Palm Oil Production in Nigeria: Leveraging Global Value Chains

Nigeria remains one of the world’s largest producers of palm fruits with huge oil palm plantations spread all around the southern part of Nigeria especially the Rain forest South East region. Unfortunately, due to low level of palm oil processing in Nigeria, leading to low level of Palm Oil Production in Nigeria, the country is still yet to fully leverage the multibillion dollar global oil palm value chain and create wealth around the oil palm industry as Malaysia has successfully done.

It is noteworthy that Malaysia which today stands as the world’s largest exporter of palm oil actually got the seedlings from Nigeria when Nigeria was the world’s largest producer and exporter of palm oil.

Due to the agro-friendly policies Malaysia operated as well as their determination to consistently provide incentives for large scale production and export, the country is now a reference point in palm oil production.

So, how did Malaysia do it? How was Malaysia able to position itself so well as to optimally address the entire oil palm value chain? Why is Nigeria still stuck at the bottom of the oil palm value chain? How can we move up the value chain and create enormous wealth for those involved in the oil palm industry?

The answer is simple and is summarized in four quick strategies:

Aggressive Palm Oil Processing in Nigeria

One of the main reasons why palm oil production in Nigeria took a nose dive was because of the paucity of processing industries which would enable farmers capture maximum value from oil palm cultivation.

Most of the owners as well as investors in oil palm plantation could not make decent return on investment due to the unpredictability of the commodity markets as well as the huge postharvest losses they were recording with the absence of processing capacities that matched the volume of palm fruits produced.

Palm Oil Production in Nigeria Ultimate Palm Oil Local Palm Oil Production in Nigeria Ultimate Palm Oil
Indeed, there were no incentives for them to either continue or expand their productivity with the innovation of more productive inputs.

Therefore, if we want to move up the oil palm value chain, we must invest aggressively in palm oil processing in Nigeria. We must encourage private sector players to diversify into palm oil processing.

Local Palm Oil Production in Nigeria
Local Palm Oil Production in Nigeria

We have to move beyond the traditional processing (as shown above) that is not only unhygienic, but very suboptimal in terms of productivity.

Standardization of Palm Oil Production in Nigeria

Beyond optimizing productivity, standardization is also very critical. Apart from meeting the specification of the National Agency for Food and Drug Administration and Control (NAFDAC) in Nigeria, palm oil processing in Nigeria must meet international hygiene/safety standard especially for those to be exported.

Standardization is very critical to leveraging global value chains in the oil palm industry. One reason why we have not taken full advantage of international trade instruments, one of which is the African Growth and Opportunities Act (AGOA) is the lack of standardization of our products.

If we standardize our oil palm products, prominent among which is palm oil, we can access more markets across the globe.

Standardization is one aspect of production highly prioritized by U&I Palm Enterprises, Makers of Ultimate Palm Oil. This explains why Ultimate Palm Oil still has the same unique taste it had when first introduced into the market in 2013.

Packaging of Palm Oil Processed in Nigeria

Almost all of the palm oil products that leave the shores of Nigeria are conveyed in drums and tanks. This smacks primary commodity and can only be treated as such.

Further processing and packaging in the destination country takes huge profit along the value chain away from Nigeria to the destination country.

Efforts must therefore be made to locally package palm oil products before export. This way, the brand identity of the makers is projected at the international level.

Packaged Palm Oil in Nigeria  Ultimate Palm Oil
Packaged Palm Oil in Nigeria

At U&I Palm Enterprises for instance, Ultimate Palm Oil including those sold locally as well as those distributed internationally are well packaged in bottles and sachets conveyed in cartons with the Trade Name Ultimate Palm Oil clearly marked. This way, apart from the distribution which is competitively outsourced, we can say that we are involved in the entire value chain.

Since it is well known that the higher you are along the value chain, the more profit you make, it therefore goes without saying that if enterprises involved in palm oil processing in Nigeria can address more aspects of the value chain, more of the profits from palm oil production will be retained in Nigeria.

Addressing the Externalities to Palm Oil Production in Nigeria

A lot of things hamper investment in palm oil processing in Nigeria. These can be described as externalities and include poor infrastructure most especially power/energy, roads, financial services etc., trade and industrial policies, security etc.

A business environment where investors who should be concerned with mobilizing investment for their area of interest which in this case is palm oil processing are instead concerned with fixing roads, power supply etc. is not encouraging at all.

An atmosphere of insecurity of lives and property as well as unstable macroeconomic policies is way too risky for any meaningful investment.

Therefore, if Nigeria must encourage the growth of palm oil processing and packaging industries in Nigeria with a view to leveraging global value chains, then, these identified externalities must be addressed to help de-risk the Nigerian business environment and attract more institutional investment into the oil industry.

Written by: Imaobong Ekanem, MD/CEO U&I Palm Enterprises