Palm oil and Palm Kernel business in South East(4)

Business and Economy Reporting

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Twin oils from Palm trees and rediscovering South-East lost economic glory by Odogwu Emeka Odogwu

PALM KERNEL

Oil Palm tree has no waste as all the products are useful for production of oil, houses, food, drinks and cosmetics as well as animal feeds. The sap produces palm wine. The wood for timber and leaves for roofing local house and making of brooms. There are four products from the Palm nut aside the red oil which are palm kernel oil, palm kernel cake, palm kernel sludge and palm kernel shell, mostly crushed shell used for biofuel. From collecting the palm nuts to breaking it and picking the nuts to extracting the oil is no longer done manually done as it was in the past, but with sophisticated machines. Palm kernel is used for making cosmetics, soaps, animal feeds and can further be processed into RBD OLEIN (Cooking Oil), Vegetable Ghee, Shortenings, Margarine, CBS, CBE, Ice Cream, Dough, Creaming, Coating, and other speciality fats, fatty alcohols, candles as well as intermediates . All aspects of the Oil palm tree is useful and economically viable.

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There are between two to five tons a day machines like fryer/dryer for heating up the crushed nuts to get oil that costs about N700,000 or more depending on the size.

The nut crusher reduces the palm kernel nuts to smaller sizes for better oil extraction. It costs about N450,000 or more while the Oil press or filter gets the oil out of the nuts and the cake separately and costs about N550,000.

In some places cracked palm kernel nut goes for between N6,000 and N8, 000 per bag of 50kg and such 20 bags makes 1 tonne, which is between N120,000 N160,000 per tonne or more depending on proximity of supply.

Health benefits of red palm oil

Palm oil is around 50% saturated fat less than palm kernel oil and 40% unsaturated fat and 10% polyunsaturated fat. It contains vitamin E as well as contains antioxidants called carotenoids, which the body can convert into vitamin A.

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Therefore, palm oil is used for preventing cancer, brain disease , vitamin A deficiency, and aging. The red palm oil is useful to treatment of malaria, high blood pressure, high cholesterol, and dementia, as well as cyanide poisoning. It is used for frying , weight loss and increasing body metabolism. Fattening of dairy cattle with palm oil is possible because of its protein, energy, vitamins and minerals content.

The palm kernel cake is used for animal diet because of its high protein content and burned to generate electricity for palm oil mills.

Everything in palm fruit is useful. Nothing is a waste, though palm kernel and palm oil dominated discuss before now.

Grinded palm kernel fibre is very lucrative product feed making for livestock and source of wood for cooking.

The water from cooking oil is used in feeding poultry and pigs. The palm kernel shell is used as source of wood for cooking and road stability is some rural terrains with bad topography.

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Smuggling and sabotage

Due to Nigeria’s porous borders and corruption by Nigeria Customs officials, palm oil worth 400,000 tons per annum are smuggled into the country.

According to Plantation Owners Forum of Nigeria (POFON), Olam Nigeria has applied to the federal government to import 95,000 metric tonnes of crude oil palm, 50,000 MT of Stearin in bulk, 60,000 MT of crude palm olein, and 50,000 MT of fatty acid distillates.

The question is why would vegetable oil banned in Nigeria or restricted by Central Bank of Nigeria (CBN) in 2016 from accessing foreign exchange market be imported into the country and seen in supermarkets? Why should porous borders and official sabotage cripple local palm oil manufacturers? Why would CBN not fund massively in Oil palm cultivation and production under its Anchor Borrowers Scheme targeted at funding over 12 crops including oil palm? CBN wanted palm oil producers to take its loans and return it in five years when it takes 10 to 13 years to make a profit in the business.

Palm oil import ban

The federal government was urged by the Senate last April to halt the importation of palm oil and palm kernel but, no decision or policy statement has been made to that effect till date. Senator Francis Alimikhena, a member of the All Progressives Congress (APC), from Edo State raised the motion in February 2018, when he said the ban would encourage the deployment of needed funds through the Ministry of Agriculture. He added that the continued importation of palm kernel and allied palm products is a threat to the Federal Government’s campaign for the diversification of the economy. There is conflicting report on whether Federal government banned importation of palm oil and palm kernel or increased duty payable to 35 percent.

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His agitation was compelled by a report bemoaning the huge sum of money spent on importation of the produce, despite the country comparative advantage in the production of Palm Oil with the availability of land and the manpower to become a formidable force in oil palm production. According to reports, Nigeria imported 450,000 tons of palm oil costing about N116.3b in year 2017 alone.

As at the end of 2017, the country’s domestic production stood at 970,000 metric tons, while demand was 2.7million tons, leaving a deficit of 1.73million mt. It is on record that between January and April 2017, 50,010 tons of the commodity was shipped into the country. For instance, SeaPrice ship discharged 15,000 tons in January; Chemtrans Havel ship, 10,700 tons in February; Star Ploeg ship, 16,400 tons in March and Mid Nature ship, 8,000 tons in April, based on reports from the Lagos Port.

Currently, Nigeria, which was the largest producer of palm oil in the world in the early 1950s, accounting for 40 per cent of the global output, now has a world share of 1.57 per cent, with Indonesia leading by 33 million mt; Malaysia, 19.8 million mt; Thailand, two million mt; Colombia, 1.108million mt; and Nigeria, a meager 970,000 mt.

Recently, the President, National Palm Oil Produce Association of Nigeria, Henry Olatujoye told newsmen that the country average consumption level stands at 2.4 million tons yearly, with the estimated production put at about 1.7 million, which gives a deficit of about 800,000 tons that are still sourced from other countries.

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The Managing Director/CEO of Bama Farms, Prince Wale Oyekoya, who lamented government’s failure to implement the ban, disclosed that the country has good policies, especially on agriculture but the problem is implementation. Though he couldn’t give a specific figure or percentage on the current importation level, Oyekoya said the country’s importation cost has risen beyond N116.3b spent in 2017, which is an indication that domestic production has further dip. He attributed the low production level to lack of research and development. “Everyone is just taking advantage of Nigeria’s weakness institution. There are fake palm hybrid seeds around that are not actually good for quality palm oil. Our institution is very weak, until we can strengthen it, we’ll continue to struggle with the problem.

“We are supposed to be the highest exporter of palm oil in the world, but it is not so. This means there is a missing link. Indonesia came to borrow our technology and now, they have surpassed us.

Implantation of policies and programmes is our problem.”Oyekoya regretted that 80 per cent of foods consumed by Nigerians are imported. “Some of the palm oil being imported are adulterated and not good for human consumption. When it’s being used for cooking, you’ll discover that the residue will go down, which is not normal. These are the causes of various diseases”.

There is adulterated palm oil or ‘killer palm oil’ in markets across the country, which according to health experts could cause heart diseases and cancer of the stomach. Adulteration of oil is mostly done, though allegedly in the Northern states and Lagos.

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Meanwhile, the National Palm Produce Association of Nigeria has called on the Federal Government to closely monitor its borders with neighbouring countries to check rising cases of smuggling of palm oil and other products to minimize denying the country the needed foreign exchange inflows by the saboteurs.

The group called on the Central Bank of Nigeria (CBN), to provide more access to credit to its members different from other farmers under the Anchor Borrowers’ Programme (ABP).

The Association noted that although the CBN provides loans under the ABP at an interest rate of nine per cent, such arrangement will not work for oil palm production due to the gestation period of oil plantation.

He said, “We are appealing to the CBN Governor to liaise with stakeholders to get our feelings across and chart a way forward. We are not against his ambitions to develop the industry, but we are saying that the implementation of the policy is faulty.

“Our problem is not the ban on CPO (Crude Palm Oil), but that borders must be totally shut against illegal importers. Let the Presidency know that it’s not the importation of palm oil that is the problem, the point is that unrestricted flow of Crude Palmoline – refined vegetable oil and fats that find their way into Nigeria’s market, is making the government lose billions of Naira or foreign exchange every year.

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“Our advice is that the government should write letters to all its neighbours that are in West Africa that such illegal importation will carry dire consequences. This move will now prevent them to make Nigeria a dumping ground.”

He said, “We are appealing to government to reduce the nine per cent interest rate for the oil palm industry for us, although the (CBN) Governor is standing on the nine per cent single digit interest rate for agriculture products, this will never help our sector at all.

“What we want is for government to give us good seedlings by developing the research centres in the country, let’s have access to good roads and markets; these are the basic things we need to grow and fully develop the sector, create jobs, and earn foreign exchange for the country.”

Strangely, export data from the Malaysia Palm Oil board has indicated that, from January 2018 to April 2019, Nigeria imported 354,868 metric tonnes of palm oil valued at over N75 billion. And the question is where is the 35% duty on the imported palm oil/palm kernel?

In 2018, Nigeria imported 242,388t of crude palm oil and in the first four months of 2019, imported 112,480t of CPO to Nigeria, totalling 354,868 metric tonnes from Malaysia in 16 months.

Using the rate of $588 as the benchmark price per tonne as obtain from an international price index, the total value of CPO imported to the country from January to April 2019 from Malaysia alone was about N23,809,766,400 at the exchange rate of N360 to a dollar.

Nigeria places 35 per cent duty on some products not manufactured in Economic Community of West African States (ECOWAS) countries, and crude palm oil is among the products.

The National Agency for Food, Drug Administration and Control (NAFDAC), through its Director of Publicity and Public Relations, Dr Jimoh Abubakar, admitted the presence of imported brands of vegetable oil, but that the agency was making efforts to sensitise dealers and retailers of such product to desist from dealing in them.

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“Our focus now is to even promote export of agricultural products processed in Nigeria. This will boost the economy, create more jobs and reduce importation of all we can produce,” Abubakar added.

Federal Government directed the Central Bank of Nigeria (CBN), to blacklist firms importing palm oil and 42 other items. With the directive, it is now an offence for any company or individual to import palm oil.

The CBN Governor, Mr. Godwin Emefiele, who disclosed this, explained that the new move will also focus on the massive production of 10 commodities: rice, maize, cassava, tomatoes, cotton, oil palm, pottery, fish, livestock and cocoa.

Malaysia and Nigeria in oil palm production

Government has not made it easy for the producers due to the continued wave of importations of palm oil from outside countries like Malaysia. The Malaysia oil is very cheap compared to the one produced in the country. Oil from Malaysia is presently sold between 7,500 and 7,000 while the ones produced in the country is sold between #8000 and 8,500.

During scarcity, they buy at very high price and still sell at the normal price because people patronize the Malaysia oil which is very cheaper even though the local oil taste is far much better than the taste of the Malaysia palm oil. In some cases marketers go to the extent of hoarding the product so as to make good sells during the period of scarcity which is normally between July and February. Within these period oil is very expensive. For oil production to be sustained and encouraged in Nigeria, government must ban the importation of Malaysia oil and the likes.

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Experts believe that there is an opportunity in the industry which multinationals like Sime Darby have seen from faraway Malaysia. Sime Darby, Malaysia’s biggest oil palm plantation company, is planning to invest in Edo or Cross River, with the former as the first choice destination, key players told me.

Executive Director of the Nigerian Institute for Oil Palm Research (NIFOR) in Benin City, Dr. Celestine Ikuenobe had said more deliberate investments, easier access to land and cheaper capital have made Malaysia overtake Nigeria in the oil palm sector, suggesting ways the industry could be repositioned for energised economy.

On how Malaysia took oil palm from Nigeria, he said: ‘’All kinds of opinions are circulating around. Some of them are wrong, some of them are right, while some of them are distorted facts. The fact is that the Malaysian oil industry started between 1911 and 1917. NIFOR was established in 1939. But research in oil palm in Nigeria started in 1912 in Old Calabar plots, and improved materials were eventually planted in different parts in southern Nigeria – in Ibadan, Abba, Ogba area, Benin City here and other areas. But eventually, understanding that Nigeria had to compete favorably in the oil palm industry globally, the colonial government, between 1927 and 1938, decided to establish an oil palm research in Nigeria and that gave to the birth to NIFOR in 1939, first as the oil palm research station of Nigerian Department of Agriculture.

‘’Eventually, by 1951, it was decided that that research was to cover all British colonies in West Africa. And to that extent, that gave birth to WAFOR in 1951. So, research was going on. But again, we had a very fine collection of gene plasm, that is the oil palm planting material which the world liked and in Malaysia and Indonesia, the gene plasm was very narrow and so they needed to expand the gen plasm and they decided to exchange materials around 1945 with the Malaysians. And eventually, by the 1960s, Nigeria led the world. Most of the palm oil then came from the wild groves. They were not planted because we had a natural grove of oil palm.

The oil palm is native to West Africa and is endemic to Nigeria. Eventually, the Malaysians understood that they had to have a West Africa gen plasm and since NIFOR then or WIFOR then had established gen plasm, globally known gen plasms, they had to come and then we exchanged materials.

‘’They took but that wasn’t the first one they took. They started with the industry before. But we exchanged materials, that is, we exchanged germplasm and by 1960 and mostly 1970s.

‘’Palm oil was the first commodity after the slave trade. But again, we did not grow because people were just doing it as a personal business and after the civil war, we did not expand. But the Malaysians had a strategic plan in 1956 to expand the industry and because they had the land, they started expanding. They had the expansion, but we were not expanding. We were relying mostly on the wild groves and then don’t also forget that in Nigeria, we have land tenure problem but there, they don’t have that.

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Malaysians are doing it as a business with big corporations. Big corporations require land. In Nigeria, it is difficult for big corporations to acquire land. In Malaysia, 18,000 hectares are like a small-holding farm business. In Nigeria before now, only small businesses run oil palm until recently big corporations are trying to do it.

‘’In Malaysia today, they have over six million hectares under improved oil palm planting and Nigeria is about 600,000 hectares. You cannot compare. It’s not because they came to collect the first seed, but because they have been doing it as a business, expanding and developing the entire value chains.

‘’Power Oil and Kings Oil that you see, for instance, are bleached products from the value chain development and industrial utilisation. So, that is why Malaysian oil palm is developed because there were deliberate investments in the industry’s value chains. In Nigeria, there has been no deliberate investment. So, for us to get there, we have to have deliberate investments, provide easy access to land and have access to capital. Now, capital is very expensive in Nigeria.

What is the best variety of palm oil that you have for farmers now?

On the best variety, he insisted that: ‘’Tenera variety is the best for now. That is the general variety. That’s what is planted all over the world. People call it different names. But our materials do very well. In fact, we can guarantee that by 27 months after planting, you can get very good harvests. Where are the local players in the palm oil and palm kernel business chain?

Mr. Fatai Abiodun, the Executive Secretary of the Plantation Owners Forum of Nigeria (POWON), said: “Given the brotherly role Nigerian plays in supporting the economies of its neighbours, they cannot be subverting its [Nigeria’s] economy and still expect support. Why should Nigeria suffer because it wants to assist other neighbouring countries?”

……to be continued.