(DDM) – Nigeria’s palm oil sector is grappling with one of its most severe crises in recent years, as prices crash, production costs rise, and smuggling undermines local producers.
Stakeholders warn that smallholder farmers, millers, and large processors are now operating at a loss, with some forced to sell below production costs, threatening livelihoods across the value chain.
The National Palm Produce Association of Nigeria (NPPAN) President, Alphonsus Inyang, described the situation as alarming, noting that the sharp decline in palm oil prices is disproportionately affecting smallholders who contribute the bulk of national production.
He explained that millers rely on profitable sales to purchase fresh fruit bunches from farmers. When sales are unsustainable, millers reduce output, cutting farmers’ income, which is vital for paying school fees, medical bills, and household needs.
Inyang added that operational costs have surged significantly due to rising diesel, petrol, and electricity prices, with electricity alone quadrupling over the past two years. Transporting palm fruits from farms further adds to expenses.
Dr Graham Hefer, Managing Director of Okomu Oil Palm Company Limited, confirmed that crude palm oil prices have fallen by roughly 25 percent in the last three months.
He warned that while lower prices may appear to reduce inflation, the reality is unsustainable as processors face higher production costs than selling prices, risking business closures.
Lax customs enforcement has allowed substandard imported palm oil to flood the market, further depressing local prices, Inyang said. He described the influx as orchestrated by syndicates, with smuggled oil entering through sea and land borders across southern, southwestern, northeastern, and northwestern Nigeria.
The imported oil benefits from government subsidies and incentives abroad, allowing it to undercut Nigerian producers, who lack similar support, he added. The resulting price disparity threatens domestic production and reduces government revenue.
Hefer noted that the crisis may give the appearance of lower inflation, but in reality, processors are experiencing stagflation, with input costs remaining high despite falling commodity prices.
Henry Olatujoye, CEO of Palmfield Development & Processing Limited, offered a differing perspective, suggesting price fluctuations are natural in a free market dictated by demand and supply. He emphasized that Nigeria remains a net importer of palm oil and asserted that legitimate imports contribute to market stability.
Despite differing views, stakeholders agree on the need for government intervention. Inyang urged stronger border enforcement, patient capital, and targeted incentives for the sector, highlighting palm oil’s role in food, cosmetics, and energy industries.
He called for the 25 percent crude palm oil import levy to be deployed toward backward integration initiatives, including plantation expansion, replanting with hybrid palms, improved seedlings, and capacity building through the Nigerian Institute for Oil Palm Research (NIFOR).
Hefer recommended stricter border control and establishing a palm oil council to strengthen oversight, while Olatujoye stressed the need for policies that encourage investors to develop two million hectares of commercial oil palm plantations to ensure sustainable supply and self-sufficiency.
Analysts warn that without decisive government action, Nigeria risks a collapse of its palm oil industry, with devastating consequences for rural livelihoods, food security, and industrial supply chains.
