Driving Palm Oil production

The drive to achieve backward integration in the agricultural sector, led the country to introduce the Anchor Borrowers Programme (ABP) in 2015. The initiative was to create a linkage between anchor companies involved in processing and small holder farmers (SHFs) of the required key agricultural commodities.

This, according to the Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, was a renewed focus by the central bank to support improved growth in the agriculture and manufacturing sector in Nigeria.

According to him, the initiative was clearly in line with the federal government’s determination to diversify the revenue base of the economy away from its over reliance on crude oil.

Among the focus agricultural produce under the ABP was oil palm. In the 50s, Nigeria was a world leader in oil palm cultivation. Then, the country was controlling about 43 per cent of global oil palm market, and the produce then accounted for about 15 per cent of the country’s total exports. Today, the nation has shifted from a global player to an import dependent nation, even as it strives to meet its local demand, a situation experts say was worrisome.

Recognising the negative impact of neglecting a critical sub-sector within the agricultural value chain, Emefiele, last year said despite the availability of over three million hectares of farmland for palm oil cultivation, production remains low at two tonnes per hectare, relative to a global benchmark of 25 tonnes per hectare.

He also said today, Nigeria is a distant fifth among leading producers of palm oil and barely produces up to three per cent of the global supply of palm oil, with an estimated production of 800,000 metric tonnes of palm oil, while countries like Malaysia and Indonesia produce 25 million and 41 million tonnes of palm oil respectively.

Emefiele, had put the country’s total domestic palm oil demand and consumption at 2.5 million while local production capacity is only 1.25 million metric tonnes.
According to him, the strategic potential of the agricultural sector and its value chain in an economy, if well harnessed, could boost rural employment generation, ensuring food security and foreign exchange conservation through reduced imports.

The apex bank governor noted that of particular interest to all the stakeholders should be how to improve the country’s oil palm industry, adding that oil palm is an important tree crop with immense economic importance as its products are important source of affordable edible and non-edible oils for domestic and industrial uses.
However, despite its potentials, Emefiele expressed concerns about the challenges facing the Nigerian palm oil industry.

He said the palm oil industry’s further growth and contribution to the national economy were being threatened by inadequate local production and continued reliance on imports.
Giving some backgrounds on the recent developments in the oil palm sector in Nigeria, he explained that the journey to revive the oil palm sector began with the discovery that over $500 million of the country’s scarce foreign exchange was being expended on the importation of palm oil to meet identified the demand gap of 1.25 million metric tonnes.

“Faced with this stark reality, the CBN decided to intervene with a view to changing the narrative and in line with the ambitious attempt to reposition agriculture as the mainstay of the Nigerian economy. Furthermore, in our bid to restore the country’s pre-eminent status as the third global net exporter of palm oil, the Central Bank of Nigeria on 23rd June 2015 included palm oil and palm oil products alongside other commodities on the exclusion list of items not valid for foreign exchange at the Nigerian Foreign Exchange window.

“The dwindling fortune of the industry has been attributed to myriads of factors that accumulated over the years, which were mainly attributed to the neglect of the agricultural sector in the wake of the oil boom, which has been exacerbated by the inherent structural deficiencies and potential risks associated with agribusiness in Nigeria. It is hard to believe that the country’s global market share in palm oil production fell from about 43 per cent in the 1960’s to just about two per cent currently,” the CBN had governor said.

Meeting ABP objectives

The broad objective of the ABP is to create economic linkage between smallholder farmers and reputable large-scale processors with a view to increasing agricultural output and significantly improving capacity utilisation of processors.

Other objectives include increasing banks’ financing to the agricultural sector, reducing agricultural commodity importation and conserve external reserves.

Others include increasing capacity utilisation of agricultural firms, creating new generation of farmers/entrepreneurs and employment, deepen the cashless policy and financial inclusion, reduce the level of poverty among smallholder farmers, assist rural smallholder farmers to grow from subsistence to commercial production levels.

This, experts said was a welcome development even as they argued interest rate under the N220 billion Micro, Small and Medium Enterprise Development Fund (MSMEDF) is not favourable to small-holder farmers in the palm oil sub-sector.

Speaking with THISDAY, recently, a board member, National Palm Oil Produce Association of Nigeria (NPPAN), Henry Olatujoye, said the modalities of the disbursement of the loan and the high interest rates are not in favour of farmers.

He argued that considering that farmers do not have any other source of income during the gestation period coupled with high cost of production makes it impossible for the nation’s vision of overtaking some countries in CPO production.

This, he said, making reference to Emefiele’s statement that, “our ultimate vision is to overtake Thailand and Columbia to become the third largest producer over the next few years.”

Olatujoye said: “I have been saying this for a long time, but let me say it because of Nigerians: we have said it at several forums that the CBN rate will not favor oil palm plantation development.”

“There is no need to beat about the bush. We say the border closure is a good thing but we are not a beneficiary,” he said

The group had earlier said the importation and illegal smuggling of palm oil was making local producers lose $500 million annually.

Iyare Harrison, a palm oil farmer with about five hectares in Benin, Edo State, said presently he has about two hectare producing for him, and hopes to expand more as soon as resources becomes available for land acquisition and farm design.

He also said the greatest issue affecting his business was collateral.

According to him, “We were thinking that BVN would serve as collateral for ABP, but unfortunately they are not coming with that now, as our cooperatives do not get information about the schemes on time.

“The issue of relationship between farmers and financial institutions is imperative to the success of the programme as most of them are far from the farmers, alongside the unit of CBN responsible with coordination.

“We have gone for the training and are trying to get all necessary documents and technicalities in place,” he revealed.

Social Intervention

Olatujoye noted that palm oil sector intervention should be seen as a social security investment for economic growth and employment generation.

He argued that small-scale farmers should be given free improved seedlings and other production incentives like land clearing, and linked up with large-scale processors as part of the integrated approach to developing the economy.

Olatujoye added that in Malaysia and Indonesia it is their government that give them seedlings, land and other forms of incentives.

“Our ministries of Agric are not doing anything, they are just using land to build houses, structures and nobody is interested to release land for plantation,” he noted.

He stressed that operators were facing lots of challenges, which he listed to include land, inputs, finance, quality seedlings, and low data collection.

“In Nigeria we do not know who is planting; who has planted, harvesting and not harvesting. It is a big challenge and we have said that government should take not only palm oil, but most of tree crop planting as a social intervention programme,” he added.

On his part, Harrison, advised government agencies like the Nigeria Custom Service to continue to discourage smugglers.

“One of those things needed to stop the importation of oil palm into Nigeria is the sincerity on the part of government agencies. If we say oil is coming from Malaysia, who is patronising them? where is entry route to the country?” he queried.

Olatujoye, had noted that that the country’s estimated production is between 1.7 million and 1.8million metric tonnes, while average consumption level stands at 2.4 million tonnes annually, which gives a deficit of about 700,000 to 800,000 tonnes that are still sourced from other countries.

He said the present administration has been taking proactive measures to promote local content of the industry, stressing that government should enforce strict compliance against smugglers that are finding ways to sabotage government’s effort.

But the latest information from the Malaysian Palm Oil Board (MPOB) for Africa from January to December 2019, showed that Nigeria was the top importer of MPO in the SSA region with 287,000 MT up by 18.4 percent.

“Despite being the largest palm oil producer in West Africa with an estimated production of 1.1 million MT in 2019, Nigeria still needs to import from Malaysia, Indonesia, and other West African countries in order to fulfill its domestic requirement of about 2.4 million MT annually. The bulk of Nigerian MPO imports are in the form of CPO/CPL 80 percent for its refineries.”

Harrison, who agreed that the business has witnessed a surge, however explained that if properly driven the sector would trigger several opportunities that would encourage other investment options in the value chain.

“Our oil processing plants should be more affordable and industrialised as you cannot cook red oil in fire and expect that industry would take it.

“Many industries want CPOs that is organic in nature, farmers use pesticides without considering measurement, use fertilizer without good agricultural practice and agronomic standard practices. All these affect our palm oil industry.

“Smallholder farmers in the palm sector should be incentivised and there must be farmers’ engagement as it is in the cocoa industry.”

“So many industries depend on the local product for raw materials in their industries. The list is countless with so many of Nigerians youths working at factories where noodles, detergent, vegetables oil, and Cosmetics are made. Government should give us inputs, improved technology and give farmers good training.”