30 January 2013

Nigeria: Bridging Supply-Demand Gap in Palm Oil Business


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.

Since 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 percent 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 percent and a consumption level of 6 percent in 1976, global palm oil production and consumption has grown to 28 percent 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 percent of GDP compared with petroleum and gas which contribute 25 percent 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.

Dr. Olukayode Oyeleye is the special Assistant on Media and Strategy to the Minister of Agriculture and Rural Development.

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