Crude palm oil importation: When local producers cried out

John Oba | Jun 10, 2013 | 0 comments

Coalition of oil palm stakeholder’s organisations recently protested large importation of crude palm oil into the country, JOHN OBA, in this write up, examines the impact of this development

In an efforts to enhance the economic potential of Nigeria’s agricultural sector, the federal government as part of its policies, in line with the recent Economic Community of West African States (ECOWAS) Trade Liberalization Scheme (ETLS) agreement, lifted the ban on the importation of crude palm oil and refined vegetable oil to fill the existing gap, but did not find a way to bridge the gap by protecting local investors and improving domestic productions.

The ETLS is a regional trade facilitation agreement endorsed by nations under ECOWAS and it is designed to boost trade among them by allowing reciprocal, duty free importation of goods and services within the West African countries with an exemption clause that would help the country to levy imports from West Africa on the same 35 per cent tariff. However, the goods and services entitled to move duty-free within the region must be indigenous to the exporting nation and must fully originate from there.

But as thoughtful as the lifting of the ban may look, there was no proper provision in the policy that take critical cognisance of how this would affect local industries who are working under the country’s economic harsh conditions to keep the industry alive.

Under normal circumstances, the gap in supply ought to be an incentive and driving force to increase local production in the oil palm industry where the nation has enormous comparative advantage and had in the past dominated the global scene.

This made the coalition of Oil Palm Stakeholder Organisations, during a peaceful protest at the office of the minister of agriculture, recently called for the revocation of all existing waivers and to stop the granting of waivers to importers of crude palm oil (CPO) and Palm Olein, and application of the exemption clause in the ETLS regulation.

Looking at this policy, it is like playing the big brother syndrome without putting the wellbeing of the farmers into consideration.

During the protest the farmers lamented the rate at which that policy has threatened the palm industry’s huge investment, the livelihood of smallholder farmers in about 24 states across the country and more importantly, the development foundation and objectives of the agricultural transformation agenda of this administration.

Addressing the minister, the leader of the group, Mr Moyi Ladoja, said it is not illegitimate to import CPO into the country provided the appropriate duty is paid, “We must recall that when the ban on the importation of CPO was lifted, the objective was to make the product more available as raw material for industrial processing and manufacture of downstream products. It is amazing to discover that the same companies that purportedly import CPO as raw material also engage in direct trade in the product. More disturbing is the rising importation of refined products, which is under ban in the guise of crude palm olein.”

He said local producers are holding on to unprecedented stocks because prices have crashed and they are being forced to sell at ridiculously low and unsustainable price levels which is occasioned by the influx of cheap, subsidized palm oil from Asia.

Ladoja therefore called for bailout incentive or palliative for plantation owners and refineries that have experienced and suffered from adverse market conditions due to the impact of the policy, while exemption should be made for large scale plantation development and refinery operation from income tax to enable reinvestment and accelerated development in the value chain.

He also called on the government to revoke all existing waivers and stop granting waivers to import CPO and palm olein and that the exemption clause in the ETLS regulation to levy imports from West Africa on the same 35 per cent tariff should be applicable to imports from other regions.

Responding the minister of agriculture and rural development Dr. Akinwumi Adesina, noted that available statistics strongly suggest that in the closest West African nations to Nigeria, most of the palm oil they import from Malaysia, Indonesia, Singapore and others actually end up in the Nigerian market duty-free; thereby displacing locally produced palm oil from the market and suffocating the Nigerian oil palm plantations.

According to Adesina, the aggregate locally produced and imported palm oil in these neighbouring West African nations by far surpass what they require both for their domestic and industrial consumption, therefore making the massive Nigerian market the dumping ground for these cheap CPO, which also comes into Nigeria duty-free under ETLS; making it by far cheaper than the CPO produced within Nigeria.

Lamenting the situation, he said: “We should be producing and exporting into those countries. We should not be using those countries as transit areas. Regional trade does not mean that we should import. Neighbouring West African countries import crude palm oil far higher than their needs. For Benin Republic 2003 to 2013, their production was stagnant, but their export increased by 1,018 per cent. Their import increased by 1,084 per cent of crude palm oil.

“Ghana’s production was also stagnant for the period. Their export rose by 62 per cent. Cote d’Ivoire’s production declined by 20 per cent during the period, but their export rose by 74 per cent. From all the evidence that I have seen, it appears they are re-exporting into Nigeria, which is killing the oil palm industry in Nigeria. We need to discuss on how regional trade will benefit us and not the one that will deplete our own resources.”

He explained that, it was possible for Nigeria to become self-sufficient in palm oil production and consumption, “When the issue of waivers came up for rice, Mr. President was under enormous pressure to grant waivers for importers. He didn’t give the waivers. Today, Nigeria is on its way to self-sufficiency in rice production. We have to do the same with the palm oil industry.

“It is shameful that we are importing crude palm oil. We should be exporting. The fact that we are having a discussion on whether we should lower the tariff, so that we could be importing, makes absolutely no sense. Some make a case for those who need palm oil for processing. We are already paying a higher price because we have rising unemployment in our rural areas; we are spending hard-earned foreign exchange on importing. We are paying a higher price with the livelihoods of rural areas producing palm oil being severely threatened. We are paying a higher price because the naira is weakened anytime we are importing,” he said.

Continuing, Adesina pointed out that “I am against reduction of tariff from 35 per cent, because every country must do what is in its interest. We cannot revive our rural areas if we are opening up our markets for everyone to dump every junk. The issue of ETLS is of great concern. ETLS in the region is to expand trade, but every country must do what is in its interest.”

Questions in the minds of most Nigerians are that, is it wise for the government to allow its market to be flooded with products that can be sourced in abundance locally? Should Nigeria be playing big brother with the well-being of its local investors?

In line with the Agricultural Transformation Agenda (ATA) of the administration, it is time, the development, and marketing of local products like the crude palm are prioritised and protected.