Post by Trade facilitator on Oct 2, 2012 20:51:49 GMT 1
By Dr. Olukayode Oyeleye-- Palm oil is an important economic commodity of national and international importance, emerging as a significant contributor to the expansion in world’s production and consumption of edible oils and fats. Studies dating back to as recently as last year are among sources of ample details on what fate has befallen the product in Nigeria over time. As of early 1900, Nigeria was producing all palm oil sold in the world market and it was considered a dominant source of foreign exchange. In the 1950s and 1960s, Nigeria was a leader in the world palm oil market to which excess of Nigeria’s palm oil was exported when the production of palm oil exceeded the domestic consumption.
The fortunes of Nigeria’s palm oil production, however, took a plunge as a result of the discovery of crude petroleum deposit in commercial quantity, over-reliance on traditional palm oil processing techniques, and the effects of Nigerian civil war which was greatly pronounced in Nigeria’s oil palm belt. Up till the 1960s, Nigeria was the world’s largest producer of palm oil accounting for 43% of global palm oil production. Over the past four decades, the gap between production and consumption has widened as consumption has grown more rapidly than production.
From a production level of 1.6% and a consumption level of 6% in 1976, global palm oil production and consumption has grown to 28% in 2009 to become the world’s largest produced and consumed oil. Palm oil recorded its fastest increase in global production and consumption due to the significant contributions by Malaysia and Indonesia. The technical and economic advantage of palm oil over other oils and fats, especially soybean oil, is the main driver of this increase. In Nigeria, despite the attraction which the petroleum industry has generated in the last forty years, agriculture remains the mainstay of the Nigerian economy, contributing almost 40% of GDP compared with petroleum and gas which contribute 25% of the GDP. Ironically, it was within this time frame that Nigeria became a net importer of palm oil.
While Nigeria is one of the world’s largest producers of palm oil, it still remains a net importer of palm oil owing to the inability to produce enough palm oil to meet local demand. This offers the opportunity for increasing productivity. There is therefore a need to share information on the sector, to refocus attention on the potential for palm oil production and highlight the potential for boosting the Nigerian economy by concentrating on the enterprise dynamics. Improving the local capacity of palm oil production in Nigeria would not only impact positively on food security and local economy, it also portends huge prospects for future exports that will advance Nigeria’s economy.
The prospects for job creation is high as palm oil production remains a major vocation in many communities, involving hundreds of thousands of poor producers and tens of thousands of poor processors. The oil palm industry represents one of the most effective avenues for poverty alleviation, food security, ensuring economic stability in Nigeria and providing income for many farmers and their dependants. It also has the prospects of providing employment for millions of unskilled and semi-skilled people. This means that an efficient and strong palm oil sector in Nigeria will enable the poor to be part of the solution to poverty challenge through provision of employment and means of livelihood.
The reference to oil palm as a crop of multiple value underscores its economic importance. There are numerous ways in which oil palm production could be deployed to boost employment opportunities for the people. Middle men (traders) appeared to have benefitted more from the palm oil business in Nigeria due to inefficiencies resulting from weak value chain coordination. As demonstrated in other economies, with proper focus on production of commodities of large scale commercial values, improvement in the production of oil palm can effectively mitigate the poverty level in Nigeria where there has been limited transformation and uses of the primary or secondary products from oil palm for either food or non-food applications. In developed economies, however, palm oil is used in the manufacturing of many foodstuffs including many industrial applications.
In Nigeria, over-reliance on traditional production methods, excessive tapping of palm trees for palm wine, neglect prompted by much emphasis to petroleum at the expense of agriculture, and the civil war between 1967-1970, contributed to Nigeria’s inability to meet up with the global rise in demand for palm oil. Thus with an annual total domestic vegetable oil requirement of about 1,722,000 tons, there is a supply and demand gap of about 585,000 metric tons annually, from the available statistics. Although the shortfall in supply in the Nigerian market is estimated by the United States Department of Agriculture (USDA) at about 150,000 MT of palm oil per annum, other studies put this between 500,000 and 600,000 MT.
For so long, this difference has been met from importation as well as smuggling across the borders, which warrants an ambitious attempt to now reposition agriculture as the mainstay of the Nigerian economy and specifically to restore Nigeria’s pre-eminent position as a net exporter of palm oil. But the Nigerian oil palm industry lacks adequate plantation culture and also operates under a land tenure system that limits smallholders’ access to enough arable land. The slow growth in production (supply) is caused by a number of factors which include: aging plantations and declining yield with no replanting plans, poor access to arable land for expansion of existing plantations or for establishment of new estates, a consequence of difficulties in land acquisition which remained a challenge owing to prevailing policy of land tenure system in Nigeria. The land tenure system in the country” has been described as a “limiting factor against private mass production of palm oil by individuals” and a call has gone out to the “local and state governments to provide land areas to oil palm farmers to encourage mass production of palm oil.” Other underlying causes entail poor plantation maintenance, poor quality seedlings, high cost of inputs, low extraction rate due to crude processing techniques.
A recent study conducted by Foundation for Partnership Initiatives in the Niger Delta admitted that, although the Nigerian oil palm industry has considerable potential to regain competitiveness and respond to the immediate domestic opportunities, it will be seriously challenged to compete internationally without a radical transformation of the industry. This is a basis for the intervention under the oil palm value chain within the Agricultural Transformation Agenda (ATA). The immediate objective has to do with meeting the local demand, since the country boasts of a large domestic market, and to focus on improving local processing quality standards. Once this is achieved, the country will be well on its way to maximising its competitive advantage and to competing effectively with Malaysia and Indonesia domestically.
But, from performance perspectives, the oil palm industry needs to overcome the problems of low productivity, quality of oil with high fatty acids, high emphasis on local use only, low adoption of modern inputs and slow access to information. The adoption of value chain approach appears a promising option. Value chains create jobs, add value, help to reduce poverty, ensure safety and increase transparency. More efficient coordination of the value chain would make farm inputs available and affordable to farmers. Growing the palm oil value chain through replacement of palm oil imports with increased production would require significant investment to be made by private operators through increasing the effective hectares planted by smallholders as well as improving the efficiency of processing technology leading to higher yields and greater production, in order to maximise growth opportunity in the oil palm value chain.
Good prospects from the perspectives of growth potential as well as potential for broad and inclusive impact on the poor and economic feasibility have been established. It is also on record that there has been some increase in private sector investments in the development of new oil palm plantations and the expansion of existing ones. The functional plantations are few and in just a few states while most of the other existing plantations are more than 30 years old and without replanting plans. The productivity of this category of plantations is lower than the younger plants.
Nigeria’s palm oil has been described as “not competitive” on the global markets. Local prices are just below the import parity price, which includes a 35 % duty. Without this protection, Nigerian palm oil cannot compete, even taking into consideration the significant margins taken by the marketing functions in the value chain. Major challenges facing the palm oil sector, affecting its competitiveness and potential for growth include the dominant presence of the wild grove of low yielding variety in the production system.
Although there are increasing number and sizes of plantations, harvests from wild groves seem to be the highest source of palm oil to date. All of the wild grove harvest is moving through traditional channels which use rudimentary technology, but there is increasing investment in smallholder production with integration into processing. For the wild grove harvesters, one of the major constraints is that they are rarely the owners of the trees. Therefore they have a disincentive to invest in them by applying inputs, weeding, and pruning. This lack of incentive to them to invest has an impact on the overall yield of those trees.
The Niger Delta Area can be said to account for 57% of the national oil palm area. Of the total, only 372,558 hectares constitute organised plantings of oil palm, of which 267,183 hectares are said to be owned by medium/small farmers while 105,375 hectares are of large estate plantation, the rest being wild groves. The ownership structure of the wild groves does not encourage any investment in their maintenance and upgrading. There are very inefficient processing technologies, extracting 25-50% of the oil content (i.e. this is equivalent to 50% of the oil is being thrown away) for half of all processed palm fruit. Other problems entail serious management challenges around most of the large estates that were created by the government, leading to their inefficient operation, bankruptcy, aging of the trees.
The varieties under production are a critical function of the long term productivity and competitiveness of Nigerian palm oil industry. Over the years, the absence of regulation on the marketing of sprouted seeds and seedlings has created the opportunity for the informal sales of adulterated, low-yield sprouted seeds and seedlings at lower prices to the detriment of unsuspecting farmers. Some farmers planted seedlings harvested from old plantations with a decline in the productivity of the palms. In all these situations, palm oil production has been adversely affected. Growing the size of the overall value chain will require improving the processing efficiency, in particular at the small commercial level, an increasing investment in re-planting and upgrading the varieties of existing palm plantations with newer higher oil content varieties, and enhanced linkages between the processors and the private farmers. The highly fragmented relations between the actors call for a remedy.
Nigeria has two main palm production systems, the wild grove and the planted farms, with the wild grove producing about 80% of total fruit for processing. Developmental projects by both the public and private sectors have often resulted into destruction of the wild grove from which the bulk of fresh fruit bunches are harvested, thereby reducing the production of palm oil. This is an environmental issue, which particularly affects the poor, who rely on the harvesting of fruit from the wild groves as their source of revenue.
It is important to note the different types of actors at each level of the value chain and the incentives that drive them if we are to target the behaviour change necessary for a better functioning value chain. Lack of proper coordination in the oil palm value chain creates poor linkages among the actors within the chain and leads to inefficiency and non-competitiveness. Palm oil is very important as an income generator for women in Nigeria. In most cases it is women who are in charge of processing the oil palm fruits into red palm oil and of selling the product in the local and even national market. The lack of proper scaling of locally fabricated milling technology adversely affects the extraction rate and volume of palm oil production. Yet, there is growth opportunity in introducing properly scaled locally fabricated technology to minimise waste and improve oil extraction rate.
Most small holder farms have been poorly maintained in terms of weeding, slashing and fertiliser application. Only a small percentage of the oil palm production invests in inputs into the productive process, primarily the larger estates and the small and medium scale farmers who have actually planted new trees. Inappropriate fertiliser or chemicals application are common among small scale holders, leading to low yield per hectare. The Palm Oil value chain inputs comprise of sprouted seeds and seedlings, fertiliser, herbicides and insecticides (chemicals). However, the availability, affordability, skilful and proper combination of these inputs determine, to a large extent, the productivity of the oil palm plantations. Farmers, especially smallholder farmers who account for about 80% of domestic palm oil production, lack access to chemical inputs.
Fertiliser is a major input in the palm oil value chain. Different types of fertilisers are required at different stages of growth for palm trees. Productivity declines without the appropriate application of fertilisers to the palm tree. However, farmers at all levels (except the best functioning large estates) have difficulty accessing the fertiliser due to a combination of availability and the cash to purchase it. The productivity of the plantations is lower than it would have been if fertiliser was available to farmers and applied at the right time in accordance with proper agronomic practices
The major driver for the demand for fertiliser is the need to revitalise soil nutrients lost as a result of continuous usage over the years. Thus, without fertiliser application, the yield from the palm trees will be very poor. Herbicides are used to combat weeds in the plantation, while insecticides are used to control insects. However, less than 5% of farmers apply insecticides in their farms. More than 50% of these farmers are willing to adopt integrated weed management technique which entails the application of herbicides along with cultural weed control.
The agricultural transformation agenda seeks to position the economically active poor within the overall subsector, with a specific focus on inclusion of the poorer members of the community, and help unlock the growth potential in pro-poor channels while also recognising that further investments in palm oil production and in enhancing processing productivity are a useful tool of poverty reduction and economic diversification. The oil palm value chain activities are being implemented in 24 producing states: Abia, Akwa Ibom, Cross River, Rivers, Bayelsa, Imo, Anambra, Ebonyi, Enugu, Delta, Edo, Ondo, Ogun, Osun, Oyo, Ekiti, Benue, Kwara, Kogi, Nasarawa, Plateau, Taraba, Adamawa and Kaduna (Southern Kaduna).
Under the agricultural transformation agenda (ATA), the major goal is to take advantage of the oil palm as largest oil producing crop, to achieve an increase in vegetable oil production in order to achieve import substitution; raise the yield/productivity of both organised and unorganised plantings; arouse greater interest and concern for engagement in competitive market activities within the oil palm value chain and create employment for the youth and reduce poverty. Technology in processing palm oil is driving change at the processor level. The demand for special palm oil (SPO) is driven by increase in the number of secondary processors refining SPO into derivatives like fatty acids, olein, stearin, and other derivatives used by industrial food manufacturers. But less than 30% of available mills and refineries are functioning.
The Traditional TPO with over 37,000 traditional processors who use traditional processing techniques (use of foot power and the mortar and pestle) and who receive the bulk of their fresh fruit bunches (FFB) from the wild, is shrinking because of the continued destruction of the wild grove for infrastructural development projects. Traditional TPO is the largest of the various product channels but it is shrinking. It is dependent on the wild grove harvest, the least productive source. It has no barriers to entry and low costs to start up. The traditional production technique is the most widely used within the oil palm producing rural areas. Recent findings show that the channel is shrinking due to very weak vertical coordination and with little horizontal linkage between traditional processors and mini processors
Medium technology TPO is driven increasingly by farming techniques (commercially oriented) and by an improved processing technology for crude palm oil. The channel is comprised of the larger private producers of FFB who are integrating vertically into processing using more efficient processing technologies. This channel is growing rapidly, attracting the more commercially oriented actors to upgrade and move into a more productive segment. In the medium technology TPO, majority of the oil palm estate owners are the key actors leading to the production of crude palm oil (CPO).
Management capacity for state-owned large plantations and factories has been observed as weak, with ineffective and inefficient management leading to improper plantation maintenance, also resulting in the closure of state-owned estates. All these are happening when an increase in the population of households, fast foods, hotels, restaurants and other end users of TPO is driving the increase in demand for both technical palm oil (TPO) and special palm oil (SPO). Under Agricultural Transformation Agenda (ATA), therefore, the focus is on how palm oil production, processing and marketing activities can become sustainable and economically viable. Emphasis on how farmers and processors can be assisted to improve on the quality of their palm oil production and achieve more value addition is also a key issue.
Accordingly, ATA has commenced actions on how to improve on the productivity and income of farmers, how to make improved planting materials available to farmers, to establish more new farms, and rehabilitate old unkempt ones. It is also working on how to achieve price parity in the local (crude palm oil) CPO production and imported products. Three varieties of oil palm are available in Nigeria; namely Dura, Pisifera and Tenera. The preferred variety among palm oil farmers in Nigeria is the Tenera hybrid which is a crossbreed of the Dura (female) and the Pisifera (male). Tenera seedlings are produced by the Nigerian Institute for Oil Palm Research (NIFOR). In terms of comparison, the fruit of the Tenera variety contains 25% oil, by weight, and the Dura variety 18%, so the same amount of Tenera can yield 30% more oil than the equivalent fruit of the Dura. Under ATA intervention, 9 million improved tenera sprouted nuts are to be produced by the NIFOR in 2012 and raised into mature seedlings for planting in 2013.
The ages of the trees in a significant proportion of existing oil palm plantations in Nigeria have gone beyond 30 years and productivity is on the decline. This poses a threat to the availability of adequate quantities and quality of Fresh Fruit Bunches (FFB) for processing. In this regard, the systematic planting of new plantations of improved tenera cultivar, especially of shorter height, to replace ageing palm groves of the dura variety, as well as access to capital for the acquisition of improved processing equipment, would result in meeting the increasing demand for raw material and improved processing efficiency. On the average, 48,000ha of unkempt plantations are expected to be rehabilitated annually, while a demonstration of fertility management practices would be done among cooperative smallholder farmers.
From the 9 million seedlings expected to be raised in 2012, a field planting of 60,000ha is to be undertaken in 2013. Plans are underway for the introduction of motorised harvesters to replace manual climbing of oil palm trees; this has capacity of harvesting 500-900 fresh fruit bunches (ffb) per day. About 30,000mt of crude palm oil is expected to be produced in 2012 from additional 192,000mt of fresh fruit bunches expected from the introduction of motorised harvesters while 87,500mt of CPO will be produced annually upon maturity of the first 60,000ha.
The transformation agenda will work with stakeholders to embark on demonstration of fertility management practices among cooperative smallholder farmers, popularise the use of Small Scale Processing Equipment (SSPE) among smallholder cooperative farmers and processors, looking at Crude Palm Kernel Oil (CPKO), Crude Palm Oil (CPO), Special Palm Oil (SPO) and Technical Palm Oil (TPO). It will lay the foundation for Roundtable on Sustainable Palm Oil (RSPO) consideration in production and processing activities and integrating RSPO principles and criteria into the Oil Palm Trading and Marketing Corporation.
Recent development in the vegetable oil industry necessitates the establishment of appropriate tariff for import of crude palm oil (CPO) that encourages local production; and strict enforcement of Ecowas Trade Liberalisation Scheme (ETLS) on the rule of country of origin of CPO. ECOWAS trade regulations allow more imports into Nigeria. Therefore, the shortfall in supply has been filled, for years, with importation instead of increase in production. The decision has been greeted with mixed experiences. Lifting of the ban on import of vegetable oil reduced investment in the palm oil value chain. The market was flooded with imported vegetable oil, leading to sharp decline in price of palm oil because palm oil has many substitutes like soybean oil, groundnut oil,
Nigeria is a significant net importer of palm oil for both food and industrial uses. Cooking oil, deep frying oils, margarines and spreads, bakery fats, cocoa butter alternative fats, confectionery fats, ice cream fats, infants’ nutrition fats are food uses. The non-food uses include cosmetics and personal care products, soaps, candles, pharmaceuticals, lubrications and grease, surfactants, industrial chemicals, agrochemicals, coatings, paints and lacquers, electronics, for leather work and biodiesel.
Industry estimates of 2008 put the average per capita domestic consumption of vegetable oils and fats in Nigeria for food and non-food uses to be about 12.3 kg in 2007. With a population of 140 million by the 2006 census, Nigeria would require annually 1,722,000 tons of vegetable oils and fats to meet the national requirement for food and non-food uses. From the analysis of the sector, total palm oil and palm kernel oil production per annum is currently at most about 741,800 MT. The Oil World (2008) puts the current 2005–2008 estimates of groundnut oil, soya bean oil and cotton oil production – the other major vegetable oils produced in Nigeria – as 325,750 MT, 50,325 MT and 19,700 MT annually respectively.
The Oil World in 2008 gives the total palm oil importation into Ghana, Togo, the Republic of Benin and Nigeria as ranging from 394,900 metric tons in 2005 to as much as 663,000 tons in September/October of 2008 only while from MPOB Statistics (2008 & 2009) the Malaysian palm oil export to Ghana, Togo and the Republic of Benin ranged from 402,312 MT in 2006 to 563,763 MT in 2008. Because of the low population of Ghana, Togo and Republic of Benin, it is likely that more than 80% of the palm oil imported into these countries is destined for informal trade to Nigeria.
Other triggers/drivers for increased cultivation and income from oil palm include increases in world vegetable oil prices, biofuel production, emerging technologies (including processing equipment) and equipment fabrication, oil palm research, support for smallholder oil palm producers, especially using the out-grower approach, as well as access to land and capital. These are receiving attention as 18 estates, spread across 11 states, recently signed agreements with the Federal Ministry of Agriculture and Rural Development to participate in estate oil palm nursery activity. They are to receive a total of 1,395,000 improved tenera oil palm nuts free under ATA to raise into mature seedlings at their own cost; and each will plant between 500 and 550ha in their plantation next year, leading to a total field planting of 9,300ha in 2013.
The ministry is finalising arrangements to give out the balance of 2,605,000 nuts from 4 million to other public and private nursery operators to raise and distribute under the Growth Enhancement Support (GES) arrangement in 2013. The ministry will pay for the cost of raising these seedlings. The GES involving planting materials, agro-chemicals and fertilisers has been worked out and will become effective in 2013 when ATA seedlings will be available while the ministry is preparing for the pilot scheme of Semi Wild Grove (SWG) Yield Enhancement. Growth Enhancement Support involving planting materials, agro-chemicals and fertilisers has been worked out and will become effective in 2013 when ATA seedlings will be available.
Two local government areas each in producing states are being identified for the pilot scheme of the Semi Wild Grove (SWG) yield enhancement in an on-going process. Each LGA is identifying two communities where trials will be conducted starting from 2013 when ATA seedlings will be available. Registration of farmers is continuing, with more than 100,000 oil palm farmers already registered. A total of 130,000ha has been proposed for planting by registered farmers showing the high level of interest in the oil palm. Currently, 4 million nuts to be raised into mature seedlings for planting next year may not be enough to meet the demand in 2013. To meet the figure needed, the oil palm value chain team is “working towards securing the balance of 5 million nuts which some seed companies we identified can raise into mature seedlings at their own cost, and distribute to farmers,” disclosed a top source.
Also, currently, improved harvesting and processing activities are being promoted as arrangement for the supply of 100 motorised harvesters and 100 small scale processing equipment (SSPE) through funding by First Bank is almost concluded. The oil palm value chain is collaborating with infrastructure team of ATA to compile the list of smallholder cooperative groups who are interested in the motorised harvesters and SSPE and get them to meet the conditions of a commercial bank for funding the supply of the equipment.
The following are the requirements of the bank: NIRSAL will provide a guarantee of up to 75% of the principal and interest. Cooperative societies will pay 3% guarantee fee as the NIRSAL guarantee is issued at a cost. Proforma invoices of the equipment and machinery to be purchased will be issued and a list of cooperative societies will be compiled to fully deploy the number of units of fixed assets being financed. Equity contribution of 10% of the value of the fixed assets being financed will be agreed upon while collateral of 15% of principal and interest (Charged Savings Deposit of 15% tangible assets) plus third party guarantee supported with assets, etc., will be required.
With the early steps being taken now to bring back oil palm business to reckoning in Nigeria, it is hoped that the fortune of the industry will soon be on the upbeat again and the country would find its slot back in the world palm oil map. The responses of stakeholders so far have been encouraging and the federal government is not relenting in responding to key issues that would help to accomplish the set goals in which case oil palm business will open up opportunities to drive the agro-economy on the path of recovery.
*Dr. Olukayode Oyeleye is the special assistant on Media and Strategy to the Minister of Agriculture and Rural Development.
Source: www.worldstagegroup.com/worldstagenew/index.php?active=news&newscid=6188&catid=11
The fortunes of Nigeria’s palm oil production, however, took a plunge as a result of the discovery of crude petroleum deposit in commercial quantity, over-reliance on traditional palm oil processing techniques, and the effects of Nigerian civil war which was greatly pronounced in Nigeria’s oil palm belt. Up till the 1960s, Nigeria was the world’s largest producer of palm oil accounting for 43% of global palm oil production. Over the past four decades, the gap between production and consumption has widened as consumption has grown more rapidly than production.
From a production level of 1.6% and a consumption level of 6% in 1976, global palm oil production and consumption has grown to 28% in 2009 to become the world’s largest produced and consumed oil. Palm oil recorded its fastest increase in global production and consumption due to the significant contributions by Malaysia and Indonesia. The technical and economic advantage of palm oil over other oils and fats, especially soybean oil, is the main driver of this increase. In Nigeria, despite the attraction which the petroleum industry has generated in the last forty years, agriculture remains the mainstay of the Nigerian economy, contributing almost 40% of GDP compared with petroleum and gas which contribute 25% of the GDP. Ironically, it was within this time frame that Nigeria became a net importer of palm oil.
While Nigeria is one of the world’s largest producers of palm oil, it still remains a net importer of palm oil owing to the inability to produce enough palm oil to meet local demand. This offers the opportunity for increasing productivity. There is therefore a need to share information on the sector, to refocus attention on the potential for palm oil production and highlight the potential for boosting the Nigerian economy by concentrating on the enterprise dynamics. Improving the local capacity of palm oil production in Nigeria would not only impact positively on food security and local economy, it also portends huge prospects for future exports that will advance Nigeria’s economy.
The prospects for job creation is high as palm oil production remains a major vocation in many communities, involving hundreds of thousands of poor producers and tens of thousands of poor processors. The oil palm industry represents one of the most effective avenues for poverty alleviation, food security, ensuring economic stability in Nigeria and providing income for many farmers and their dependants. It also has the prospects of providing employment for millions of unskilled and semi-skilled people. This means that an efficient and strong palm oil sector in Nigeria will enable the poor to be part of the solution to poverty challenge through provision of employment and means of livelihood.
The reference to oil palm as a crop of multiple value underscores its economic importance. There are numerous ways in which oil palm production could be deployed to boost employment opportunities for the people. Middle men (traders) appeared to have benefitted more from the palm oil business in Nigeria due to inefficiencies resulting from weak value chain coordination. As demonstrated in other economies, with proper focus on production of commodities of large scale commercial values, improvement in the production of oil palm can effectively mitigate the poverty level in Nigeria where there has been limited transformation and uses of the primary or secondary products from oil palm for either food or non-food applications. In developed economies, however, palm oil is used in the manufacturing of many foodstuffs including many industrial applications.
In Nigeria, over-reliance on traditional production methods, excessive tapping of palm trees for palm wine, neglect prompted by much emphasis to petroleum at the expense of agriculture, and the civil war between 1967-1970, contributed to Nigeria’s inability to meet up with the global rise in demand for palm oil. Thus with an annual total domestic vegetable oil requirement of about 1,722,000 tons, there is a supply and demand gap of about 585,000 metric tons annually, from the available statistics. Although the shortfall in supply in the Nigerian market is estimated by the United States Department of Agriculture (USDA) at about 150,000 MT of palm oil per annum, other studies put this between 500,000 and 600,000 MT.
For so long, this difference has been met from importation as well as smuggling across the borders, which warrants an ambitious attempt to now reposition agriculture as the mainstay of the Nigerian economy and specifically to restore Nigeria’s pre-eminent position as a net exporter of palm oil. But the Nigerian oil palm industry lacks adequate plantation culture and also operates under a land tenure system that limits smallholders’ access to enough arable land. The slow growth in production (supply) is caused by a number of factors which include: aging plantations and declining yield with no replanting plans, poor access to arable land for expansion of existing plantations or for establishment of new estates, a consequence of difficulties in land acquisition which remained a challenge owing to prevailing policy of land tenure system in Nigeria. The land tenure system in the country” has been described as a “limiting factor against private mass production of palm oil by individuals” and a call has gone out to the “local and state governments to provide land areas to oil palm farmers to encourage mass production of palm oil.” Other underlying causes entail poor plantation maintenance, poor quality seedlings, high cost of inputs, low extraction rate due to crude processing techniques.
A recent study conducted by Foundation for Partnership Initiatives in the Niger Delta admitted that, although the Nigerian oil palm industry has considerable potential to regain competitiveness and respond to the immediate domestic opportunities, it will be seriously challenged to compete internationally without a radical transformation of the industry. This is a basis for the intervention under the oil palm value chain within the Agricultural Transformation Agenda (ATA). The immediate objective has to do with meeting the local demand, since the country boasts of a large domestic market, and to focus on improving local processing quality standards. Once this is achieved, the country will be well on its way to maximising its competitive advantage and to competing effectively with Malaysia and Indonesia domestically.
But, from performance perspectives, the oil palm industry needs to overcome the problems of low productivity, quality of oil with high fatty acids, high emphasis on local use only, low adoption of modern inputs and slow access to information. The adoption of value chain approach appears a promising option. Value chains create jobs, add value, help to reduce poverty, ensure safety and increase transparency. More efficient coordination of the value chain would make farm inputs available and affordable to farmers. Growing the palm oil value chain through replacement of palm oil imports with increased production would require significant investment to be made by private operators through increasing the effective hectares planted by smallholders as well as improving the efficiency of processing technology leading to higher yields and greater production, in order to maximise growth opportunity in the oil palm value chain.
Good prospects from the perspectives of growth potential as well as potential for broad and inclusive impact on the poor and economic feasibility have been established. It is also on record that there has been some increase in private sector investments in the development of new oil palm plantations and the expansion of existing ones. The functional plantations are few and in just a few states while most of the other existing plantations are more than 30 years old and without replanting plans. The productivity of this category of plantations is lower than the younger plants.
Nigeria’s palm oil has been described as “not competitive” on the global markets. Local prices are just below the import parity price, which includes a 35 % duty. Without this protection, Nigerian palm oil cannot compete, even taking into consideration the significant margins taken by the marketing functions in the value chain. Major challenges facing the palm oil sector, affecting its competitiveness and potential for growth include the dominant presence of the wild grove of low yielding variety in the production system.
Although there are increasing number and sizes of plantations, harvests from wild groves seem to be the highest source of palm oil to date. All of the wild grove harvest is moving through traditional channels which use rudimentary technology, but there is increasing investment in smallholder production with integration into processing. For the wild grove harvesters, one of the major constraints is that they are rarely the owners of the trees. Therefore they have a disincentive to invest in them by applying inputs, weeding, and pruning. This lack of incentive to them to invest has an impact on the overall yield of those trees.
The Niger Delta Area can be said to account for 57% of the national oil palm area. Of the total, only 372,558 hectares constitute organised plantings of oil palm, of which 267,183 hectares are said to be owned by medium/small farmers while 105,375 hectares are of large estate plantation, the rest being wild groves. The ownership structure of the wild groves does not encourage any investment in their maintenance and upgrading. There are very inefficient processing technologies, extracting 25-50% of the oil content (i.e. this is equivalent to 50% of the oil is being thrown away) for half of all processed palm fruit. Other problems entail serious management challenges around most of the large estates that were created by the government, leading to their inefficient operation, bankruptcy, aging of the trees.
The varieties under production are a critical function of the long term productivity and competitiveness of Nigerian palm oil industry. Over the years, the absence of regulation on the marketing of sprouted seeds and seedlings has created the opportunity for the informal sales of adulterated, low-yield sprouted seeds and seedlings at lower prices to the detriment of unsuspecting farmers. Some farmers planted seedlings harvested from old plantations with a decline in the productivity of the palms. In all these situations, palm oil production has been adversely affected. Growing the size of the overall value chain will require improving the processing efficiency, in particular at the small commercial level, an increasing investment in re-planting and upgrading the varieties of existing palm plantations with newer higher oil content varieties, and enhanced linkages between the processors and the private farmers. The highly fragmented relations between the actors call for a remedy.
Nigeria has two main palm production systems, the wild grove and the planted farms, with the wild grove producing about 80% of total fruit for processing. Developmental projects by both the public and private sectors have often resulted into destruction of the wild grove from which the bulk of fresh fruit bunches are harvested, thereby reducing the production of palm oil. This is an environmental issue, which particularly affects the poor, who rely on the harvesting of fruit from the wild groves as their source of revenue.
It is important to note the different types of actors at each level of the value chain and the incentives that drive them if we are to target the behaviour change necessary for a better functioning value chain. Lack of proper coordination in the oil palm value chain creates poor linkages among the actors within the chain and leads to inefficiency and non-competitiveness. Palm oil is very important as an income generator for women in Nigeria. In most cases it is women who are in charge of processing the oil palm fruits into red palm oil and of selling the product in the local and even national market. The lack of proper scaling of locally fabricated milling technology adversely affects the extraction rate and volume of palm oil production. Yet, there is growth opportunity in introducing properly scaled locally fabricated technology to minimise waste and improve oil extraction rate.
Most small holder farms have been poorly maintained in terms of weeding, slashing and fertiliser application. Only a small percentage of the oil palm production invests in inputs into the productive process, primarily the larger estates and the small and medium scale farmers who have actually planted new trees. Inappropriate fertiliser or chemicals application are common among small scale holders, leading to low yield per hectare. The Palm Oil value chain inputs comprise of sprouted seeds and seedlings, fertiliser, herbicides and insecticides (chemicals). However, the availability, affordability, skilful and proper combination of these inputs determine, to a large extent, the productivity of the oil palm plantations. Farmers, especially smallholder farmers who account for about 80% of domestic palm oil production, lack access to chemical inputs.
Fertiliser is a major input in the palm oil value chain. Different types of fertilisers are required at different stages of growth for palm trees. Productivity declines without the appropriate application of fertilisers to the palm tree. However, farmers at all levels (except the best functioning large estates) have difficulty accessing the fertiliser due to a combination of availability and the cash to purchase it. The productivity of the plantations is lower than it would have been if fertiliser was available to farmers and applied at the right time in accordance with proper agronomic practices
The major driver for the demand for fertiliser is the need to revitalise soil nutrients lost as a result of continuous usage over the years. Thus, without fertiliser application, the yield from the palm trees will be very poor. Herbicides are used to combat weeds in the plantation, while insecticides are used to control insects. However, less than 5% of farmers apply insecticides in their farms. More than 50% of these farmers are willing to adopt integrated weed management technique which entails the application of herbicides along with cultural weed control.
The agricultural transformation agenda seeks to position the economically active poor within the overall subsector, with a specific focus on inclusion of the poorer members of the community, and help unlock the growth potential in pro-poor channels while also recognising that further investments in palm oil production and in enhancing processing productivity are a useful tool of poverty reduction and economic diversification. The oil palm value chain activities are being implemented in 24 producing states: Abia, Akwa Ibom, Cross River, Rivers, Bayelsa, Imo, Anambra, Ebonyi, Enugu, Delta, Edo, Ondo, Ogun, Osun, Oyo, Ekiti, Benue, Kwara, Kogi, Nasarawa, Plateau, Taraba, Adamawa and Kaduna (Southern Kaduna).
Under the agricultural transformation agenda (ATA), the major goal is to take advantage of the oil palm as largest oil producing crop, to achieve an increase in vegetable oil production in order to achieve import substitution; raise the yield/productivity of both organised and unorganised plantings; arouse greater interest and concern for engagement in competitive market activities within the oil palm value chain and create employment for the youth and reduce poverty. Technology in processing palm oil is driving change at the processor level. The demand for special palm oil (SPO) is driven by increase in the number of secondary processors refining SPO into derivatives like fatty acids, olein, stearin, and other derivatives used by industrial food manufacturers. But less than 30% of available mills and refineries are functioning.
The Traditional TPO with over 37,000 traditional processors who use traditional processing techniques (use of foot power and the mortar and pestle) and who receive the bulk of their fresh fruit bunches (FFB) from the wild, is shrinking because of the continued destruction of the wild grove for infrastructural development projects. Traditional TPO is the largest of the various product channels but it is shrinking. It is dependent on the wild grove harvest, the least productive source. It has no barriers to entry and low costs to start up. The traditional production technique is the most widely used within the oil palm producing rural areas. Recent findings show that the channel is shrinking due to very weak vertical coordination and with little horizontal linkage between traditional processors and mini processors
Medium technology TPO is driven increasingly by farming techniques (commercially oriented) and by an improved processing technology for crude palm oil. The channel is comprised of the larger private producers of FFB who are integrating vertically into processing using more efficient processing technologies. This channel is growing rapidly, attracting the more commercially oriented actors to upgrade and move into a more productive segment. In the medium technology TPO, majority of the oil palm estate owners are the key actors leading to the production of crude palm oil (CPO).
Management capacity for state-owned large plantations and factories has been observed as weak, with ineffective and inefficient management leading to improper plantation maintenance, also resulting in the closure of state-owned estates. All these are happening when an increase in the population of households, fast foods, hotels, restaurants and other end users of TPO is driving the increase in demand for both technical palm oil (TPO) and special palm oil (SPO). Under Agricultural Transformation Agenda (ATA), therefore, the focus is on how palm oil production, processing and marketing activities can become sustainable and economically viable. Emphasis on how farmers and processors can be assisted to improve on the quality of their palm oil production and achieve more value addition is also a key issue.
Accordingly, ATA has commenced actions on how to improve on the productivity and income of farmers, how to make improved planting materials available to farmers, to establish more new farms, and rehabilitate old unkempt ones. It is also working on how to achieve price parity in the local (crude palm oil) CPO production and imported products. Three varieties of oil palm are available in Nigeria; namely Dura, Pisifera and Tenera. The preferred variety among palm oil farmers in Nigeria is the Tenera hybrid which is a crossbreed of the Dura (female) and the Pisifera (male). Tenera seedlings are produced by the Nigerian Institute for Oil Palm Research (NIFOR). In terms of comparison, the fruit of the Tenera variety contains 25% oil, by weight, and the Dura variety 18%, so the same amount of Tenera can yield 30% more oil than the equivalent fruit of the Dura. Under ATA intervention, 9 million improved tenera sprouted nuts are to be produced by the NIFOR in 2012 and raised into mature seedlings for planting in 2013.
The ages of the trees in a significant proportion of existing oil palm plantations in Nigeria have gone beyond 30 years and productivity is on the decline. This poses a threat to the availability of adequate quantities and quality of Fresh Fruit Bunches (FFB) for processing. In this regard, the systematic planting of new plantations of improved tenera cultivar, especially of shorter height, to replace ageing palm groves of the dura variety, as well as access to capital for the acquisition of improved processing equipment, would result in meeting the increasing demand for raw material and improved processing efficiency. On the average, 48,000ha of unkempt plantations are expected to be rehabilitated annually, while a demonstration of fertility management practices would be done among cooperative smallholder farmers.
From the 9 million seedlings expected to be raised in 2012, a field planting of 60,000ha is to be undertaken in 2013. Plans are underway for the introduction of motorised harvesters to replace manual climbing of oil palm trees; this has capacity of harvesting 500-900 fresh fruit bunches (ffb) per day. About 30,000mt of crude palm oil is expected to be produced in 2012 from additional 192,000mt of fresh fruit bunches expected from the introduction of motorised harvesters while 87,500mt of CPO will be produced annually upon maturity of the first 60,000ha.
The transformation agenda will work with stakeholders to embark on demonstration of fertility management practices among cooperative smallholder farmers, popularise the use of Small Scale Processing Equipment (SSPE) among smallholder cooperative farmers and processors, looking at Crude Palm Kernel Oil (CPKO), Crude Palm Oil (CPO), Special Palm Oil (SPO) and Technical Palm Oil (TPO). It will lay the foundation for Roundtable on Sustainable Palm Oil (RSPO) consideration in production and processing activities and integrating RSPO principles and criteria into the Oil Palm Trading and Marketing Corporation.
Recent development in the vegetable oil industry necessitates the establishment of appropriate tariff for import of crude palm oil (CPO) that encourages local production; and strict enforcement of Ecowas Trade Liberalisation Scheme (ETLS) on the rule of country of origin of CPO. ECOWAS trade regulations allow more imports into Nigeria. Therefore, the shortfall in supply has been filled, for years, with importation instead of increase in production. The decision has been greeted with mixed experiences. Lifting of the ban on import of vegetable oil reduced investment in the palm oil value chain. The market was flooded with imported vegetable oil, leading to sharp decline in price of palm oil because palm oil has many substitutes like soybean oil, groundnut oil,
Nigeria is a significant net importer of palm oil for both food and industrial uses. Cooking oil, deep frying oils, margarines and spreads, bakery fats, cocoa butter alternative fats, confectionery fats, ice cream fats, infants’ nutrition fats are food uses. The non-food uses include cosmetics and personal care products, soaps, candles, pharmaceuticals, lubrications and grease, surfactants, industrial chemicals, agrochemicals, coatings, paints and lacquers, electronics, for leather work and biodiesel.
Industry estimates of 2008 put the average per capita domestic consumption of vegetable oils and fats in Nigeria for food and non-food uses to be about 12.3 kg in 2007. With a population of 140 million by the 2006 census, Nigeria would require annually 1,722,000 tons of vegetable oils and fats to meet the national requirement for food and non-food uses. From the analysis of the sector, total palm oil and palm kernel oil production per annum is currently at most about 741,800 MT. The Oil World (2008) puts the current 2005–2008 estimates of groundnut oil, soya bean oil and cotton oil production – the other major vegetable oils produced in Nigeria – as 325,750 MT, 50,325 MT and 19,700 MT annually respectively.
The Oil World in 2008 gives the total palm oil importation into Ghana, Togo, the Republic of Benin and Nigeria as ranging from 394,900 metric tons in 2005 to as much as 663,000 tons in September/October of 2008 only while from MPOB Statistics (2008 & 2009) the Malaysian palm oil export to Ghana, Togo and the Republic of Benin ranged from 402,312 MT in 2006 to 563,763 MT in 2008. Because of the low population of Ghana, Togo and Republic of Benin, it is likely that more than 80% of the palm oil imported into these countries is destined for informal trade to Nigeria.
Other triggers/drivers for increased cultivation and income from oil palm include increases in world vegetable oil prices, biofuel production, emerging technologies (including processing equipment) and equipment fabrication, oil palm research, support for smallholder oil palm producers, especially using the out-grower approach, as well as access to land and capital. These are receiving attention as 18 estates, spread across 11 states, recently signed agreements with the Federal Ministry of Agriculture and Rural Development to participate in estate oil palm nursery activity. They are to receive a total of 1,395,000 improved tenera oil palm nuts free under ATA to raise into mature seedlings at their own cost; and each will plant between 500 and 550ha in their plantation next year, leading to a total field planting of 9,300ha in 2013.
The ministry is finalising arrangements to give out the balance of 2,605,000 nuts from 4 million to other public and private nursery operators to raise and distribute under the Growth Enhancement Support (GES) arrangement in 2013. The ministry will pay for the cost of raising these seedlings. The GES involving planting materials, agro-chemicals and fertilisers has been worked out and will become effective in 2013 when ATA seedlings will be available while the ministry is preparing for the pilot scheme of Semi Wild Grove (SWG) Yield Enhancement. Growth Enhancement Support involving planting materials, agro-chemicals and fertilisers has been worked out and will become effective in 2013 when ATA seedlings will be available.
Two local government areas each in producing states are being identified for the pilot scheme of the Semi Wild Grove (SWG) yield enhancement in an on-going process. Each LGA is identifying two communities where trials will be conducted starting from 2013 when ATA seedlings will be available. Registration of farmers is continuing, with more than 100,000 oil palm farmers already registered. A total of 130,000ha has been proposed for planting by registered farmers showing the high level of interest in the oil palm. Currently, 4 million nuts to be raised into mature seedlings for planting next year may not be enough to meet the demand in 2013. To meet the figure needed, the oil palm value chain team is “working towards securing the balance of 5 million nuts which some seed companies we identified can raise into mature seedlings at their own cost, and distribute to farmers,” disclosed a top source.
Also, currently, improved harvesting and processing activities are being promoted as arrangement for the supply of 100 motorised harvesters and 100 small scale processing equipment (SSPE) through funding by First Bank is almost concluded. The oil palm value chain is collaborating with infrastructure team of ATA to compile the list of smallholder cooperative groups who are interested in the motorised harvesters and SSPE and get them to meet the conditions of a commercial bank for funding the supply of the equipment.
The following are the requirements of the bank: NIRSAL will provide a guarantee of up to 75% of the principal and interest. Cooperative societies will pay 3% guarantee fee as the NIRSAL guarantee is issued at a cost. Proforma invoices of the equipment and machinery to be purchased will be issued and a list of cooperative societies will be compiled to fully deploy the number of units of fixed assets being financed. Equity contribution of 10% of the value of the fixed assets being financed will be agreed upon while collateral of 15% of principal and interest (Charged Savings Deposit of 15% tangible assets) plus third party guarantee supported with assets, etc., will be required.
With the early steps being taken now to bring back oil palm business to reckoning in Nigeria, it is hoped that the fortune of the industry will soon be on the upbeat again and the country would find its slot back in the world palm oil map. The responses of stakeholders so far have been encouraging and the federal government is not relenting in responding to key issues that would help to accomplish the set goals in which case oil palm business will open up opportunities to drive the agro-economy on the path of recovery.
*Dr. Olukayode Oyeleye is the special assistant on Media and Strategy to the Minister of Agriculture and Rural Development.
Source: www.worldstagegroup.com/worldstagenew/index.php?active=news&newscid=6188&catid=11
