Palm oil is one of the essential ingredients in food preparation. It is also used in the production of soaps, cosmetics, magarine and many others. Its price has been rising and falling. Right now, it is down, making it easy for users to keep cost of products down. But stakeholders say there is the need to stabilise the price through increased production with high-yielding seedlings and better techniques. DANIEL ESSIET reports.
THE price of palm oil rose last year. According to the National Bureau of Statistics (NBS), the price of a bottle of palm oil went up from N775.11 in November 2021 to N1,006.64 November last year. Also, the bureau said the Southwest recorded the highest average price of palm oil at N1,174.30, followed by the Northwest at N1,129.63, while the Northeast recorded the lowest price at N765.04.
Early last year, two largest palm oil producers, Okomu Oil Palm and Presco Plc., grew their revenue by 83 per cent to N82.47 billion in the first-half from N45.09 billion in the corresponding period of 2021. However, in the fourth quarter, there was a 29.2 per cent pullback in palm oil prices on the back of increased supply from Malaysia and Indonesia, the two largest producers of crude palm oil (CPO) and an expected slowdown in demand from China and India, hence, the quarterly decline in revenue reported by Okomu Oil Palm and Presco Plc.
However, both companies’ revenue declined by 36.47 per cent to N26.91 billion in the third quarter from N42.36 billion in the second quarter of last year; therefore, bringing total revenue to N59.84 billion in the second half of last year, 27.43 per cent down from N82.46 billion in the first-half of 2022 (January to June).
Notwithstanding, revenue reported by Nigerian palm oil producers grew by 68 per cent to N142.31 billion in 2022, from N84.82 billion in 2021, thereby bringing total profit for the year to N38.81 billion, a 26 per cent increase from N30.86 billion in 2021.
While vegetable oils were the highest on record last year, the Food and Agriculture Organisation (FAO) said the prices fell for nine months in a row.
The FAO Vegetable Oil Price Index averaged 144.4 points in December, down 10.3 points from November and hitting its lowest level since February 2021.The decrease in the index was driven by lower international price quotations across major vegetable oils such as palm, soybean, rapeseed, and sunflower oils. While world palm oil prices dropped nearly five per cent, led by sluggish global import demand and world soybean oil, rapeseed, and SFO international prices dropped on account of ample global supplies and subdued import demand.
In the next three months, the Chief Executive, James Energy and Construction Limited (Jemas Palmoil), Mr. Jerry Sam Etukapan, said the price of palm oil would be on a downward trend, attributed to low purchasing power occasioned by the currency squeeze. He said that 25 litres of palm oil now sells for N4,000 because people were not buying as before.
He explained that the price spike is caused by the enthusiasm to purchase oil palm. He has been working with local farmers in Akwa Ibom State, where he buys their palm fruits and processes them into oil.
Etukapan exports and others are integrated into palm oil derivatives including frozen pizzas, chocolate and hazelnut spreads, cookies, and margarine. He, however, said it had been difficult for those involved in growing palm fruit and converting palm fruit into oil.
He expects the edible oil prices to rise again after June as palm oil production is not expected to increase due to non-availability of manpower required to produce theoil. This, according to him, has impacted palm oil production.
Palm oil is used in manufacturing various products ranging from cakes, frying fats, vegetable oil, cosmetics and cleaning products. Following Indonesia’s ban on palm oil exports from April 28, last year, prices of edible oil in most countries in Africa rose due to shortage of supply.
Indonesia accounts for more than half of global palm oil supply. The ban led to an increase in the price of major edible oils, including palm oil, soy oil, sunflower oil and rapeseed oil, for consumers in Asia and Africa. Consequently, manufacturers of cooking oil were buying palm oil, the main raw material, at between $1,760 and $1,980 per metric tonne. Before the escalation of Ukraine-Russia conflict, the commodity retailed at $1,490 per tonne, having more than doubled from $700 per tonne before the onset of the pandemic in March 2020.
For Etukapan, seasonal palm oil price fluctuations have a significant effect on farmers’ gross margins. According to him, in the lean palm oil seasons, farmers get good prices, but gross margins are not good during the peak/high seasons between January and March.
He noted that the country would face a wave of high prices of vegetable oil in light of the supply shortage, during the summer season when harvest is low.
He acknowledged small-scale farmers face a myriad of challenges, including experiencing low oil palm yields because they use minimal input and crop maintenance.
Etukapan put the issues and challenges in the business in perspective: “Our palm oil is more expensive than that of countries such as Indonesia and Malaysia. Few days ago, I lost business to an Indonesian company because our palm oil was costlier than others. After harvesting their palm fruits, they will collect N600 per bunch. It takes 20 bunches to produce 25 litres of oil. If they collect N600, you will be paying N12,000 to produce 25 litres of oil. This makes oil very expensive.”
It is easy to see the implications of this price difference on the local palm oil industry.
He explained: “With this (the prevailing price structure), we cannot compete with exporters in the international market because they use sophisticated machines that make the process cheaper for them.
“We are using crude methods and ancient machines. Today, we still use those machines that our forefathers were using.The other thing is that the cost of purchasing oil palm processing machines is high. We cannot afford it here. It is one or two companies that have been able to afford such machines in Akwa Ibom.
“If these machines are made available to local farmers, production level will expand and at the end of the day, the oil palm prices will go down. We cannot compete favourably with our counterparts in Indonesia and Malaysia. We should take note of this.”
Experts are positive that the federal and state governments, as well as the private sector, can work with research institutes and universities to produce and use improved seedlings, techniques, and storage to realise optimal output from the three million hectares of farmland said to be available for palm oil cultivation in the country.
Nigeria has an unmet demand of 500,000 tonnes of palm oil. According to Statisca, a research portal, palm oil consumption in Nigeria amounted to about 1.72 million metric tonnes. The Economic Community of West African States (ECOWAS) sub-region has an unmet demand of two million tonnes. This presents an opportunity for Nigeria to scale up production of the cash crop to satisfy local and regional demand for much-needed foreign exchange.
Increasing oil palm production
For instance, the National President, Palm Produce Association of Nigeria, Alphonsus Inyang, said the industry had the potential to close the domestic demand as well as capacity to produce for export. He has been driving a two million seedling project and urged Nigerians to embrace the project and vision of the association. He made a passionate call for the local palm oil industry to be protected. He said local producers have more than sufficient capacity to refine and bottle palm oil to meet local demand. He said Nigeria had several thousands of acres with high potential for palm oil development that could be cultivated with foreign investors. He said oil palm products made in Nigeria could find ready export markets in the United States and Europe.
Inyang urged the government and the private sector to plant one million oil palm trees in four years. He wants policymakers and business actors to discuss how to ensure Nigeria played a big role in global palm oil supply to meet demand for edible oils.
In doing so, one of the issues that will engage the attention of policymakers and business actors is, perhaps, the traceability for much of the palm oil produced in rural areas, as larger companies depended on middlemen to source palm fruits in the rural areas.
There is also the issue of the ease of doing business in Nigeria. “The ease of doing business is not there,” Etukapan pointed out, accusing the Standards Organisation of Nigeria (SON) and the National Agency for Food, Drug Administration and Control (NAFDAC) of making it difficult for entrepreneurs to get certifications.
“Sometimes, it can take you more than three years to have one certification. Before they give you that paper, they will come to your office 10 times, collecting money. At the end of the day, if they don’t collect enough money, they will not release the paper to you. When it happens like this, people cannot do palm oil exports. As far as oil exports are concerned, I want to say that the Nigerian Exports Promotion Council (NEPC) is really trying. If other agencies can do like NEPC, we will make a headway.”
Renewed hope
The average yield of oil palm farms in Nigeria is five tonnes of fresh fruits per hectare per annum, representing 25 per cent of potential production— a yield considered very low and attributable to poor agronomy and limited knowledge on best management practices for oil palm cultivation.
There is hope of a rebound of Nigeria’s palm oil industry, following recent global partnerships to deal with shortages of fertiliser and workers, for instance.
The price of fertiliser makes up about 40 per cent of palm oil’s production cost. So far, oil palms in Nigeria have not reached their full potential because of the lack of fertiliser input and farmers cannot get certain types of fertilisers
According to the Chief Executive, Oil Palm Research (NIFOR), Dr. Celestine Ikuenobe, oil palm requires a steady diet of nutrients and minerals. Malnourished trees produce less, which leads to lower oil extraction rates.
However, to ensure Nigeria’s palm oil production rises beyond two million metric tonnes per annum (MMTA) in the next three years, OCP Fertilisers Nigeria Limited and NIFOR are working on trials for the specialised fertiliser that will increase production by 40 per cent per hectare.
The Nation learnt that researchers at the Institute of Agricultural Research and Training (IAR&T) and NIFOR are testing fertiliser formulation at various agro-ecological situations across oil palm production states.
Deputy Managing Director, Programme Incubation, West Africa, OCP Africa, Mr. Caleb Usoh, said the company, in partnership with NIFOR and IAR&T, had conducted a soil mapping survey, to facilitate the development of specialised fertiliser recommendation for oil palm nationwide, to address complaints of low yields by farmers.
Ikuenobe explained that oil palm output had failed to keep pace with rising demand, so millions of dollars on imports had put a strain on state foreign currency reserves. He noted that characterising soils of the oil palm belt had helped to determine limiting nutrients based on new fertiliser formulations tested on farmer’s fields in validation trials across the country.
He noted that the soil test-based application of nutrients would help oil palm farmers to realise higher response ratio and in turn, higher yields.
The President, Federation of Agricultural Commodities Association of Nigeria (FACAN), Dr. Victor Iyama, believes that the sector could achieve a lot in increasing domestic and export production of palm oil if the government worked with producers to ensure that smallholder communities living in the production belts enjoyed higher incomes and a better quality of life, and improved rural infrastructure.
According to him, oil palm offers an opportunity to support rural livelihoods. He said as the palm oil industry expanded, so too would opportunities for the private sector to tap into the demands, particularly with regard to export.
He said the projected unprecedented growth in national income would be largely driven by unlocking opportunities in agriculture.
For Etukapan, there is the need for the government to provide the necessary support and an enabling environment to increase the competitiveness of local businesses to meet the demands of the sector.
He noted that while there has been a growing interest in strengthening and intensifying local oil palm production to capture the global market over the years, measures need to be implemented to mitigate the adverse effect of operational volatilities.
He added that the impact of a vibrant local oil palm value chain on the economy is huge and must be harnessed through a proactive approach to promote the growth of the production of sufficient palm fruits. This, he said, will make the country not only self-sufficient but also a net exporter of palm oil products into the sub-region.
Sustainable West Africa Palm oil Programme (SWAPP)
The Federal Government is collaborating with Solidaridad West Africa (SWA), a Non-Governmental Organisation (NGO) to ensure that the Best Management Practices approach to oil palm production at both the farm and mill levels .SWAPP is implemented in Ghana, Nigeria and Ivory Coast with a focus on increasing the productivity and profitability of the Small to Medium-Scale Enterprises in the palm oil sector. Since its inception, SWAPP has produced quality palm oil onto the market and also trained more than 2000 farmers across the three West African countries benefiting from the programme.
This year, ministers from 10 African countries signed the Africa Sustainable Commodities Initiative (ASCI) Declaration, a single set of principles for the responsible production of agricultural commodities in Africa.
ASCI puts producer countries in Africa at the forefront of defining the principles for the sustainable development of cocoa, rubber, palm oil, coffee and other commodities in a way that protects livelihoods and protects natural resources, including forests.
