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Economy

Revitalizing the Nigerian Economy With Palm Oil

Last Updated on December 12, 2021 by LANFarms

Palm Oil as they say is a Silent Goldmine. It was a lifesaver in the ’80s and has the potential to help re-build the oil-driven economy that has lost its steering. But how can this happen? This article explores the road map.

istorians believe that the use of palm plants as a food source dates back 5,000 years ago to West Africa. Oil palm trees grow in warm climates that have an abundance of rain and sunshine such as Nigeria, Malaysia, and Indonesia. Palm plants produce two exportable commodities.

Grown only in the tropics, the oil palm tree produces high-quality oil used primarily for cooking in developing countries. It is also used in food products, detergents, cosmetics, and, to a small extent, biofuel. Palm oil is a small ingredient in the U.S. diet, but more than half of all packaged products Americans consume contain palm oil—it’s found in lipstick, soaps, detergents, and even ice cream.

Oil Palm is a very productive crop. It offers a far greater yield at a lower cost of production than other vegetable oils. Global production of and demand for palm oil is increasing rapidly. Plantations are spreading across Asia, Africa, and Latin America. But such expansion comes at the expense of tropical forests—which form critical habitats for many endangered species and a lifeline for some human communities.

The pulp of the tree is crushed to form palm oil while the seed is crushed to form palm kernel oil. Palm oil has several applications including cooking, lubricants, candle-making, cosmetics, and can even be eaten before being crushed. It is cheaper to produce bio-fuel using palm oil making it a cost-efficient substitute to using soybeans or other crops.

The commercial palm oil industry rapidly expanded in the late 20th century and led to the deforestation of significant swaths of Indonesia and Malaysia as well as large areas in Africa.  Palm Oil is in abundance in Nigeria, specifically in Enugu, Imo, Ondo, Edo,, Ekiti, Cross River, Delta, Akwa-Ibom, Bayelsa, Anambra, Oyo, Abia, and the Ogun States, and these are considered to be the largest producers of palm oil. Palm tree plantations are spread over an area estimated to range from 1.65 million to 2.4 million hectares.

The Palm Oil Industry: An Overview

The palm oil industry is considered the industry that will revitalize the Nigerian economy and reduce its excess dependence on oil. Here is a statement from the Governor of Nigeria’s central bank Mr. Godwin Emefiele about palm oil, “in the 60s, Nigeria controlled 40 percent share in the global palm oil chain’’. We were exporting our palm oil to different parts of the world, but because we found crude oil, we receded and abandoned it. The price of a ton of palm oil is more than the price of a barrel of crude oil. So, what happened?

“For other countries, when they had the opportunity in agriculture and in the crude sector, they did not let their guards down; unfortunately, we did and that is what we are paying for today. We will grow that market again and after that, we will go into cocoa,” he said. From his statement, the value of Palm oil on the Global market is greater than that of Crude oil (which is Nigeria’s main export).

Here is a detailed price comparison:

  • As of January 27,2020, one barrel of crude oil today sold for about $53.14 which is N1,9263.25 (exchange rate N362.50 = $1).
  • A barrel contains 159 liters. This means crude oil sold for $0.334 per liter.
  • As of January 24, 2020 — Palm oil closed on January 24,2020 at $2,925.00 per ton which is N1,060,312.50 (exchange rate N362.50 = $1).
  • A ton is 1,000 liters. This means palm oil sold for $2.93 per liter on the international market.

How big is the market? Huge. The worldwide demand for palm oil has increased sharply over the past few years, to more than 60 million tonnes annually, and continues to grow.

Frozen Pizza; image credit of The Kitchen Community

Frozen Pizza; image credit of The Kitchen Community

Each day, there are more and more people on Earth. However, this is not the worse. The number of people is not the problem, but the true challenge is the way people consume goods. People consume more because they earn more money and can afford a higher quality of life. Moreover, people work more and have less time to cook. And if they do not cook, they buy ready-to-eat food like frozen soups or pizzas. As people get a higher quality of life, they use more make-up to look beautiful, and they use more fuel for transportation. Oil palm is present in a lot of products spanning from face creams, frozen pizzas, and fuels powering public transports. As the world economy is booming, oil palm consumption is expected to increase… a lot.

So Where Do We Go from Here?

Palm oil is the most widely consumed vegetable oil on the planet! About 2.3 billion people around the world currently depend on palm oil as an important part of their food supply. But here in the U.S., most of us are just learning to appreciate palm oil for its health, culinary and environmental benefits.

Oil palm is a highly productive plant. In optimum conditions, for example in Indonesia and Malaysia, on average one hectare of oil palm produces 4.5 tons of oil. This is huge compared to other common vegetable oils like rapeseed and soy which produce only 2 tons of oil per hectare. In fact, for the same area, oil palm is the most productive vegetable oil. This high productivity is an opportunity to set apart and preserve some areas for biodiversity.

It is found in about half of all household products, from processed foods such as biscuits and ice cream to soap and lipstick, though consumers are unaware because most of the time it is listed simply as ‘vegetable oil’.

Oil palm is cultivated in the countryside of tropical countries which are often poor. Rural populations use oil palm as an opportunity to earn more money and make a profit with land often economically idle. People who were practicing subsistence agriculture can now earn enough money to buy modern tools and send their children to university.

The expected increase in oil palm consumption makes it a very good investment. Oil palm is also a very productive plant. When natural conditions and management are optimal, oil palm can produce up to 10 tons per hectare. In Indonesia, the government subsidizes fertilizers and pesticides and promotes oil palm plantations having high productivity. Palm oil can be sold for 500$ per metric ton, therefore oil palm companies significantly contribute to Indonesia and Malaysia’s incomes and economic growth. Many rich businessmen in these countries built their empires on oil palm. Yes, oil palm generates a lot of cash.

A liter of crude oil sells for $0.334 while a liter of palm oil sells for $2.93 (almost ten times the value of crude oil). Palm oil is easily produced locally and with the government's drive for more hands in the agricultural sector, this would be the best area to invest money, time, and human resource into as it will yield more returns.

Authors

  • Ebuka Raphel
  • Uchechukwu Ajuzieogu

    Dog lover, foodie, farmer, co-founder, Head of Marketing & Communications, and all things awesome at LANFarms where he spends his time sharing memes, deploying data models, and writing articles to help make better products and informed decisions for people and businesses.

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