Data from the Malaysian Palm Oil Council shows that Nigerian palm oil imports have risen by 353% within the first four months of 2023. This is despite an increase in local production by Nigerian palm oil producers.
Between January to April 2023, Nigeria imported 92,961 metric tonnes (MT) of palm oil from Malaysia, a significant surge from the 20,513 MT imported during the same period in 2022, representing an increase of 72,448 MT. Throughout 2022, Nigeria imported 227,035 MT of palm oil from Malaysia.
Also Read: The Engineer Who Used to Process Palm Oil in Edo State
Despite palm oil being included in Nigeria’s forex restriction list of 43 items, its imports into the country continue to increase due to a significant demand-supply gap.
In 2022, Nigerian imports of crude palm oil from Malaysia dipped by 34.7% year-on-year compared to 2021. Also, in 2022, Nigeria hit an all-time high production figure for the commodity.
After the palm oil import data for 2022 was released by the Malaysian Palm Oil Council, there was a striking euphoria over the prospects of palm oil production in Nigeria. Some observers attributed the increased domestic production capacity to the backward integration policy, noting that top palm oil producers who were into refining palm oil were now developing oil palm plantations. The former President of the National Palm Oil Producers Association of Nigeria, Henry Olatujoye, noted to the Guardian newspaper that “Nigeria has added 100,000 hectares to its palm oil plantation.”
Crude palm oil is one of the most utilized raw materials in manufacturing, especially for Fast Moving Consumer Goods (FMCG). It is used to make a variety of products, including noodles, vegetable oil, biscuits, chips, margarine, shortenings, cereals, baked goods, washing detergents, and even cosmetics. With Nigeria’s estimated consumption of palm oil yearly hovering between 2 million and 2.5 million tonnes, local production is grossly insufficient to satisfy the local demand for the product. Alphonsus Inyang, the National President of the National Palm Oil Producers Association of Nigeria noted to the Guardian Newspaper, “Some statistics will say we are consuming over three million metric tonnes, but all we know is that oil palm import is hovering between $500 to $600m yearly.”
With the importation figure surging to decades-high levels after such an impressive performance in 2022, it begs the question, what is going on? An Academic Researcher at the Nigerian Institute for Oil Palm Research (NIFOR), Dapo Olufade, noted, “One factor we can attribute to this to is the cash crunch. The cash crunch affected things in the agricultural sector, not just in palm oil production alone, but across the different sectors of agriculture.
“Oil palms are not annual crops, the harvesting starts three years after planting, hence we cannot attribute it to the plantation. Normally, in small-scale palm oil production, the climbers, the harvesters, and the people involved in the processing usually wait to collect money from the marketers before doing anything. Considering that many of these people are in rural communities, the lack of physical cash hampered their work and the overall palm oil production ecosystem.”
The Big Opportunity in Export Agriculture
Agriculture accounts for less than 2% of Nigeria’s exports, compared to 13.5% in Malaysia another oil-producing country, with crude oil accounting for over 80%. But agriculture represents 25% of Nigeria’s GDP while oil accounts for only 8.6%; this suggests that many Nigerians are engaged in agriculture but that Nigeria needs to enhance its capacity to export crops. In 2018, Nigerian agriculture exports were worth N302.3 billion, less than a billion dollars. In contrast, Malaysian export of just palm oil and its derivatives in 2017 was $966,000 i.e. almost $1 billion- a clear indication of the challenge but also opportunities that Nigeria faces in increasing agriculture exports.
Also Read: President Buhari Insists Agric Autarky Policies Have Saved Nigeria
Just three crops account for 70% of Nigerian agriculture exports- sesame seeds, cashew nuts and cocoa and its derivatives. Other imports include soya beans, frozen shrimp and prawns. Nigeria, with a population of 195.9 million and land covering 923,768 square kilometres, has barely scratched the surface of her potential for agriculture exports. Malaysia with 31.53 million people and a landmass measuring only 329,847 square kilometres in 2016 exported agricultural produce worth $27.5 billion. Given her natural endowments, Nigeria is estimated by the Nigerian Export Promotion Agency to have the potential to export agricultural produce worth $40 billion per annum.
Barriers to Nigeria’s $39 Billion Annual Agriculture Income
Agriculture is attracting a new wave of entrepreneurs, encouraged partly by the Central Bank of Nigerian lending towards the sector. Policymakers must be innovative and must target policies more directly at stimulating agriculture exports and entrepreneurs and SMEs must also finetune their strategies towards earning the possible additional $39 billion in agriculture export revenue.
According to Bisi Iyaniwura, an export commodity consultant whose family started exporting cocoa more than 40 years ago, Nigerian agriculture suffers both a quality and quantity problem. His views are supported by a report by the consultancy, PwC, Unlocking Nigeria’s Agricultural Export, which identified the following as constraints responsible for the low level of agricultural exports: logistics challenges at the ports, inadequate storage and poor distribution network, poor quality of agricultural products for exports and low value-addition, rising by only 1% per capita in the last two decades, to agriculture exports.
The cost of these constraints is a big deterrent to venturing into exporting agricultural produce. Iyaniwura explains that Nigerian cashew is often rejected by buyers because farmers harvest them before they are fully ripe. Delays at the ports and also while transporting cashew within Nigeria make the nuts lose moisture and thus weigh less, earning the exporters less money. Foreign buyers also terminate lucrative supply contracts because delays at the ports mean the goods arrive at their destination late.
Also Read: NNPC, Sahara Group Invest USD300m In Gas Carriers To Drive Clean Energy Access
Nigerian agriculture products have been banned in many foreign markets because farmers use pesticides which have been prohibited in many export markets. Insufficient inputs such as tractors also make Nigerian agriculture expensive- more time and labour produce less yield per hectare. Iyaniwura commented that “In the past, agriculture extension workers worked with farmers before and during planting and post-harvest, now there is no extension work. That’s why Nigeria has developed a costly reputation for poor quality.”
