ESG Telegraph
  • Home
  • Latest News
  • Environment
  • Companies
  • Investors
  • Governance
  • Markets
  • Social
  • Regulators
  • Sustainable Finance
Featured Posts
    • Companies
    Next faces HMRC probe over incorrect staff payments
    • August 7, 2022
    • Latest News
    Tensions ratchet up in Gaza as Israeli strike kills second militant leader
    • August 7, 2022
    • Latest News
    UK to review Macquarie’s £4.2bn deal for National Grid’s gas business
    • August 7, 2022
    • Latest News
    The challenges for Latin America’s new left
    • August 7, 2022
    • Latest News
    Disengaged, indifferent, deluded? Why young workers have an image problem
    • August 7, 2022
Featured Categories
Belarussia
View Posts
Companies
View Posts
Energy
View Posts
Environment
View Posts
Food
View Posts
Governance
View Posts
Health
View Posts
Investors
View Posts
Latest News
View Posts
Markets
View Posts
Potash
View Posts
Regulators
View Posts
Russsia
View Posts
Social
View Posts
Supply Chain
View Posts
Sustainable Finance
View Posts
Technology
View Posts
Uncategorized
View Posts
ESG Telegraph ESG Telegraph
7K
9K
4K
1K
ESG Telegraph ESG Telegraph
  • Home
  • Latest News
  • Environment
  • Companies
  • Investors
  • Governance
  • Markets
  • Social
  • Regulators
  • Sustainable Finance
  • Markets

From crude oil to palm oil: Nigeria strives to diversify

  • February 15, 2022
  • Staff
Total
0
Shares
0
0
0

President Muhammadu Buhari has made the development of Nigeria’s agriculture a central part of his plan to cut the country’s food import bill, and reduce the reliance of Africa’s largest economy on crude oil sales.

But, while efforts to boost the production of palm oil — which is used for cooking and found in goods ranging from toothpaste to soap — have reinvigorated the local industry, they have also highlighted the challenges a new president will face when Buhari’s second term ends next year.

Nigeria was the world’s leading palm oil producer in the early 1960s. However, after focusing on crude oil exports in subsequent decades, it slipped to fifth and now mostly imports the vegetable oil from Indonesia and Malaysia. Crude sales provide around half of all government revenues these days, and most foreign exchange earnings. So, as part of a drive to reduce dependence on crude, the government has sought to return Nigeria’s palm oil industry to its heyday.

Just after Buhari took office in 2015, the government introduced a ban on the allocation of foreign exchange to importers of palm oil, as well as 40 other products. Importers of crude palm oil also have to pay a duty of 35 per cent.

Then, in 2019, the government unveiled a $500mn plan to increase funding to Nigerian producers through low interest loans. The aim was to raise domestic output by 700 per cent by 2027, while meeting local demand.

 a worker shifts a heap of palm kernels

Domestic palm oil production grew from 1.03mn tonnes in 2017/18 to 1.26mn tonnes in 2020/21, according to the US Department of Agriculture. The USDA projects it will increase to 1.4mn tonnes in 2021/2022.

“Once they put palm oil on the list of those that can’t access forex, it triggered this need for domestic production,” says Chibundu Emeka-Onyenacho, sub-Saharan Africa research analyst at investment bank Renaissance Capital.

Emeka-Onyenacho adds that, whereas Nigeria imported about 34 per cent of its palm oil in 2014, the figure has hovered at around 25 per cent since
the forex restrictions were introduced.

A worker empties a steamer at a palm oil mill. Imports have fallen since the government set out to increase production

But, despite increased production, supply has failed to meet the demand for palm oil among Nigeria’s 200mn inhabitants. This has contributed to the double digit inflation that has marked much of Buhari’s tenure.

And, according to Emeka-Onyenacho, smaller producers are missing out on government’s largesse.

“A lot of the money allocated by the central bank goes into the big companies because they are much more viable investments than small scale farmers,” he says. The result is a “fragmented market”, in which the two largest producers, Presco and Okomu, and other established companies are able to invest in more efficient methods, while small farmers struggle to access funds.

More stories from this report

Even so, new entrants have been drawn in. One such company is Releaf, which sources palm nuts from smallholders and extracts palm kernel oil at its factory in the southeastern state of Akwa Ibom. It sells the oil to consumer goods companies such as PZ Cussons, which use it in food products and soap.

“Nigeria has about twice the demand for vegetable oil than it has supply, and the government has made a lot of innovative policy choices,” says Ikenna Nzewi, chief executive of Releaf, which evolved from a non-profit set up in 2015.

However, while Nigeria’s authorities want more palm oil production, conservationists warn of the environmental cost. “Palm oil is among the main commodities driving deforestation globally,” says Sabrina Goncalves Krebsbach, agricultural commodities specialist at conservation group WWF-UK.

Krebsbach says the area dedicated to its production worldwide increased from 3.3mn hectares in 1970 to 28.7mn hectares in 2020. Although she acknowledges that palm oil “can be produced responsibly as a part of sustainable development”, she fears that growing demand threatens “more of the same” in the coming decades.

Column chart of Thousand metric tons showing Nigeria is slowly increasing its palm oil output. . .
Bar chart of Palm oil output (thousand metric tons, 2022 forecast) showing . . . but it is still only the world’s fifth largest producer

Emeka-Onyenacho argues that Nigeria is less of culprit than Indonesia and Malaysia — the world’s top palm oil producers. “Nigeria isn’t cutting down and burning forests as much,” he notes.

Some producers are also signing up to certification schemes, such as the one run by the Roundtable on Sustainable Palm Oil. Chuka Mordi, chief executive of agriculture business Ellah Lakes, says it is applying because the scheme offers a “credible way to show that what you are producing is responsible”.

Meanwhile, both he and Nzewi say agricultural opportunities are opening up that extend beyond palm oil.

In December, Ellah Lakes announced a partnership with the southeastern state of Enugu to produce rice and build an ethanol processing plant.

Nzewi says he was encouraged by the announcement in December of a $210mn African Development Bank loan to Nigeria to set up “Special Agro-industrial Processing Zones”. These are areas where food processors can access reliable electricity supply and a well developed transport infrastructure.

“It’s a great example and hopefully a catalyst for more investment in this space,” he says.

Total
0
Shares
Share 0
Tweet 0
Pin it 0
You May Also Like
Read More
  • Markets

US banks tout fossil fuel credentials after Republican ESG backlash

  • Staff
  • August 7, 2022
Read More
  • Markets

US oil producers defy calls to open taps and tame war-driven energy prices

  • Staff
  • August 6, 2022
Read More
  • Markets

Directors’ Deals: Harbour Energy key shareholder cuts stake

  • Staff
  • August 5, 2022
Read More
  • Markets

FT Cryptofinance: Ethereum prepares to ditch its energy-guzzling blockchain

  • Staff
  • August 5, 2022
Read More
  • Markets

‘Grotesque greed’ — but are energy windfall taxes the answer?

  • Staff
  • August 5, 2022
Read More
  • Markets

Traders seek out gilts ahead of US payroll data

  • Staff
  • August 5, 2022
Read More
  • Markets

Market rally delivers hard lessons for fund managers

  • Staff
  • August 5, 2022
Read More
  • Markets

Losers can keep losing | Financial Times

  • Staff
  • August 5, 2022

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Featured Posts
  • 1
    Next faces HMRC probe over incorrect staff payments
    • August 7, 2022
  • 2
    Tensions ratchet up in Gaza as Israeli strike kills second militant leader
    • August 7, 2022
  • 3
    UK to review Macquarie’s £4.2bn deal for National Grid’s gas business
    • August 7, 2022
  • 4
    The challenges for Latin America’s new left
    • August 7, 2022
  • 5
    Disengaged, indifferent, deluded? Why young workers have an image problem
    • August 7, 2022
Recent Posts
  • Colombia ushers in its most leftwing president
    • August 7, 2022
  • Merck defends tax approach against senator’s claims of avoidance
    • August 7, 2022
  • The west’s phantom energy sanctions fuel Russia’s war machine
    • August 7, 2022

Sign Up for Our Newsletters

Subscribe now to our newsletter

ESG Telegraph
  • Home
  • Privacy Policy
  • Guest Post
  • Contact

Input your search keywords and press Enter.