Manufacturers say 400,000MT of palm oil smuggled through borders hurting investments

Local manufacturers say over 400,000 metric tons of crude palm oil (CPO)smuggled into Nigeria each year are hurting margins and investments.

“There is a massive smuggling of palm oil across the borders to the tune of 400,000 tons per annum due to which Federal Government loses millions of dollars in revenue from duty and tax collection,” Santosh Pillai, managing director, PZ Wilmar, told BusinessDay in an interview.

Pillai said smuggling is hitting hard on local investors.

Nigeria has an estimated demand –supply gap of 800,000 MT in palm oil, which is often filled by smuggling and unbridled importation.

The country is fifth largest producer of palm oil, churning out between 930,000 metric tons (MT) of palm oil and 1.3 million (MT) annually, behind Indonesia’s 36 million MT output; Malaysia with 21 million MT; Thailand with 2.2 million MT, and Colombia with 1.3 million MT.

The National Bureau of Statistics (NBS) said in the second quarter of 2017 that Nigeria imported N7 billion worth of Crude Palm Oil (CPO) within the three-month period, with Indonesia accounting for 76 percent of the total import. The CPO is the red palm oil which is sold in the open market and used in daily meal.

Solidaridad Networt, an international organisation facilitating the development of socially responsible, ecologically sound and profitable supply, released its data last year showing that Nigeria imported 552,000 metric tons of CPO in 2016.

According to Pillai, there are illegal and questionable importation of CPO into the country, which means that genuine investors do not have a level playing field.

“Visit any supermarket or traditional market of Nigeria and you will see plenty of imported vegetable oil which is banned in the country,” he said.

He pointed out that current policies are only aiding cross border trade and smuggling, adding that leading domestic refineries in Nigeria are facing a crisis and need to be supported.

He said while it is important to create conducive environment for the development of plantations to improve CPO production, there is a need to meet the present need for palm oil.

“The only viable means of bridging that gap now is developing the domestic plantation industry and supporting local refineries to the extent the demand gap is present by allowing the importation of the CPO for further processing within Nigeria.

He said, however, critical long terms goals should aim at supporting development of palm oil plantations within Nigeria by providing time bound critical infrastructural and policy support, developing the palm oil supply chain by implementing a robust smallholder scheme,” he added

Nigeria produced 45 percent of global palm oil in 1960s but this position has been taken by Indonesia (and Malaysia) due to what is popularly called Dutch Disease. In simple terms, when a country discovers a natural resource that brings in foreign exchange but ignores other critical sources, it is said to suffer from Dutch Disease.

Felix Nwabuko, managing director of Presco, told BusinessDay that if certain companies are allowed to import CPO illegally into the country, investments made by genuine players will be in danger.

“If this is allowed, it discourages further huge investment by investors like us and creates unhealthy competition in the market,” Nwabuko said.

ODINAKA ANUDU