Incredibly, Nigeria spends a whopping $500 million to import palm oil annually to meet local demand. This is a big irony, as a full harvest of the country’s potential in this resource will reverse this trend, and channel the saved funds to the development of priority areas. The Governor, Central Bank of Nigeria, Godwin Emefiele, wants this achieved with the bank’s interventionist policy in this sub-sector of the economy. The irrational dependence on petro-dollars resulted in the country abandoning palm oil production in commercial quantity, a commodity it was the leading global producer in the 1960s and early 1970s.
States, especially in the southern part of the country, which have oil palm plantations as part of their agricultural set-up, have, therefore, been charged to lead the way in its revival to diversify the economy. The governors are to play a crucial role by easing access to land for farmers. Edo State has taken the bull by the horns with Governor Godwin Obaseki’s recent launch of the Edo Oil Palm Programme and Plantation Owners Forum of Nigeria Oil Palm Discourse in Benin. For leading other states in oil palm investment, Emefiele said the CBN would provide the state with N69 billion funding facility. This is encouraging.
Nigeria’s annual total domestic palm oil consumption is 2.5 million metric tonnes, but only 1.25 MMT is produced, leaving a shortfall of 1.25 MMT, the import of which gulps $500 million. The palm oil paradox is similar to the import of refined petroleum products despite the country being a major crude oil exporter.
The CBN Rice Anchor Borrower’s Programme is a huge success, which has helped to increase local production. Consequently, Nigeria’s rice import of 644,131 MT from Thailand annually had gone down to 20,000 MT, as of 2018. Emefiele believes this accomplishment can be replicated in oil palm production. As a result, he has met with the 14 governors whose states are in the oil palm belt. In September, these states pledged 100,000 hectares each. The CBN boss said, “We currently have a total of 904,624 hectares, which are available in the states for allocation and investors have matched with the states of interest to process necessary documentation and titling requirement.”
Already, the apex bank has committed N30 billion to the project, with PZ Wimar, Okomu Oil Company, Presco Oil Company, Biase Oil Company and SIAT Limited as the beneficiaries. Emefiele said in September that about 140 investors had applied to the bank for support for the cultivation of 126,694 hectares.
There should be periodic meetings between Emefiele and the governors to ensure their fidelity to the scheme. Palm oil is among the products being smuggled into the country. For this reason, the CBN has threatened to suspend the account of any person with the desire to sabotage government’s investment in the project under the guise of ECOWAS Trade Liberalisation Scheme.
With the progressive decline of revenue from the distributable pool, which states rely on, the CBN initiative should be leveraged by the 14 governors without further delay, to boost their revenue base. Interestingly, the price of the commodity in the global market is higher than that of crude oil, says Emefiele. This is the time for governors to be creative in order to shoulder the increasing fiscal challenge governance is beset with, in the face of dwindling revenue from the Federation Account Allocation Committee. For instance, FAAC shared N635.8 billion for the month of November among the three tiers – federal, state and local governments – whereas the amount shared in the corresponding month in 2018 was N817.76 billion. According to FAAC, the gross statutory revenue for November this year was N491.87 billion, which was lower than the N596 billion received in October by N104.1 billion.
This entrenched negative trend was why the Presidency queried the immediate past chairman, Federal Inland Revenue Service, Babatunde Fowler, in August, on the consistent mismatch between budgeted revenue and receipts from 2015 to 2018. Most states are financially bleeding – as a result.
But the palm oil-rich states can use the commodity to ignite an economic rebirth – in providing jobs and wealth creation. Imo State is among the 14 states in the palm oil belt, which in the eight years of the previous administration could not exploit the advantage it had with its palm plantation of about 9,000 square kilometres in Ohaji and two oil mills left to fallow. The commodity has a lot of value-chain: palm kernel cake, a source of feed for livestock, palm wax used in making candle, edible oil, bio-diesel, lubricants, cosmetics and detergents, among others. These spin-offs are capable of being veritable job creation vehicles.
Indonesia and Malaysia, the two leading producers, have enriched themselves by exporting the commodity. India in 2018 spent $5.5 billion to import it, China ($3.4 billion), Pakistan (1.9 billion), the Netherlands ($1.8 billion), Spain ($1.3 billion) and the United States ($1.1 billion), just to mention a few. Taxes from export on the palm oil alone fetched Indonesia $5.7 billion in 2013, while it generated total revenue of RM 67.5 billion or $16.2 billion.
According to The Guardian of London, “Producing nations view palm oil as a poverty-reduction scheme, while international finance organisations view it as a growth engine for developing economies. The International Monetary Fund has pushed Malaysia and Indonesia to produce more… Worldwide production of palm oil has been climbing steadily for five decades. Between 1995 and 2015, annual production quadrupled, from 15.2m MT to 62.6m MT. By 2050, it is expected to quadruple again, reaching 240m tonnes.”
The World Economic Forum says global market for the product will reach $88 billion by 2022. Therefore, Nigeria’s oil palm belt states should make hay while the sun shines with this laudable CBN initiative.
