Nigeria is ranked the fifth largest producer of palm oil in the world but it is unable to meet domestic consumption and spends billions of naira on imports to fill the demand-supply gap. Hence, there is a need for the government and concerned agencies to revamp the country’s palm oil sector.

Reports show that Nigeria loses over N90 billion yearly to the importation of palm oil which it could produce. In the next three years, it is expected to lose not less than N270 billion, according to the December 2019 World Bank price index for crude palm oil.

Based on the United States Department of Agriculture (USDA) data, oil palm is currently the most consumed edible oil in the world. Malaysia and Indonesia are the top major producers with a recorded output of 43 and 21 million metric tonnes, respectively in 2019. Globally, the production of oil palm has continually evolved, rising from 1.2 million metric tonnes in 1964 to 73.3 million metric tonnes in 2018.

Despite boasting of over 34 million hectares of arable land, Nigeria has not been able to meet local demand for palm oil, let alone export. The sector is faced with several challenges that hinder it from efficient production and exportation of the commodity. These include the domination of the industry by smallholders, poor infrastructure, inadequate asses to credit facilities, among others.

The situation certainly has economic implications. According to CBN, if Nigeria had maintained its once-held market dominance in the palm oil industry, the country could have been earning approximately $20 billion annually from the cultivation and processing of palm oil as of today.

Moreover, palm oil is known to be a complex commodity. One of the main reasons for this is the demand for a large number of fractions and derivatives processed from the oil. About 60 percent of the palm oil consumed globally is in the form of derivatives, which Nigeria does not have the capacity to produce.

Palm kernel and palm oil uses are widely varied because they can be processed and blended to produce a vast range of products with different characteristics, such as vegetable oil, vegetable fat, energy, glycol, and others.

Corroborating the data from the USDA and the challenges in the sector, Ajibola Adebutu, Managing Director of JB Farms, a palm oil producer and refiner in Nigeria, told The Guardian that his refinery company processes 200 tonnes of palm oil into vegetable oil daily, which means about 6000 tonnes a month. But Okumu Oil Palm Plc supplied his company with 300 tonnes of palm oil for the month. “I use 6,000 tonnes a month, but it could only supply me 300 tonnes (one-and-a-half-day raw materials), so there is a huge gap,” Adebutu said.

Thus beyond the domestic supply gap, the deficit in Nigeria’s palm oil production compels industrial users to import from countries Indonesia and Malaysia.

To address the problem, there is an ongoing planting of improved varieties of palm seedlings by many private palm oil firms in the country. But it would take Nigeria 10 years to close the production deficit if consistency is maintained, an expert has said.

In addition to the seedlings initiative, there should be more established oil palm plantations with good breeds, modern equipment for processing and maximum extraction of oil from the palm fruits while the government should also ensure the industry is more attractive to investors.

By Ahmed Iyanda.

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