Border closure boosts local production of palm oil
By Chris Ndibe
Mr Dapo Awofisayo, Executive Director, Ore-Irele Oil Palm, has reported that border closure by President Muhammadu Buhari in August 2019 has impacted positively on local palm oil production.
Awofisayo said in Lagos that restricted access to forex did not really help until the border closure.
He said the country’s annual palm oil demand currently stood at about two million metric tons while the production capacity was below 800,000 tons.
Awofisayo, however, decried the production pace of palm oil against the growing pace of manufacturing companies, who needed the commodity, stating that although, about 90 per cent of produced palm oil was consumed as food, a little above 10 per cent was used by manufacturing companies.
“When government placed oil palm on the list of banned items to access forex, we didn’t feel the immediate impact because people find ways to get their dollars,, so palm oil was still finding its way into the country regardless.
“The forex restriction is one policy and the border closure is another policy. The border closure led to a 30 per cent increase in palm oil price immediately,, because a lot of people were smuggling palm oil into the country from neighbouring countries.
“So, after a while, the border closure immediately dried up the market especially for smuggled palm oil and then increased the local price of palm oil by 30 to 40 per cent immediately.
“Obviously, all players in the sector benefited from that and brought palm oil to its real status because we cannot compete with smuggled palm oil. The border closure had more of an impact than the forex restriction.
“Local production of palm oil is below one million tons annually and the consumption demand is about two million tons if not more with the growing population and so you can imagine.
“As manufacturing companies require palm oil as they expand production, their requirement for palm oil increases, however, the production of palm oil is not growing at the same pace with the demand, hence, the gap,” he said.
Awofisayo, whose oil palm plantation sat on 4,000 hectares, said that milling plants was very expensive to set, urged the Federal Government to set up milling plants while the beneficiaries repaid directly to the Central Bank of Nigeria (CBN).
According to him, routing agricultural funds via commercial banks, pulls agribusinesses down, thwarting the efforts of government and the CBN to develop the sector.
“We all heard of the N30 billion palm oil fund, but can real time producers access the fund, I doubt it. I will like the CBN to have a specialised team that will investigate oil palm plantations in the country to identify their needs.
“Then provide milling plants as we pay back directly to the government; as long as agriculture funds are being channelled through commercial banks, there will be no way forward because the challenge we have is the milling capacity.
“A straight business becomes complicated when commercial banks are involved as the commercial banks run after people that do not need the loan,’’ he said.
While applauding the feats of the federal government in the sector, Awofisayo said that no government had ever been as proactive as this current administration and CBN.
He, however, hoped that policies through the CBN, positively impacted the sector immediately, adding that a four-year policy plan was good but was meaningless if the sector needed an urgent rejigging, especially in the palm oil sub-sector because it was capital intensive.
Awofisayo also called on government to address the issue of multi-taxation as that was hindering development of the sector and scaring away youths to venture in the agriculture space.