Nigeria maintains market’s dominance in Palm oil in Africa, earns $20bn annually

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According to the Central Bank of Nigeria (CBN), if Nigeria had maintained its market dominance in the palm oil industry, the country would have been earning approximately $20 billion annually from the cultivation and processing of palm oil as of today, however, the government through the Central Bank (CBN), is pumping billions of naira in loans to assist farmers and investors in the industry to revive the palm oil sector.

It’s a welcome development that Federal Government have decided to give attention to the palm oil sector, have written write-ups about the importance of the palm oil sector even have once said the government will focus on this sector, palm oil is of strategic importance as it is used in the production of more than half of the products sold in supermarkets globally. Some foreign investors have been striving to invest in Nigeria’s palm oil sector for the past few years, with the decision of the federal government to revive the palm oil sector, which would motivate them to invest heavily in the sector, also attract more investors.

The Nigerian palm oil industry is very fragmented and dominated by numerous small-scale farm holders, which account for over 80% of local production, while established plantations account for less than 20% of the total market. Local farmers produce roughly 80% of the total production while using approximately 1.6 million hectares of land and the dominance of small farm holders in the palm oil market has resulted in low output compared to the country’s production potential. Nigeria is the largest consumer of palm oil in Africa with a population of 197 million people (The World Bank, 2018). Nigeria consumed approximately 3 million MT of fats and oils in 2018, with palm oil accounting for 44.7% or 1.34 million MT. In the same period, production stood at 1.02 million MT resulting to supply shortfall of 0.32 million MT (excluding possible impact of palm oil exports).

However, Nigeria is the fifth-largest palm oil producer in the world and the largest producer of palm oil in Africa. In 2018, Benin was the largest exporter of the commodity from Africa while Nigeria was confined to the sixth position on the list of palm oil-exporting countries in Africa. The big players in Nigeria account for just 30% of local production, while small growers represent 70%. To develop one hectare of oil palm requires $4,000 to $5,000 and the gestation period is a minimum of three years, according to the Plantation Owners Forum of Nigeria. To revive the palm oil sector, the government (Nigerian Institute for Oil Palm Research), the big players ( Okomu Oil Palm PLC (OKOMUOIL) and Presco Plc) and investors (Wilmar International and Salim Group Inc. etc) need to come up with a business model to support the smallholder farmers, which represent 70% of the industry.