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Nigeria Imports Palm Oil Worth N300 Billion in 5 Years Despite Forex Restriction, Scarcity

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Despite adding palm oil to the foreign exchange restriction of the Central Bank of Nigeria (CBN) to encourage its local production, Nigeria spent N299.6 billion on the importation of the commodity between 2017 and 2022.

A new report from the National Bureau of Statistics (NBS) showed the commodity is often in the top five most imported agricultural products.

Despite the importation ban, Nigeria imported 302,000 metric tons of palm oil in 2017, according to CBN Governor, Godwin Emefiele. This is because current production levels cannot meet local demand, which averages three million metric tons per year.

Experts believe that Nigeria can do more because the country has the knowledge, land, climate, and history to succeed in palm oil production.

However, analysis shows that Malaysia is where Nigeria sources most of its palm oil, with N151.5 billion of the product imported during the period.

This is followed by India with N65.2 billion, Ivory Coast with N22.4 billion, China N20.3 billion, Singapore N20.6 billion, Indonesia N17.1 billionn, Columbia N1.4 billion, United States N727 million, Ghana N130.6 million, and Cameroon N4.26 million.

Historical records suggest that Nigeria had a fine collection of gen plasm—the oil palm planting material—that the world liked. Most of the palm oil then came from the wild groves, which were not planted because Nigeria had a natural grove of oil palm.

The Malaysians understood the need for a West Africa gen plasm and collected materials from the Nigerian Institute for Oil Palm Research (NIFOR) in the 1960s and mostly 1970s. Since then, Malaysia has become the world’s second-largest producer and exporter of palm oil after Indonesia.

On the other hand, Nigeria’s palm oil industry is mostly dominated by small-scale farm holders, which account for over 80 per cent of local production, while well-established companies account for less than 20 per cent of the total market, according to a report by PWC.

The two largest producers, Okomu and Presco, contribute largely to the market share, but the dominance of small farm holders in the palm oil market has resulted in low output compared to the country’s production potential.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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Expert Warns Against Palm Oil Adulteration, Cites Health Risks

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Amidst concerns over the quality of palm oil in Nigeria, Professor Kehinde Owolarafe of Obafemi Awolowo University, Department of Agriculture and Environmental Engineering, has sounded a clarion call, warning producers, distributors, marketers, and retailers against the perilous practice of adulteration.

At a recent workshop organized by the Standards Organisation of Nigeria (SON) in Osogbo, Osun State, Owolarafe underscored the potential health hazards posed by adulterated palm oil.

Highlighting the historical significance of Nigeria in palm oil production, Owolarafe lamented the country’s decline from a leading producer to the fifth position globally, trailing behind Indonesia and Malaysia.

Despite an increase in local production, Nigeria still imports approximately one million metric tonnes of palm oil to meet domestic demand.

Factors contributing to Nigeria’s dwindling palm oil production include aging oil palm plantations, inadequate processing technologies, and unfavorable government policies towards agriculture.

Owolarafe urged industry stakeholders to prioritize improving both the quality and quantity of palm oil production to meet international standards and revitalize the sector.

Dr. Ifeanyi Okeke, represented by SON’s Southwest Director, Ethan Talatu, emphasized the workshop’s aim to raise awareness among stakeholders regarding the importance of adhering to government-set standards.

The event sought to instill a collective commitment to producing palm oil that meets stringent quality criteria.

Amidst growing concerns over the health implications of consuming adulterated palm oil, stakeholders are urged to heed Owolarafe’s warning and prioritize quality assurance measures.

Ensuring the integrity of Nigeria’s palm oil supply chain is not only essential for public health but also crucial for revitalizing the nation’s palm oil industry on the global stage.

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Commodity Trading Industry Hits $100 Billion Profit, Second-Best Year on Record

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The global commodities market has reported $100 billion in profits despite facing challenges and disruptions, making its second-best year ever. 

According to analysis from consultancy firm Oliver Wyman LLC, while earnings have dipped slightly from the record-breaking levels of 2022, this year’s profits easily surpass previous highlights, including those seen during the global financial crisis of 2008-2009.

Consultant Adam Perkins attributes this success to favorable margins driven by ongoing supply-demand dynamics, despite the volatility seen in various sectors.

While specific financial results for many players within the industry are yet to be made public, the report indicates that major independent trading houses are expected to show an average drop of over 30% from the record levels of 2022.

However, disruptions in supply chains and shortages of diesel and fuel oil have somewhat offset the decline in volatility related to Russian crude oil.

These profits have enabled commodity trading firms to bolster their positions as key providers of energy, metals, and food resources on a global scale.

With significant investments in oil refineries, storage facilities, power plants, and acquisitions of other trading companies, these firms are solidifying their roles in shaping global supply chains.

Moreover, the windfall profits have led to executives and partners within these firms becoming multi-millionaires, facilitating a generational shift in leadership as seasoned traders retire.

Despite the pressure to uphold legacies and navigate increased scrutiny, the influx of new leadership presents opportunities for innovation and growth within the commodity trading sector.

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