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The Nigerian Palm Oil Industry: What Went Wrong

by:Wingoil     2020-06-21
Nigeria's once-thriving palm oil industry is often cited as one of the most miserably failed economic opportunities in Africa. Use of the oil palm fruit to extract edible oil has been in practice across the continent for centuries, and it remains an essential ingredient in much of West African cuisine. Farmers in the region, who inter-cropped palm oil with other food crops like yam and maize, started the first export trade early in the nineteenth century. Before its close, the industrial revolution in Britain had created a huge demand for palm oil, which by then had found its way to use in candle making and as an industrial lubricant. The economic importance of palm oil grew steadily because of its high yield, leading European colonists to start plantations in Central Africa by 1900. As palm oil found wider use in food-processing and industry, global demand for the commodity surged. By 1982, worldwide palm oil exports had grown to a staggering 2,400,000 million tonnes per annum1. For most of this period, Nigeria held centre stage as one of the largest producers and exporters of palm oil, accounting for more than 40% of global output in the 1950s. At the time of the country's independence from British colonial rule in 1960, palm oil contributed 82% of national export revenue. However, the oil boom of the mid-seventies and the subsequent decline of farming proved catastrophic to the sector. By the end of the twentieth century, the Nigerian palm oil harvest had dwindled to just 7% of global production. More embarrassingly, the once-largest exporter had turned into a net importer of palm oil, sourcing 180,000 MT of the commodity from international markets to meet local demand2. The fundamental flaw with the palm oil sector lies in Nigeria's colonial origins, when British trade necessities dictated economic policy. Because of its primary export orientation at that time, planned expansion of the industry was slow in coming through and its future competitiveness had been compromised. As a result, the bulk of Nigerian palm oil comes from dispersed and semi-wild groves, and through the use of highly outdated manual processing techniques. Several attempts to establish large-scale plantations since the 1960s - including the Cross River State plan and the Oil Palm Belt Rural Development Programme - ended in miserable failure. Currently, 80% of production comes from scattered smallholdings spread over an estimated 1.6 million hectares of land. In contrast, plantations occupy only about 300,000 hectares - most of it coming up over the last decade with private sector investment.
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