Palm oil and Palm Kernel business in South East (5)

Business and Economy Reporting

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

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Nigeria’s Palm Oil and Malaysia’s Palm Oil

Malaysia and Indonesia both in South East Asia focused more on refining both Palm Oil and Palm Kernel oil to the worlds export standards, but Nigeria focused on producing Palm Oil and Palm Kernel Oil for local use.

And the result was low export of Palm oil and Palm kernel oil in Nigeria and high export of the same products for Malaysia even Indonesia. Nigeria consumed more of its oils locally rather than focus on export initially, but now having achieved much locally and without government’s support, it is now time for interventions from government at all levels an wealthy organizations to turn Palm oil and palm kernel oil into major export commodities for South East Nigeria and Nigeria at large.

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These differences in the way we view Palm Oil is the reason why Malaysia and Indoneisa are seen as the top oil palm producers in the world and Nigeria is now currently ranked at the Fifth.

The world players are forcing their preferences of RBG Palm Oil and not the CPO (Crude Palm Oil) which Nigeria specializes in whereas Malaysia and Indonesia were busy pumping in their Refined Palm oil (RGB) into West African markets.

This is where the government at all levels should support policies to enable well-meaning individuals invest massively in refining of our crude oils at least for export even if we wish to continue enjoying our raw crude oil.

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In its pure form, RBD palm olein is sold as cooking oil. RBD palm olein is also used in the manufacture of margarine and shortenings and in industrial frying of processed foods like potato chips, chips, instant noodles and other snack foods.

RBD palm stearin is used in for margarine and shortenings and as a source for producing specialty fats for coating in confectionery. It’s also used in the soap and oleochemical industries.

Palm Oil in its raw state (Crude Palm Oil), the red rich carotene containing oil is what is in use and it is good for all kinds of native soups and sauces; whereas in Malaysia or Indonesia, clear coloured Palm oil (RGB Palm Oil) is what is in vogue over there. And in the international market, there is high demand for Refined Palm Oil and Low demand for Palm Kernel oil, probably because of the de-marketing by the Europe.

When palm oil is refined, it goes through various processes, with the first stage removing the Complex Organo Phosphorus Compounds through hydration with water, then you have Orthophosphoric Acid and Polybasic Acids through a process called Degumming (removing the gums or the phosphatides).

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After degumming, the next stage is bleaching of the degummed Palm oil to change its colour and purify the Fat and Oil, done using either Acid Activated Bleaching Earth(Clay), Natural Bleaching Earth or Activated Carbon and Synthetic Silicates.

Then the last stage is Deodorization of the oil which is done by using a vacuum steam distillation process through a high pressure steam vacuum to change the smell and separate other volatile compounds.

The result after these processes is Refined Bleached Deodorised Palm Oil, (RBDPO).

Refined Palm Oil can be used on its own or fractioned into other oils like RBD palm Olein and RBD Palm Stearin or mixed with Palm Kernel oil for other uses.

Presco Plc: Worthy of Emulation in South-East for oil palm youth initiative

A private company, Presco Plc, says it is working with the Federal Government to establish a one million hectare Oil Palm Youth Programme in the country. This should be emulated for more companies to invest in Palm oil business to revamp our economy in less time in line with countries and states embarking on businesses it has comparative advantage.

The Chairman, Board of Directors, Presco Plc, Mr Pierre Vandebeeck, stated this at the 26th Pre- Annual General Meeting (AGM/Cocktail), at the company’s integrated industrial establishment at Obaretin in Benin.

Vandebeeck expressed optimism that Nigeria would regain its glory as the major supplier of palm oil to the world, if the initiative worked through. He noted that the country was currently importing about a million tonnes of oil palm per annum which was affecting domestic production and sales. “This year was a difficult one for us due to massive importation of palm oil and palm oil products. “The country is importing about a million tonnes of oil palm per annum. “This is not an enviable position, but the future looks bright as we plan to revamp the oil palm industry in the country,’’ Vandebeeck said. The chairman thanked the federal and state governments for ensuring an enabling environment for the company to carry out its operations. He added that one of the company’s achievements in the outgoing business year was improved relationship with the host community, noting that that its corporate social responsibility policy was one of the best in the country.

The Managing Director the company, Mr Felix Nwabuko, said they had given shareholders value for their money in the outgoing business year in spite of challenges encountered. He listed achievements in the outgoing financial year as employment of over 8000 people, ongoing expansion of processing capacities in palm oil and palm kernel crushing plants and energy production facilities.

The Speaker, Edo House of Assembly, Mr Frank Okiye, commended the company for assisting government carry the burden of job creation and bridging unemployment gap in the country. Okiye said that Edo government was in support of the company’s expansion plans and assured of more ease of doing business in the state.

There are farmers known as Farmers Unite, who launched the Nigeria-based Initiative for Public Policy Analysis (IPPA), “be dedicated to fighting dangerous campaigns by Western politicians, the political elite, the media, uncompetitive oilseed producer and European –funded NGOs that threaten the livelihoods and the economic well-being of small farmers and their families in Africa and Asia.”

Thompson Ayodele, Director of IPPA and Farmers Unite, said the goal of the elite at the European Commission and Parliament is to prevent the use of palm oil entirely, whether in food, bio-fuel or consumer goods.

“In doing this,” he added, “they threaten the future livelihoods of tens of millions of small farmers in developing nations. African and Asian palm oil farmers and their communities must rise up against this threat to our livelihoods and families.”

The farmers called on the EU Commission to drop the discriminatory “deforestation criteria” and end its alleged efforts to impoverish African and Asian small farmers.

The group claimed the negative campaign against palm oil consumption and processing is based on junk science, deceits and falsehoods.

If the campaign succeeded, the group added, it would have negative impacts on livelihoods, investments and trade of oil palm farmers across the world.

600,000 plantation workers may lose jobs

Facts emerged that over 600,000 workers employed in over 200,000 hectares of palm plantations across Nigeria may lose their jobs. This is on account of threats posed to the industry by smugglers and the increasing cost of production due to gross shortage of power supply and infrastructure.

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According to the Guardian, Emmanuel Ibru, Managing Director, Aden River Estate Ltd, Edo State, a member of (POFN), explaining threats posed to investments worth millions of dollars in the oil palm sector, said “All indications point to large-scale smuggling of crude palm oil into this country the last few years”.

He claimed that despite the financial programme of the Central Bank of Nigeria (CBN) and acclaimed availability of resources for industrial and agricultural loans from specialized banks, including Bank of Industry (BOI) and Bank of Agriculture (BOA), sourcing funds for agro-industrial investments in the country is perpetually a challenge to the industry players.

Proving the alleged economic sabotage, Aden River Estate ltd boss explained that the Republic of Benin produces about 40,000 metric tonnes, while its demand is about 70,000 metric tonnes yearly, with a shortfall of about 30,000 tonnes. He added that the same country imported about 500,000 metric tonnes from Malaysia last year.

“So, you can imagine where the excessive 470,000 tonnes of crude palm oil goes to,” Ibru said, “and because of the ECOWAS’ free trade zone treaty, goods and services produced, not imported, within the ECOWAS are meant to be duty-free, meaning that all you have to do is pay the 10% tariff.

“Now, if you can buy palm oil produced in West Africa and bring to Africa, you do not have to pay 35% duty. The scenario I have just described is that if the countries that are producing palm oil are not producing enough, how come they are exporting to Nigeria.”

He said tonnes of imported palm oil are being smuggled or disguised as products produced in the ECOWAS, thereby short-changing the Federal Government and posing a threat to local producers by not paying the 35 per cent duty.

It is killing the backward integration investments because a metric tonne of crude palm oil that was sold for N400 last year is now sold for N250,000. This, he said, could have negative consequences.

He insisted that palm produce imported from neighbouring countries are imported from Malaysia and Indonesia, and therefore should not be treated as goods produced in ECOWAS countries.

To justify this, he gave a breakdown of palm oil production in the region, saying, “Nigeria produces roughly a million tonnes of palm oil yearly but consumption is about 1.4 million tonnes. So, there is a demand gap of about 400,000 metric tonnes.

We are the largest producer in West Africa and by virtue of that, in Africa.

“Cote d’Ivoire produces about 700,000 metric tonnes and is the second largest producer, but they also have a demand shortfall, and are importing from Malaysia. Ghana also produces palm oil but not enough for their need.

“The Republic of Benin produces about 40,000 metric tonnes, while its demand is about 70,000 metric tonnes yearly, with a shortfall of about 30,000 tonnes, but the same country imported about 500,000 metric tonnes from Malaysia last year.”

He said the excessive palm imports to Benin Republic are either being smuggled into the country or being officially imported as products produced in ECOWAS’ countries, thereby evading duty and sabotaging the economy by waging price war against local investors.

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“There is a 35 per cent duty on importation of palm oil into the country. If you factor the cost of that duty in, there is no way you sell imported palm oil in this country for N250,000 per tonne to make a profit unless you are not paying the duty,” Ibru said. “Our main suspicion is that people are bringing in palm oil to the Republic of Benin, and from there, smuggle it to Nigeria.

“I will not want to say the Republic of Benin is colluding with smugglers. If you are importing palm oil into their country, as long as you meet their legal requirements and pay their duty, and you smuggle it out of the country, it does not mean the government of that country is involved. So, I will not go as far as alleging conniving with smugglers. But there is no doubt that palm oil storage facilities have been built in the Republic of Benin and people are bringing it into Nigeria.”

The palm producer urged the Nigerian government ensure that anybody bringing in palm oil into the country must pay the stipulated 35 per cent duty, saying, “That is what we want. They should investigate the source of the oil, because a country that cannot produce enough for itself cannot export under the ECOWAS’s treaty. They have their record of what comes in through the ports.”

Nigeria’s agony and lost

If the palm industry in Nigeria goes under, then the billions of dollars invested in it will also go down.

Since 1999 backward integration and import substitution policies of the Federal Government, local manufacturers have been encouraged but, “Now, a lot of us have been investing heavily in the palm industry in the last 10 years. And all of this is threatened by smuggling,” Ibru lamented.

To develop 10,000 hectares of oil palm, about $50 million at $5,000 for each hectare is required and the gestation period is three to four years. And in that period, if the plantation is not intercropped with arable crops, no return is made.

And investigation disclosed that a large-scale 10,000-hectare plantation would be accompanied with a minimum of 30-tonne per hour mill to avoid post-harvest wastages of fresh palm fruits. The imported integrated mill would cost between $20 to $28 million depending the country of origin and specifications. Therefore, developing 10,000 hectares of oil palm, it was learnt, would gulp a minimum investment of $75 million (N27 billion).

Ibru said “Okomu Oil has 20,000 hectares of palm plantation, and they have a 230-tonne per hour mill and they are bringing in another mill. So, you can imagine the amount of investment they have made.”

He added that PZ Wilmar Ltd has about 20,000 hectares of palm plantation, and a state-of-the-art vegetable oil mill in Ikorodu. Flour Mills (AgriPalm) also has started a backward integration. It also has a 1000-tonne per day refinery for vegetable oil in Ibadan.

Dufil, he said, is also into palm oil production. It has a factory with the processing capacity of 1,500 metric tonnes per day. Pressco is also there.

“If we have a shortfall of about 400,000 tonnes, if it has been brought into the country (which we do not have any complaint about), it should be imported formally and duty should be paid to the government because the Federal Government needs money too. And that is one of the major sources of income to the government.

“If people are bringing in palm oil and are not paying duty, it is an economic sabotage. They are sabotaging the government,” Aden Estate boss said.

Two, there would be job losses because the industry employs a lot of people both formally and informally.

It is estimated that over 200,000 hectares of palm tree plantations are under commercial cultivation, apart from the smallholding plantations. A minimum of three full-time farm hands employed per hectare. These over 600,000 direct workers in the 200,000 hectares could lose their job opportunities if the government allows the industry to crash.

This may escalate the security situation in the country, swell the already large labour market and the country could become a breeding ground for an army of unemployed millions living in abject poverty.

Infrastructural deficiency, power failure and increasing cost

Speaking on behalf of plantation owners and processors of crude palm oil, Ibru said most factories and processing plants are running on diesel power generators, self-made road networks, water and other facilities, urging the government to really come to the aid of investors.

He said: “The bottom line is that smuggling through our porous borders is impacting very negatively on the industry. Rice producers are also lamenting smuggling of the product. Even Aliko, because he is also into rice processing now, complains about smuggling, that Nigerian borders are porous.

“People in the poultry industry are complaining. What is going on implies that Nigeria is a free market for everybody. So, the Nigerian Custom Service has to be effective. The government should not turn its eyes away from the realities of these threats to the industries. The economy is difficult right now, but these factors also make it more difficult.”

He disclosed that he runs his farm and oil mill on diesel power generators 24 hours and seven days in a week, saying, “In Indonesia or Malaysia, they are not burning diesel. I have three generators, because in the peak season, we run two shifts. One generator for day and another one for night operations. And we have one stand-by generator in case any of the two is faulty.”

He explained that cost of production had gone up drastically in the last six years, and that wages, cost of transportation and the price of diesel, because of deregulation, are going up.

“Now, price of crude palm oil is going down, but cost of production keeps going up. We are on the verge of operating without profits. Most of the funds invested are bank loans and we have to pay loans,” he lamented.

Palm Oil and Palm kernel, a Conclusion

Primitive acts manifest in lack of equity, justice and fair play in all spheres of Nigeria with Northern and Islamic domination of a supposedly secular nation. A nation where cows are more important than Human beings? Efforts are on to take lands probably, forcefully for Rural Grazing Area, RUGA. Even, control of waterways is in the offing, yet cash crops with high economic values like cashew nuts and palm trees would not get attention probably because these are domiciled in other zones other the North?

President Mohammadu Buhari’s regime has borrowed over N2.66 trillion and our country’s debt profile is now over N24.39 trillion, yet nothing was built for the poor masses. No new schools, no soft loans, no grants to farmers, no new businesses, no hospitals, no mass housing, no equitable appointments and nothing is targeted at the poor Nigerians, but frustration and deprivation. Yet, some people were busy chanting Buhari is the best. Impossible!

Can this free African continental trade zone unify Africa and without fraudsters and marauders having a field day? Will it affect our secular state with its diverse beauty? Without intention of ethnic profiling? Will the North ever have peace again with the level of banditry and kidnapping currently going on there? Can their infrastructural development match that of the Southern Nigeria, even with the humongous resources coming from the centre to them for land mass, rather than population?

Is Nigeria comparatively on good footing in the manufacturing sector, or is it only dependent on crude oil? Is Nigeria’s industrial policy handy for this or has the strangulating operating environment for businesses in Nigeria going to be a huge barrier for laudable suggestions in 2020? Is Nigeria going to lose money in millions of Dollars for its engagement in the African Continental Free Trade Area (ACFTA) agreement? Or, is it going to help our manufacturing to shove up for the raw materials from our palm trees to thrive?

The treaty establishing the African Economic Community was signed in Abuja in 1991. It is believed that ACFTA will eliminate challenges of security, corruption among others but with a strong buy-in of the private sector and civil society stakeholders as well as the public in general.

AfDB has embarked on extensive sensitization to ensure a buy in of domestic stakeholders on the ACFTA as it is going to be a platform for African manufacturers of goods and providers of services to form regional value chains for made in Africa goods and services. But, my question is how is Nigeria going to benefit and our agricultural products like groundnuts, Cocoa , cashew nuts , palm oil , palm kernel and other derivatives from the palm tree thrive in the free trade zone?

The Executive Director of Nigerian Export Promotion Council (NEPC), Mr Segun Awolowo, validated the preparedness for ACFTA as Nigeria pries itself with 22 non-oil sector products, identified by the Federal Government for export, worth about $30,000bn yearly.

The items include cocoa, cotton, cement, leather, cashew, Sesame, Shea butter, palm oil, fertiliser, petrochemicals, and rubber among others. Nigeria has comparative advantage on them. Is there any fear that Nigeria would be a dumping ground for other African countries?

Manufacturers Association of Nigeria (MAN) insisted that they would not support Federal Government’s adoption and ratification of ACFTA unless issues of market access and enforcement of rules of origin, among other concerns, are addressed.

Probably, their stand point was as a result of lack of consultation and non-inclusion of inputs of key stakeholders before Nigeria’s position was presented at the meetings of the African Union-Technical Working Group on CFTA in the build-up to the negotiations.

MAN stated that the issues of market access that allowed only 10 per cent of products to be protected as well as government’s mechanism for enforcement of rules of origin should be defined before local producers could support the agreement.

Governor of the Central Bank of Nigeria (CBN) Godwin Emefiele said during a stakeholders’ meeting on the Palm Oil Value Chain held in Abuja that over five hundred million dollars was being spent by the country annually on importation of palm oil.

Emefiele added that it was a sad fact that the country was still importing palm oil in spite sufficient arable land in the South-South and South-East regions of the country to farm it.

Imagine Malaysia and Indonesia that came for seedlings and rudiments of cultivating palm trees in Nigeria now top producers of palm oil and Nigeria is fifth, even worrisome that Benin Republic, Togo, Ghana dominate the Nigerian palm oil market. It is shameful that Nigeria continued to depend on crude oil imports even when it has quantum crude? Can Nigeria’s productive base be ever diversified to create jobs that would help conserve our foreign exchange?

It is outrageous to know that Nigeria still expends close to 500 million dollars on oil palm importation annually? So, which oil, do we now export when we can’t meet our domestic needs? Can’t we as a country reach self-sufficiency in Palm oil? Can Nigeria ever take over Thailand and Columbia to become the third largest producer of oil in a few years?

Is the Nigerian Institute for Oil Palm Research (NIFOR), in Benin moribund? What improvement has NIFOR brought to research and production of quality oil palm seeds in Nigeria? What incentives did NIFOR propose for the oil palm industry? Can’t palm oil be used to manufacture margarine, soaps, toothpaste and bottled palm wine as well as other things for household needs, even job opportunities?

Nigeria is the giant of Africa in comparison with other African nations but is it in industrialization and manufacturing? News had it that Ghana is already into bottling Palm wine and fabrics manufacturing from palm tree. What a novelty? How far can Nigeria particularly South-Eastern states which have palm trees as unique selling proposition than other products use the numerous raw materials of the Palm trees to advance the Nigerian economy in the South-East to make it economically viable in the comity of states?

The time for the South East Governors forum and other organizations with interest in the economy of the South-East to act is now.

..Concluded.