By Gbenro Adeoye
Like Nigeria, its palm oil industry is a sleeping giant. Perhaps the vast potential in the industry, which has largely lain dormant, is best explained with the recent success stories of Okomu Oil Plc and Presco Plc – arguably the biggest players in the industry. For instance, Okomu Oil Plc said its net profit for the third quarter of the year rose by 166 per cent to N933m. The company’s net profit in its last year’s result was N350m. The group’s gross revenue rose to NGN10.9bn as against N7.7bn last year. Also, Presco Plc recorded a nine-month-ended September 30, 2016 profit before tax of N9.71bn as against N4.74bn a year ago.
Experts say the companies are benefitting from increased local demand for palm oil and allied products following naira’s devaluation and the worst forex crisis in many years. Sadly, only the big players have benefitted from the supply shortfall of palm oil in the market, which has led to a drastic increase in its price, as the small players like Olabode and Elegbeleye, who are in the majority, have been excluded because they lack capacity
A community elder in Ogotun-Ekiti, a palm oil producing community in Ekiti State, who has retired from palm oil processing, Mrs. Elizabeth Oni, lamented the tragic story of stagnation in the town. Oni retired from the local processing of palm oil about a decade ago after spending a corresponding period of time in practice and surviving lumbago and hernia. To Oni, no job can possibly be more physically demanding than processing palm oil at Eku –Yoruba name for local palm oil mill, and his battles against ailments considered serious enough to have forced him to retire speak volumes. Interestingly, that is not Oni’s biggest regret. Her most bitter regret was that the fortune of Ogotun-Ekiti has largely remained the same in all that period despite the number of residents involved in palm oil business.
“It is sad to see that the way we processed palm oil in my time is still the way it is being done many years later; not much has changed,” she said. “And that is why we have not seen major benefits in this community because even though, palm oil business is supposed to be big. Many people in Ogotun-Ekiti are involved in palm oil business, but you see so much poverty on their faces. “You see many of them going to farms with their children and my fear is that these children will follow in the footsteps of their parents and labour hard without getting meaningful returns. Instead of over relying on crude oil, Nigeria can make palm oil the mainstay of its economy. We hear that is the situation in Indonesia and Malaysia that used to be behind us in palm oil production.”
The Indonesia story
Indeed, Indonesia is the world’s biggest producer of palm oil, providing about half of the global supply. Oil palm plantations in the country stretch across six million hectares, which is roughly twice the size of Belgium, according to Wikipedia. Meanwhile, according to a 2013 Journal of Development and Agricultural Economics, the oil palm is a perennial crop that originated in the tropical rain forest of West Africa before it spread to South America in the 16th century and Asia in the 19th century.
Unlike Nigeria, where crude oil is viewed as the alpha and omega of the country’s income, Indonesia’s largest revenue generator is palm oil and its infrastructural development in the last few decades is testament to how much foreign exchange earner it is. The Report (Indonesia 2014) which analysed the country’s growth in economy, industry and others, said, “Over the past 15 years, the palm oil industry has been one of Indonesia’s success stories, as its rapidly expanding palm plantations became an increasingly important foreign exchange earner and employer.”
Palm oil production in the country has been steadily increasing, according to data from the Indonesian Palm Oil Association. It said production reached 26.5 million tons in 2012, up from 23.5MT in 2011 and 21.8MT in 2010. There have been stories that Malaysia, which is the world’s second largest producer of palm oil, took a special kind of seedlings from Nigeria in the early 70s and boosted its oil palm production from that point to eventually overtake its benefactor.
But NIFOR in 2013 denied it at a presentation delivered by Dr. Christy Okwuagwu, who was the most senior crop scientist at the institute. Okwuagwu had said, “The earliest record of oil palm into Far East Asia was (through) four seedlings planted in a botanical garden in 1848 in Java in the Dutch East Indies. Two of these were from Amsterdam Botanical Garden, but it is not known how they originated, (while) the others were from Bogo or Mauritius in Indian Ocean. The oil palms that sprang from these four seedlings were all quite similar and they were supposedly originally from Amsterdam through some African unknown origin.”
However, a researcher and expert with 25 years experience in building palm oil mills, Charles Aladewolu, also expressed surprise at the way Nigeria has failed to give the oil palm sector prominence in its programmes and their implementation over the years. Aladewolu said he was told by the Head of the Nigerian Institute for Oil Palm Research “many years ago that Malaysia got Tenera seedlings from the institute.” “The Tenera (an advanced oil palm seedling) in those days was developed in NIFOR and the man confirmed it then that Malaysia took Tenera seedlings from them. The man was the Head of NIFOR at the time but he is dead now,” Aladewolu said.
Experts have identified Nigeria’s over reliance on crude oil as the bane of the country’s problem, which the 2013 Journal of Development and Agricultural Economics agreed with. It, however, added that a country like Malyasia enjoyed political stability after its independence from the British government in 1957, Nigeria had no such luxury. It said, “A comparison of Malaysia and Nigeria’s growth record shows divergence in growth rates, and differing structural changes to the economy. Malaysia on average has grown at a faster rate than Nigeria.
“In contrast to Malaysia’s post-independent experience, political instability was more pronounced in Nigeria. The military has ruled for 25 out of its 50 years as an independent nation. In Malaysia there was relatively, political stability and continuity, no changes in government and the present coalition government is still in power, after more than 50 years. “Malaysia achieved sustained growth of about six per cent per annum growth for the past 50 years. It maintains large external reserve in comparison to Nigeria and has continued to maintain low inflation rates.”
Also, a professor of Agricultural Economics and Farm Management at the Federal University of Agriculture, Abeokuta, Idris Ayinde, explained that leaving palm oil production in the hands of local processors with “rudimentary technology” had cost Nigeria its top position globally. The don said Nigeria “would need an estimated 30 million more palm trees, which will require a land area of about 25 hectares to meet up with its local demand of palm oil.” He said, “We produce 900,000 tons annually and we import about 300,000 tons of palm oil and to meet local demand.
“Over 90 per cent of palm processing is done at the small scale level using rudimentary technology, where palm fruits are boiled and legs are used to march on them to extract the oil. Apart from the fact that the output will be grossly low, the efficiency of production is very low compared with when you use mechanised system, which can give you up to 95 per cent oil yield. “It is one of the problems being faced in palm oil production. As long as it is left for the local women to do without the government providing them with assistance, we will continue to get very low yield from oil palm production. Most countries that have been successful in palm oil production today, like Malaysia and Indonesia, have moved ahead from the local processing that we have been using since the 1960s to modern methods.
“To a very large extent, when we have the situation we have in Nigeria, the economics of production is such that efficiency is low, profit is low, revenue is low and at the end of the day, the return on investment for the local women is low. And that will not get Nigeria anywhere.”
Prof. Adegbenga Adekoya, an expert in community agricultural development with the University of Ibadan, also lamented that Nigeria has been going about palm oil the wrong way, saying, “We have it this way because we have left it in the hands of local farmers who may not have the capital to invest in modern production techniques.” “Everywhere in the world where agriculture does well, there is always initial government intervention supporting farmers to produce more. In Nigeria, the few occasions where government has tried to support agriculture, we realise that less than 20 per cent of the support get to the farmers. A lot of what is called support is lost through bureaucracy, corruption and so on. So it doesn’t change the situation,” he said.
“That was why the former Minister of Agriculture (Akinwunmi Adesina) introduced e-Wallet when he realised that government support was not getting to the farmers. That way, the support was meant to get to the farmers through their mobile phones, but it was still not well implemented because so many farmers were left out of the scheme.” Also according to Ayinde, efforts by the Federal Government in the past to improve palm oil production were largely unsuccessful. He, however, suggested to the government to encourage palm oil production providing incentives to farmers and making improved seedlings available to them at affordable costs.
He said, “Nigeria is a net importer of palm oil now; meanwhile, it used to be the biggest producer. To turn the situation around, improved seedlings should be made available by NIFOR to farmers at affordable costs, new young farmers should be encouraged with incentives, and bottlenecks involved in securing land should be removed. “Government should also assist in energising manufacturing companies to develop intermediate technologies that can be capable of processing one to 15 tons of palm fruits at affordable costs locally. If government does not have enough funds, the Bank of Agriculture and Bank of Industry can be empowered to shift focus to palm oil production.”