Stakeholders advocate special intervention funds for smallholders in oil palm industry to boost productivity
While the Anchor Borrowers scheme of the Central Bank of Nigeria (CBN) to boost productivity in the oil palm sector was identified as a step in the right direction, some stakeholders believe that to actually give it a human face, the smallholders in the oil palm sector need special intervention funds. WALE OLAPADE writes.
PALM oil is of strategic importance as it is used in the production of more than half of the products sold in Nigeria. It is also one of the major items used by many households globally. However, oil palm and other bye products do not just have the capacity to reset the unbalanced economic situations that have made jobs non- existent, but could also help turn in more revenue for Nigeria.
Experts and some organised stakeholders have argued that if the right interventions are put in place, things will go back to the glorious days of oil palm boom in Nigeria.
Some believe that why efforts invested in the oil palm sector have not produced the expected results is because there is a disconnect in the channel of funding which focuses rather more on the big holders in the sector than the smallholders who are the prime focus of the sector.
The Nigerian palm oil industry is fragmented and dominated by numerous small-scale farm holders, which account for over 80 per cent of local production, while established plantations account for less than 20 per cent of the total market.
However, the two largest producers – Okomu and Presco – individually hold a sizeable market share in terms of value due to their combined capacity, compared to small-scale farmers. Local farmers produce roughly 80 per cent of the total production, while using approximately 1.6 million hectares of land. The dominance of small farm holders in the palm oil market has resulted in low output compared to the country’s production potential. This is because local farmers’ manual harvesting techniques are outdated, which often results in significant wastages during the harvesting process.
In Nigeria, lack of investment in palm oil extraction technology and technical incompetence/inadequate training have resulted in poor management of palm oil plantations over the years, causing some of them to cease operations. Despite this, there has been renewed interest in Nigeria’s palm oil market with the entrance of major food manufacturers via backward integration strategies into the upstream and midstream segments. For instance, in 2018, PZ Wilmar, a joint venture between PZ Cussons International UK and Wilmar International Ltd Singapore invested over $650 million in palm oil plantations and processing facilities. The company also planted almost 26,500 hectares of palm oil in Cross River State and installed a 65-ton per hour palm oil mill, which translates to estimated annual capacity of 40,000 tons.
Also, in 2019, Dufil Prima, manufacturers of Indomie noodles and Power oil, finalised acquisition of 17,954 hectares of land in Edo State and a 1,040-hectare palm oil farm in Abia State.
According to the United States Department of Agriculture (USDA), “From 1975 to 2009, Nigeria remained the second largest recipient of funding from the World bank for palm oil investments with six projects.” However, only one project survived while the rest went bankrupt. Today, Nigeria is the fifth largest palm oil producing country with 1.5 per cent or 1.03 million metric tonnes of the world’s total output.
However, with a population of over 197 million people, Nigeria consumes roughly three million MT of fats and oils annually with palm oil accounting for approximately 45 per cent of total consumption in 2018. Nigeria is the largest consumer of palm oil in Africa with 1.34 million metric tonnes in 2018.
According to Nigerian Tribune’s investigations, the smallholders in the oil palm sector who amount to 80 per cent of the stakeholders in the sector play a significant role in boosting the yield and production of oil palm compared to 20 per cent of others big players who get most of the attention in terms of funds and other supports from the government.
Also, it is not news that from being one of the leading exporters of palm oil in the 1960s, Nigeria is now a net importer. In a bid to close the supply gap and encourage local investment, the Federal Government included Refined Palm Oil (RPO) as one of the items that importers are restricted from accessing foreign exchange at the interbank market. Also, an increased duty charge of 35 per cent on CPO was introduced.
In addition to the above policy measures, the CBN launched a series of intervention schemes which include the Anchor Borrowers Programme. The programme is designed to provide single-digit interest rate loans to farmers through the Deposit Money Banks and other participating financial institutions.
For the palm oil sector, the interest on the loan facility is at nine per cent per annum. In 2019, the Federal Government of Nigeria also mandated CBN to support corporate bodies and individuals that are engaged in production of 10 specified agricultural commodities. Palm oil was listed among the 10 commodities.
In an online publication, Solidaridad, an International Non-Governmental Organisation (INGO), declared that it will assist Nigeria to recover lost grounds in palm oil production by repositioning the country to become a major player in the global oil palm market.
According to the Solidaridad’s Programme Manager for Oil Palm in Nigeria, Kenechukwu Onukwube, the importance of improved palm oil production in Nigeria was underscored by the global market size of the commodity, which is estimated at $62 billion.
He noted that palm oil production has the capacity to lift millions of rural poor out of poverty and contribute to attainment of the Sustainable Development Goals (SDGs).
“Empowering smallholder farmers would translate to pro-poor strategy that would lift millions of Nigerians out of poverty in line with Federal Government’s plan to lift 100 million Nigerians out of poverty,” he said.
“Solidaridad, in furtherance of the aim to enhance palm oil output in the country, is set to commence full implementation of the Government of Netherlands funded programme that would build capacity of farmers to implement best management practices in palm oil production.
“The programme would also intensify efforts meant to ensure sustainable climate-smart practices for increased productivity of palm oil by introducing innovation that would improve downstream processing to increase palm oil extraction rate and quality, create competitive oil palm sector through policy and institutional dialogue and influencing, improve access to finance, inputs and market for oil palm smallholder farmers and SMEs,” he added.
Also, the national president, Oil Palm Growers Association of Nigeria, Igwe Hilary Uche who spoke to Nigerian Tribune said he has made it clear to the CBN on the way to go to make the oil palm sector more vibrant and productive.
According to Hilary, “I have made it clear to Central Bank of Nigeria and I do hope they understood what I meant. I have made it clear to them in a forum and I told them at that auditorium that the firms that go into oil palm farming in Nigeria are not Nigerian firms. And also, the foreign firms have MoUs with their counterparts here and Nigerians don’t know about it and they contribute just less than 20 per cent of oil palm production here, while the smallholders contribute 80 per cent of oil palm. So, for Nigeria to grow and have a better economy they should fund the smallholders which I made clear to the CBN and they have understood that and they are working on it.
Apart from the Anchor Borrowers programme, there should also be need for special intervention funds from the CBN which should also be channelled through the smallholders and I think they have yielded to that submission and they have started working on it.
Asked if the special intervention funds be given directly to the smallholders, the president said that “the funds should be strategically and strictly channelled to the smallholders in the oil palm sector, that it is the only way out or else the money will be wasted.
“As we speak, I have already organised smallholders’ clusters with their leaders and monitoring team to see the smooth take-off and steady running of the operations of the clusters to scale up productivity.
“Also, the logistics for the take-off have been finalised and I have submitted it to the CBN with the funding banks. So, there is no time for delaying, since everything is on board now, the planting season is on, so they have to buckle up and go ahead with funding since we have provided all requirements so that the farmers can go ahead with planting.
“Nigerian Institute for Oil Palm Research (NIFOR) will supply the seedlings. We, the millers are ready, they have tested our mills and we have produced LPOs and Nigeria will become a different country in the next two to four years from now”, he concluded.