Mr Fatai Afolabi, Chief Executive Officer, Foremost Development Services Limited and Consultant/Adviser, Plantation Owners Forum of Nigeria (POFON), explains ways to revamp Nigeria’s oil palm industry, how the government interventions should look like and the need for smallholder and commercial models of oil palm cultivation and value chains. FEMI IBIROGBA, Head, Agro-Economy, reports.
Nigeria used to be a top palm oil-producing country, but today it imports large quantity of the commodity into the country. How did we get here?
Much has been said about this by other stakeholders that I don’t like to repeat. But I like to emphasise that over the years, the Nigerian oil palm industry has been a victim of neglect and sabotage, the combined effect of which has depressed and almost crippled the capacity of the country to produce palm oil effectively.
The weak integration of our palm oil value chain and the lack of competitiveness of the industry derive from internal and external sabotage. It is also the sabotage that militated against past interventions to turn around the industry.
It is estimated that Nigeria has a demand-supply deficit of about 1.5 million metric tonnes. How can we turn this around?
This deficit projection is another fallout of the sabotage of the Nigerian palm oil industry. Palm oil is not the only edible oil consumed in Nigeria. Ascribing 70% to palm oil in the vegetable oil demand would still not throw up this staggering deficit.
A PWC report X-raying the Nigerian Palm Oil Sector (2019) presents what appears to me a fairly accurate and unbiased situation. We can turn the situation around by repositioning oil palm in the Nigerian economy by projecting palm oil as a source of foreign exchange saving and a huge earner of foreign exchange.
The current estimate by the Federal Government is that Nigeria spends USD$500 million annually importing palm oil. Our initial projection should be to cancel the deficit and to supply palm oil to the rest of Africa. Then we should step up the promotion of oil palm investment at both corporate and smallholder levels, and more importantly, as a source of livelihood and employment security among the youth.
We need to establish the structure and mechanism for accelerated and sustained oil palm investment, including opening up the investment space to the global palm oil giants like Malaysia.
What is the present oil palm production outlook in view of the current interventions by the government and the private sector?
The current production output appears better than in the last five to10 years. Unfortunately, we have no figure of our own to support the current production increase. However, there has been considerable increase in the number of new entrants at the corporate level, like Agro-Allied Resources and Processing Nigeria Limited, and Fayus Nigeria Limited. These are game changers in terms of their entry point planting plans.
Existing plantation owners like Okomu Oil Palm Company, Presco Plc, JB Farms Limited and Wilmar have expanded their planting areas and processing facilities. The smallholders too have increased their level of production.
The planting of oil palm has expanded into the fringe states, that is, outside of the traditional oil palm states. While the private sector and the smallholders are trending in the oil palm space, the impact of the government intervention leaves a lot to be desired. By and large, the current growth progression is commendable and needs to be sustained.
Has the placing of the commodity among the list of items restricted from accessing forex helped the industry?
Yes, it has helped the industry. The sustenance of the policy has also helped. It is a major reason that some new entrants have ventured into oil palm production.
Has border closure helped the local production of palm oil?
The closure of the border seems to have helped the local production of palm oil. It has reduced smuggling of palm oil into Nigeria. That does not mean to say that the domestic production of palm oil needs the closure of the borders to thrive.
How do we get more of investors like Okomu and Presco into the industry, instead of the smallholders?
You can get more investors like Okomu and Presco into the industry through investment-friendly policies and by demonstrating consistency in the implementation of the policy. Over the last few years, big companies like Wilmar and DUFIL have established their own plantations, and I am aware that a lot more reputable companies are seeking to establish their own plantations in different parts of the oil palm belt.
However, I should make it clear that the desirability of large-scale corporate oil palm plantation investments should not happen in the stead of smallholder operations. Smallholder is a unique and different oil palm production model. It predates large-scale corporate operations in Nigeria and should not be wished away.
Corporate, large-scale and smallholder oil palm operations are not mutually exclusive and I believe that the Nigeria’s oil palm industry should benefit from the complementarity of the two models.
The CBN has promised increased support for the oil palm industry. Can you take us through what has been done for plantation owners?
I am aware that the CBN is providing support to some plantation owners. I believe that the individual plantation owners should be able to give account of the kinds and level of support that they have received from the CBN.
Let me also say that I have received complaints from some plantation owners, especially the indigenous ones. Their grouse is that the CBN interventions are discriminatory against them to the extent that CBN is targeting and focusing on the very big plantation owners with impressive cash flows and hence, better ability to pay back the CBN loan. In their opinion, they are not able to access the CBN interventions.
In my own opinion, I think that the indigenous plantation owners have a valid point. I believe that the CBN intervention should be more developmental in its design and implementation in terms of disbursement, and recovery should not have a commercial undertone.
How would you want the interventions carried out in the absence of any action from the Federal Ministry of Agriculture?
In the absence of actions from the Federal Ministry of Agriculture and Rural Development, I am of the opinion that stakeholders should seize the initiative to design, drive and implement a sustainable palm oil policy and development plan for the Nigerian oil palm industry, canvass and follow up to achieve the establishment of a stakeholder-based Nigerian Palm Oil Council.
We should build and operate the Nigerian Palm Oil Council as a one-stop shop to superintend over the issues relating to policy, trade, production and use of palm oil in Nigeria. We should also rally to reposition the Nigerian Institute for Oil Palm Research (NIFOR) to be able to service the industry better by concentrating on research, while the private sector stakeholders should take over the seed production function.
Again, we should forge and promote local and international partnerships, especially with Malaysian Oil Palm companies to accelerate our oil palm value chain intensification and integration. Another thing is to develop a capacity building programme on oil palm best management practices to increase productivity and profitability.