Today, in the world market, a litre of palm oil is more expensive than a litre of crude oil. Malaysia, which sourced her palm fruits from Nigeria in the early 1960s, has reversed her economy from crude oil dependency to palm oil dependency while Nigeria is still rooted on the same spot.
The federal government has failed to intervene with special funds in this abandoned sector of the economy. OKEY IKORO, managing director and chief executive officer, Camela Vegetable Oil Company, based in Owerri, Imo State, and current president of Vegetable and Edible Oil Producers Association of Nigeria (VEOPAN), explains to business a.m.’s DIKACHI FRANKLIN the problems of the sector and tells of what the federal government should do to encourage its growth.
Being the national president of the Vegetable and Edible Oil Producers Associations of Nigeria (VEOPAN), can you tell us the story of your members’ struggles to survive in this economy, which has been tough on business?
As a matter of fact, the Nigerian economy today has failed; it has offered nothing to the vegetable oil sector. When I say total neglect, I mean we have never had it this bad. It is a pity that in Nigeria, under the prohibition list, prohibition of vegetable oil is there. We are not supposed to import vegetable oil in bulk. Also, under the exclusion list, palm oil is excluded from import, but you notice that all over the country today, all kinds of branded vegetable oil are in all the supermarkets, in all the open markets, all the borders are open and there is no control.
The vegetable oil industry is in extreme hardship. To tell you the truth, we are not getting reprieve from anywhere at all, not from the Customs, because the borders are open; not from government, because there are no strict measures being taken. It has become a free-for-all thing. And even people are making applications now asking for waivers to bring in the bulk; so it has become uncontrollable. It’s like nobody is in charge of stopping this smuggling of importations of vegetable oil.
While smuggling in items on the prohibition list has been a big challenge to many sectors like yours, are there other challenges facing your sector?
Yes, power has been a very big and constant challenge. It is not like there is any good improvement in power supply, especially in Owerri. So, the cost of production continues to go higher, and that is why smuggling of finished products is thriving. There is no power and industries are striving with epileptic power supply. When you run your factory on generator for 24 hours, I don’t know how you can compete with people who are bringing in finished products from Malaysia, Indonesia etc. They are landing at our neighbouring countries and then coming in through the borders. So the power issue is a critical one, it affects all sectors of the economy. You can see the vegetable oil sector, rather than growing, it is shrinking; there is no incentive and there is no encouragement.
The federal government said they have floated all sorts of funds, but there is no particular fund, there is no intervention fund for the palm oil sector. We have written several letters to the Central Bank of Nigeria (CBN), to the Presidency, to the Ministry of Finance, Ministry of Agriculture, asking for proper intervention in the vegetable oil sector, yet there has been no positive response.
When you look at products like palm oil, you will know that if there is intervention fund in that sector, it will help the economy, along with job creation and wealth growth. Of course the palm oil at a point was one of the foremost revenue earners of the Federal Government of Nigeria, but today not only that we are net importers of palm oil there is also no plan, no road-map to redirect Nigeria on the point of growth as far as the palm oil industry is concerned.
In the face of these challenges, is there no enabling environment at all created by the government for the players in the palm oil sector of the economy to thrive or leverage their business?
For now there is none, there is no roadmap; we have done a lot of things, we have had so many meetings, we have even drawn a programme for the growth of the sector, but implementation by the federal government is zero. There is no implementation by the federal government. In fact, I don’t even know whether Nigerian economy is constant. For the past one year everybody is making politics rather than seeing how the economy will grow.
What is the installed capacity of your production line? And how often do you work for full capacity?
Well, it is 100 metric tonnes of palm oil daily. But meeting up the capacity, we are running at above 25 percent of the installed capacity of our production line. It is not only that there are no new materials, but because of the smuggled products, you cannot compete, you can’t sell against the smuggled products, so business has been really tough for the sector.
As the VEOPAN president, what do you think the federal government should do and is not doing or not doing right?
The government has to go back to the drawing board. They have to bring out a strategy. First of all, get the Customs to do their job of monitoring the borders to stop the smuggling of the furnished palm oil products. That is number one critical step they must take. Customs must undertake an exercise, which they call off-the-shelf.
How can a product be prohibited and you find it in supermarkets, you find it in the open market; this means the smugglers are known because they did not fly into Nigeria. They came through a source; the man who is displaying it bought it from a source, so Customs must do
Off-the-shelf and remove all these imported items from the open market.
When they start confiscating it, it will be easy to know the source through the people who are exhibiting it and track down the source. If you get the source you can now control the import, set an example with one or two of them and the custom should be proactive.
And then, also, government must have a palm oil policy; bring out an intervention fund for the growth of the sector. You can call it Oil Palm Intervention Fund, but there must be a fund. Government must encourage the sector.
When they put palm oil as one of the 41 items for prohibitions of import, the next thing they should have done was to create an intervention fund for people to go back to planting, but you discover that even though they said they have provided cheap funds but there is no fund because palm oil sector should come under Special Fund for consideration.
You cannot say that the fund you have provided for groundnut and rice, which are annual crops, is the fund you are going to use for palm oil.
Palm oil takes a minimum of four or five years for you to get the real fruit and for you to talk about repayment. So it has very long gestation period, so you must provide a special fund to intervene in that sector but it is not available now.
So it is not enough to say we prohibit the import of palm oil and you do not encourage the growth. People must go back to planting, go back to the field to plant and it will take this long gestation period before they can reap. So such fund must also have a long moratorium period for repayment and must be at every, very low interest rate because it is not an annual crop, but no such incentive is provided.
Are you saying the prohibition is not an advantage to the VEOPAN sector?
No, the prohibition, which would have been an advantage to this sector, rather turned out to be a disadvantage because now, if you do not import the raw materials and as no incentive is created, you are like being static, you are not doing anything. So, the growth of the sector is not being encouraged. So the federal government should take a critical look at that to encourage the palm oil sector through creation of special intervention fund for the palm oil sector.
Thirdly, is the general situation of the economy; they have to take a critical look at it. Because of the way the economy is being run, people do not have the purchasing power to buy as they were buying before, so the market is bad, production is bad, there is no incentive for back to the farm like backward integration and all that.
What is the future of the vegetable and edible oil sector of the economy?
The future, if we start now, is still very, very good because the oil palm, I can tell you now is the future of this country. If you look at the world economy today, you will realize that even a litre of palm oil is more expensive than a litre of crude oil, but we are not taken advantage of that and in Nigeria, out of the 36 states, about 28 can plant or grow oil palm seedlings.
And you also discover that oil palm value chain is very long, its employment creation is very huge. Now, we are crying youths are unemployed; this is one sector that can generate heavy employment. And it is also a sector that can add so much to the gross domestic product (GDP) of a country because a country like Malaysia has reversed its economy dependency from crude oil to palm oil dependency. It is a country that can export palm oil to up to $18 billion to $20 billion in a year.
How much crude oil do we export? If we add palm oil export to crude oil you will discover that Nigeria will have more stability. Palm oil sector is the next thing that can create an alternative base for Nigeria.