NIGERIA – Nigeria’s palm oil production in the Marketing Year (MY) 2021/22 is expected to reach 1.4 million metric tons (MMT), up about 9 percent greater than the previous year’s estimate of roughly 1.28 million metric tons (MMT).
The projected increase, according to USDA in a Gain report, is attributable to an increase in private sector investment.
According to the report, two major Nigerian palm oil companies i.e., Okomu Oil Palm Plc and Presco Plc, are currently expanding their production capacity.
Presco recently commissioned 500 MT capacity refinery that is presently running at 70% installed capacity.
The public sector is also at the forefront in boosting local production of the commodity, with the government targeting to produce 5 million metric tons (MMT) in the next 6 years, meeting 100 percent of local crude palm oil demand and increasing revenue from import duties.
Part of the strategies formulated to actualize the set targets include the Central Bank of Nigeria, providing a 10-year long term funding with 3 years moratorium for large-scale production.
Additionally, Edo State is currently implementing the most ambitious cultivation program under the Edo State Oil Palm Production (ESOP).
The state government allocated 120,000 hectares from its forest reserve to companies for cultivating palm oil. The area is expected to be fully planted by 2030.
At full maturity, the 100,000hectares will add about 400,000 tons of palm oil to the domestic production, which is still short of demand-supply deficit.
Demand for palm oil rises
Nigeria’s palm oil consumption in the period under review is expected to reach nearly 1.87 million metric tons (MMT) up about 12 percent than the USDA official MY 2020/21 estimate of 1.6 million metric tons.
Sources indicate that in MY 2020/21, Nigeria’s per capita consumption of edible oils stood at 12.5 kilograms compared to world average of 20 kilograms.
The widening between soybean oil and palm oil prices globally, is expanding the demand for palm oil in Nigeria.
Palm oil imports to continue increasing despite restrictive measures
Meanwhile in terms of trade, the country’s palm oil imports are expected to reach 500,000 MT, up nearly 16% higher than the previous period’s quantities.
Malaysia, Indonesia, Cote D’Ivoire, and Ghana origin imports fill Nigeria’s palm oil deficit. Significant quantities of unrecorded palm oil products also enter Nigeria’s market through cross-border gray channels in neighbouring countries i.e., Benin, Togo, and Cameroon.
Importers actively engage in this cross-border trade to evade the more than 35 percent import duty imposed on palm oil imports.
In a bid to protect the local market, the CBN included palm oil on the list of 42 items for which no foreign exchange would be allocated for import purchases in 2015.
Also, since 2008, the Nigerian government has allowed into the market crude vegetable oil for local refining and packaging, but maintained the import ban on vegetable oil in retail packs.
However, local vegetable oil refining companies face high-cost production and are uncompetitive.
Subsequently, vegetable oil in retail packs continue to enter the Nigerian market through cross-border gray channels.
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