African Reserves

Nigeria’s Edo State goes back to the future with palm oil production

In the 1960s, Nigeria was the world’s largest producer of palm oil. Today, palm oil has become one of the most versatile oils and can be found in almost everything.

The World Wide Fund for Nature estimates that it is found in up to 50% of the packaged products we find in supermarkets around the world, from pizza, donuts and chocolate, to deodorant, shampoo, toothpaste and in lipstick. It is also used in animal feed and as a biofuel in many parts of the world.

But as Nigeria after independence focused on crude oil and agriculture faltered, palm oil production declined. Today, the country imports most of its palm oil from Indonesia and Malaysia, the world’s largest producers.

Oil palm plantations are best suited to grow about five degrees on either side of the equator. Thus, many African countries have a competitive advantage, even though Malaysia and Indonesia currently account for 85% of world production.

Harvesting palm oil in a plantation. (Photo: khamkula/Adobe Stock)

But palm oil has not been without controversy. As these two countries increased their production, they were accused by environmentalists of destroying large tracts of forest to make way for plantations.

In Edo State, southern Nigeria, where the local government launched a coordinated strategy to develop the industry, policy makers had to learn from the mistakes of the past in order to lay the foundations for a brighter future. sustainable.

Godwin Obaseki, Governor of Nigeria’s Edo State, says the industry needs to be more aware of its environmental footprint to thrive.

“Palm oil has a bad press. And we knew we had to do things differently. We argued that we were not going to cut down forests to grow oil palm plantations, but rather that we would grow palm oil and encourage producers to invest in making our forests grow again.

Obaseki, governor since 2016, campaigned on a promise of job creation. The state had a history in agriculture, including palm oil, and it viewed the sector as low hanging fruit when it came to job creation.

Rehabilitate degraded land

The first challenge, he explains, was to map land ownership and availability for agriculture.

The state engaged Proforest, an NGO that supports agriculture that can produce positive social and environmental outcomes, to oversee the mapping analysis. The idea was to work with environmentalists to grow palm oil in the most sustainable way and protect the forest as much as possible.

Obaseki is a career investment banker, but he grew up in a family that has always been involved in forestry. When he saw the results of the mapping exercise, he was devastated. Vast tracts of forest, far more than Edo State had anticipated, have been degraded.

“When we saw the [Proforest] report, we realized that 80% of the reserves had been encroached. Of nearly 625,000 hectares of reserve land, what might be called real forest was less than 200,000 hectares.

“We had to go back to the drawing board in terms of strategy. There was land that had been so badly degraded that we couldn’t do much. There were some that could be cleaned up and then there was the forest. So we had to figure out what we could make available for farming and ranching, what we needed to protect and preserve, and how to regenerate degraded land.

It was on this basis, he adds, that Edo State developed a strategy that companies developing these plantations would do so on degraded land. When granting concessions to companies, they would also insist on restoring a degraded forest area equivalent to 25% of their land ownership.

The case of the private sector

Obaseki says his state has the added benefit of palm oil experience. Two of Nigeria’s largest producers, Okomu and Presco, were already operating in Edo State.

There were institutional knowledge and professionals already operating in the field.

The economic environment was also favorable. In 2015, the newly elected Buhari government, faced with a global drop in the price of oil and a reduction in foreign exchange reserves, began to encourage an import substitution policy.

The federal government imposed a 35% tariff on the import of palm oil and banned the allocation of foreign currency to importers of palm oil, as well as 40 other products, including rice. This has led to serious thinking about the potential of the palm oil industry.

“Today Nigeria spends half a billion dollars a year importing palm oil…farming is a business and we need to understand the beneficiaries of this chain and create a market for it,” says Obaseki.

“We had to be very careful and very deliberate about the program. This meant putting in place the right frameworks and also the right institutions, including updating forest laws, land records, etc. This was to make sure that all the different stakeholders were comfortable with the program, both from the point of view of the investor, the local communities and also to make sure that things were developed sustainably. .

He estimates that Nigeria today has a palm oil production deficit of 650,000 tonnes: “This will require 350,000 hectares of plantations. We have already cultivated 70,000 hectares and we will cultivate 125,000 new hectares over the next three years. This should represent 20 to 30% of the current deficit.

Edo State also develops other crops including cassava, cocoa and rubber. The framework around sustainability will be the same for these crops as for palm oil.

Producing countries, he says, are seeking to agree on principles for the responsible production of key commodities, with the aim of signing a new protocol at COP27 in Egypt in November, called the Africa Commodities Initiative. durable.

“Cassava is quite prolific. It also has industrial uses, from fish stock to ethanol, so we support investors with large chunks of land to grow cassava, from around 25,000 hectares to 70,000 hectares today.

Even with mechanization, he estimates that one hectare of land requires an average of four workers. With 100,000 hectares, there is therefore in theory a potential for the creation of 400,000 jobs, even before considering those of processing and recovery.

Coherent strategy

But farmers need support to make the most of the opportunities. Obaseki explains that a thriving agricultural sector requires extensive coordination so that input subsidies, including seeds and fertilizers, are distributed to those who need them most.

Obaseki says the state has created its own programs that can tap into funding initiatives that the federal government and central bank make available. This includes a $500 million fund of low-interest loans made available to Nigerian producers. The Edo State Oil Palm Production Program (ESOPP) is the vehicle through which public-private partnerships and investments occur.

Capacity building and institution building are also critical to success, he says. The State works with partners and international organizations. Edo State is a signatory to the Marrakesh Declaration for the Sustainable Development of the Palm Oil Sector in Africa – initiated at COP22 in 2016 – and a member of the Africa Palm Oil Initiative, along with nine countries from West and Central Africa.

But the most important factor in bringing palm oil back to Nigeria is a coordinated approach and a coherent strategy, he explains.

“Our plan was not to reinvent the wheel, but to see what resources were available and to harness those resources to strengthen what we do.”