palm oil-to-biodiesel blend to 50 percent (B50) in 2026, according to recent confirmation from President Prabowo Subianto. Indonesia has maintained high export taxes (recently adjusted to 10%) to finance these domestic initiatives, which are directly passed on to Nigerian importers.
This action is intended to reduce Indonesia’s own fuel import costs, considering that crude oil prices are trading at high levels.
The price of palm oil is tracking Brent Crude because palm oil is used to make biodiesel, which is currently hovering around $120 per barrel. Market action shows palm oil prices are unlikely to fall below $1,135 as long as crude oil remains high.
Indonesia, the world’s top producer, is facing a severe dry season in 2026. Analysts predict a decline of up to a million tons in output compared to 2025 due to El Niño-induced weather and high fertilizer costs.
Supply is tightening as Southeast Asian countries push higher mandates (like Malaysia’s move toward B15 and Indonesia’s B45). This consumption helps to sustain higher prices by removing millions of tons from the worldwide export market.
Nigeria heavily dependent on Palm Oil importation
The cost of a 25-liter gallon of palm oil remains a major factor in food inflation, which continues to strain Nigerian households despite a global decline.
Nigeria’s domestic demand for palm oil exceeds 2.5 million metric tons annually, while production stands at only about 1.4 million tons. This imbalance is putting pressure on the agricultural sector and forcing the country to rely on imports to bridge the gap.
- Ongoing conflicts in West Asia have kept fertilizer prices elevated, and energy costs volatile, directly affecting production costs and the “POGO” (Palm Oil-Gasoil) spread.
- Rising energy prices projected by the World Bank to increase significantly this year often push palm oil prices higher as it becomes more attractive for biodiesel blending.
- Nigeria was once a global leader in palm oil production in the 1960s, accounting for more than 40% of the global supply. At that time, palm oil was a major export commodity and a key driver of economic development.
- However, production capacity has drastically declined over time. Import costs range from $500 million to $600 million due to the current deficit, which is more than one million tons annually.
Despite the optimism, analysts note that Nigeria currently imports an estimated $600 million worth of palm oil annually, underscoring the need to close the domestic supply gap. Kyari noted that this represents the country’s lost economic opportunities.
The effectiveness of the plan’s execution, which calls for exact deadlines, measurable performance indicators, and accountability frameworks will determine Nigeria’s capacity to reclaim its position in the world palm oil market.
Presco Plc, which is now mostly owned by SIAT Group, recently opened a 15,000-hectare expansion and a 60 MT/hour mill in Edo state. Okomu Oil, a company listed on the NGX, reported a profit of N34.4 billion from palm oil alone, an 87% increase in 2025.
Nigeria should invest in the internal production of Palm Oil through innovation to boost productivity at the grass root base, for the end processed products to be affordable and competitive in price and standard for the local,regional and international markets but this needs foreign technical assistance for Nigeria to return to the glorious days as a Major exporter 0f Palm Oil and its derivatives.