In the annals of Nigeria’s agricultural landscape, the oil palm industry stands as a cornerstone of economic prosperity and agricultural advancement. Nigeria was a lead exporter of crude palm oil in the 1960s.
Palm oil is an edible vegetable oil derived from the reddish mesocarp (pulp) of the fruit of the African oil palm. The oil is used in food manufacturing, in beauty products, and as biofuel. Humans used oil palms as far back as 5,000 years. Palm oil from Elaeis guineensis has long been recognized in West and Central African countries used widely as a cooking oil.
Along with coconut oil, palm oil is one of the few highly saturated vegetable fats and is semisolid at room temperature. Palm oil is a common cooking ingredient in the tropical belt of Africa, Southeast Asia and parts of Brazil.
Here’s a look at the current state and future prospects of palm oil production in Nigeria.
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Historical Context and Current Status
In the 1960s, Nigeria’s palm oil production accounted for 43% of the world production. Today it accounts for only ~3-5% of total global output, and Nigeria is a net importer of palm oil. It is currently the largest consumer of palm oil in Africa, according to the World Bank.
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The United States Department of Agriculture (USDA), says that oil palm production in Nigeria reached 1.4 million metric tonnes (MT) in 2022, a nine percent rise from 2020/21 when production stood at 1.28 million MT. Nigeria’s palm oil investments are growing rapidly.
Despite this increase, Nigeria’s annual consumption for oil palm produce lies at 2.4 million tons, with local production meeting only 50% of demand leaving FMCGs like Indomie still having to import Oil palm because local demand outstrips supply.
Amidst being the largest global Oil palm exporting country at the beginning of the 20th Century, Nigeria’s oil palm industry still faces many challenges that require urgent attention to achieve sustainable palm oil production to cater to and satisfy the local daily needs.
Key Players and Investments
Several companies are making significant investments in Nigeria's palm oil sector:
- PZ Wilmar: A subsidiary of PZ Cussons, has nearly 26,500 hectares of palm oil plantations in Cross River State, with about 5,549 hectares in Calaro Estate and 2,369 hectares in Calaro Extension.
- Ellah Lakes: Plans to start production in the first half of 2025.
“The main purpose is to stimulate investments in the real sector and to use technology to make the industry attractive to investors."
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Production Methods and Processing
Oil palm production is categorized into three groups; smallholders, medium, and large-scale plantations. Several million smallholders are spread over an estimated area of 2.1 million ha (83% of the production area). According to a case study by the Initiative for Public Policy Analysis (IPPA), the small holding control over 80% of Nigeria’s palm oil production.
Oil palm plantations or estates cover around 118,264 ha and make up only 5% of the palm oil production in Nigeria.
Besides milling, palm oil is produced by cold-pressing the fruit of the oil palm since the 1990s. This type of artisanal palm oil is usually not further refined, so it keeps the natural red color.
The result of milling or cold-pressing is a mixture of water, crude palm oil, and fibers from the palm fruit. A minimum degree of processing is required to obtain the oil. The mixture is first passed through a filter to remove the solids, then separated by density to remove the water. The result of basic processing is called a "crude palm oil" or a "red palm oil", referring to its intense color due to the high carotenoid content.
Red palm oil is a traditional cooking oil in West Africa. The free fatty acids within provide a "bite" to the flavor. The triglyceride part is around 50% saturated fat-considerably less than palm kernel oil-and 40% monounsaturated fat and 10% polyunsaturated fat.
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The final, refined oil is called "refined, bleached and deodorized palm oil" (RBD PO). RBD PO is also known as white palm oil. It can be further fractionated using the different melting points of its components. The part with a higher melting point, which crystalizes out as a solid earlier, is called palm stearin. It consists of mostly saturated fats. RBD PO, or "palm shortening", is extensively used in food manufacture.
Palm oil production is done in some parts of the world artisanally, and the locally produced oil is used for food, handicrafts and other products.
Uses of Palm Oil:
- Food Industry: Common cooking ingredient in tropical regions, used in pastry dough and baked goods.
- Personal Care and Cleaning Products: Foaming agent in soaps, shampoos, and detergents.
- Biofuel: Used to produce methyl ester and hydrodeoxygenated biodiesel.
The highly saturated nature of palm oil renders it solid at room temperature in temperate regions, making it a cheap substitute for butter or hydrogenated vegetable oils in uses where solid fat is desirable, such as the making of pastry dough and baked goods. Palm oil is pervasively used in personal care and cleaning products, and it provides the foaming agent in nearly every soap, shampoo, or detergent. Around 70% of personal care products including soap, shampoo, makeup, and lotion, contain ingredients derived from palm oil.
Palm oil is used to produce both methyl ester and hydrodeoxygenated biodiesel. Palm oil methyl ester is created through a process called transesterification. Palm oil biodiesel is often blended with other fuels to create palm oil biodiesel blends. Palm oil biodiesel meets the European EN 14214 standard for biodiesels.
The organic waste matter that is produced when processing oil palm, including oil palm shells and oil palm fruit bunches, can also be used to produce energy. This waste material can be converted into pellets that can be used as a biofuel.
Palm Oil Composition:
- Composed of fatty acids esterified with glycerol.
- High concentration of saturated fat, specifically palmitic acid.
- Major constituent: monounsaturated oleic acid.
Palm oil, like all fats, is composed of fatty acids, esterified with glycerol. Palm oil has an unusually high concentration of saturated fat, specifically the 16-carbon saturated fatty acid, palmitic acid, to which it gives its name. Monounsaturated oleic acid is also a major constituent of palm oil.
Challenges and Solutions
After the crude oil discovery in 1950, the agricultural sector has been neglected and poorly funded. Oil palm production which is a capital-intensive industry, requires access to funds, loans, and credit facilities from the government and banks.
Smallholder farmers in Nigeria face significant hurdles in palm oil production, particularly concerning labor costs. The high expense of labor often prevents farmers from hiring help unless they have ample funds, leading to the potential waste of ripe bunches. Poor road infrastructure further increases production costs, making haulage services expensive, especially for transporting fresh fruit bunches to processing centers.
To tackle the challenges above and move forward, some members of the Plantation Owners Forum of Nigeria (POFON) and other stakeholders have also called for the establishment of a national palm oil council to drive investments, industrialization of the crop, and its value chain development.
Unreliable distribution (incl. However, the Federal and State Governments have developed efforts towards revitalizing the sector through various oil palm development and environment friendly programs. To address these challenges, IDH together with key stakeholders started a Sustainable Palm Oil Landscape Program in Edo State and Ondo State in Nigeria. The program is based on IDH’s PPI Approach.
Recommended Solutions:
- Support Smallholder Inclusion: Provide smallholder farmers with training, access to finance, and improved farming practices to increase their productivity and income. Promote the formation of cooperatives to enhance bargaining power and market access.
- Market Expansion: Explore new markets and export opportunities for palm oil and its derivatives. Tailor products to meet the specific demands of different markets, including those emphasizing sustainability and health.
- Infrastructure Development and Technology Adoption: Invest in infrastructure such as transportation networks, processing facilities, and storage capacities to improve supply chain efficiency and reduce logistical bottlenecks. Embrace modern technology and automation in both farming and processing to improve efficiency, reduce post-harvest losses, and ensure product consistency and quality.
Initiatives for Sustainability:
- Convene multi-stakeholder initiatives (state-level) and development of and implementation of a Green Growth Plan (incl.
The Roundtable on Sustainable Palm Oil (RSPO) was established in 2004 with the objective of promoting the growth and use of sustainable palm oil products through global standards and multistakeholder governance. 51,999,404 metric tonnes of palm oil fruit produced in 2016 was RSPO certified.
In 2019, RSPO launched the Independent Smallholder Standard (ISH). By simplifying documentation and cost requirements, it expanded the RSPO system to smallholder farmers not affiliated with large corporations or cooperatives.
The mass production of palm oil in the tropics has attracted the concern of environmental and human rights groups. Forests have been cleared in parts of Indonesia and Malaysia to make space for oil-palm monoculture. This has significant impacts on the local ecosystems leading to deforestation and biodiversity loss.
In addition to environmental concerns, palm oil development in specific regions that produce it has also led to significant social conflict. The palm oil industry has had both positive and negative impacts on workers, indigenous peoples, and residents of palm oil producing communities.
The palm oil industry has a history of violating labor-related human rights, indigenous territorial right and environmental rights of communities in the contexts where the industry is prominent. Child labor violations are common in smallholder farming in many of the post-colonial contexts (such as Africa) in which palm oil is produced.
Reports of indigenous peoples and communities in Indonesia, indicate losing farmland and traditionally significant land due to palm oil industry expansion.
Palm oil has garnered criticism from environmentalists due to the environmental importance of where it is grown. However, it is indisputably more efficient in comparison to other oil-producing plants. Compared to fossil fuels, palm oil systems have lower non-renewable energy consumption, global warming potential (GWP, excluding land-use change), and acidification potential than fossil fuel alternatives.
Global Palm Oil Market
While only 5% of the world's vegetable oil farmland is used for palm plantations, palm cultivation produces 38% of the world's total vegetable oil supply. In terms of oil yield, a palm plantation is 10 times more productive than soybean, sunflower or rapeseed cultivation because the palm fruit and kernel both provide usable oil.
According to the Hamburg-based Oil World trade journal, in 2008 global production of oils and fats stood at 160 million tonnes. Palm oil and palm kernel oil were jointly the largest contributor, accounting for 48 million tonnes, or 30% of the total output. Soybean oil came in second with 37 million tonnes (23%).
About 38% of the oils and fats produced in the world were shipped across oceans. Of the 60 million tonnes of oils and fats exported around the world, palm oil and palm kernel oil made up close to 60%; Malaysia, with 45% of the market share, dominated the palm oil trade.
The biggest consumers of palm oil are India, the European Union, and China, with the three consuming nearly 50% of world exports.
Production of palm oil that complies with voluntary sustainability standards is growing at a faster rate than conventional production.
Previously, palm oil could be listed as "vegetable fat" or "vegetable oil" on food labels in the European Union (EU). From December 2014, food packaging in the EU is no longer allowed to use the generic terms "vegetable fat" or "vegetable oil" in the ingredients list. Food producers are required to list the specific type of vegetable fat used, including palm oil.
In Malaysia, it is illegal to label products in ways that discriminate against palm oil. Offenders can be fined up to RM250,000 or sent to prison for up to five years.
In 2010, the Consumer Goods Forum passed a resolution that its members would reduce deforestation to net zero by 2020.
Table: Key Statistics of Palm Oil Production in Nigeria
| Metric | Value |
|---|---|
| Production in 2022 | 1.4 million metric tonnes |
| Annual Consumption | 2.4 million tons |
| Local Production Meeting Demand | 50% |
| Smallholders' Control of Production | 80% |
Oil Palm Fruit Bunch in Malaysia
Deforestation Due to Palm Oil Plantations in Indonesia
