Unregulated palm oil imports threatening local investments – Okomu MD

Nigeria’s palm oil industry is facing renewed pressure as rising imports, policy uncertainty and structural bottlenecks threaten local production. Industry stakeholders have warned that a surge in cheap imports could undermine decades of investment aimed at rebuilding domestic capacity under the government’s backward integration policy.

In this interview, Graham Hefer, managing director  Okomu Oil Palm Company Plc, spoke with TAOFEEK OYEDOKUN on the impact of illegal imports and import waivers on local producers, the sharp drop in palm oil prices, and the broader challenges facing the sector. He also discussed Okomu’s recent financial performance, Nigeria’s persistent palm oil supply gap, and why stronger policy coordination and enforcement are essential to restore investor confidence and revive the country’s competitiveness in the global palm oil market.

Stakeholders in the palm oil industry recently raised concerns about a surge in imports and policy inconsistencies affecting the sector. Nigeria also spent about $154 million importing crude palm oil in 2024, according to data from UN’s comtrade. How is this affecting Okomu and local producers?

The issue really comes down to whether imports are happening legally or illegally and whether the existing policies are being implemented properly.

Under Nigeria’s current policy framework, crude palm oil can be imported, but only under certain conditions. If it is imported from outside the ECOWAS region, it must attract the appropriate duties and levies. If it comes from ECOWAS countries, then the importer must provide a certificate of origin and pay the ECOWAS Trade Liberalisation Scheme (ETLS) levy, which is about 5 percent. However, refined palm oil and related vegetable oils are completely banned from importation.

So the policy is actually quite clear. The challenge is enforcement. What we are seeing in the market today is that some traders bring in products and mislabel them. They claim the product is crude palm oil, but in reality it is processed palm olein or other refined derivatives that should not be entering the country under current regulations.

In addition, many of these imports are not paying the required duties and levies. That means the government is losing revenue, while local producers are forced to compete with products that enter the market at artificially lower prices.

One of the tactics used is to claim the product is “crude palm olein,” which is often labelled with the same acronym, CPO, as crude palm oil. In reality, there is no such thing as crude palm olein; it is already a processed product. That is one way some operators circumvent the regulations.

The bigger problem is that a significant amount of this oil is simply being smuggled through porous land borders. Even if someone wants to pay duties, they often do not. The reality is that Nigeria’s borders are currently very porous, and smuggling affects almost every commodity, not just palm oil. For producers like us, it creates an extremely difficult environment. We are operating within the law, paying taxes and complying with regulatory standards, while illegal products enter the market and distort prices. That is not a sustainable situation for any industry.

When products enter the country illegally or under questionable classifications, they often bypass the regulatory agencies responsible for quality control.

For example, our products are routinely tested and certified by regulators to ensure they meet required food safety and quality standards. But when products are smuggled or misdeclared at entry points, they may not pass through those checks.

So beyond the economic impact, there is also a potential consumer safety issue because authorities cannot verify the quality of those products. If the government engaged more with stakeholders in the sector before introducing policies like waivers or allowing large volumes of imports, we could help design solutions that protect both consumers and local industries.
Right now, however, what we are seeing is essentially unfettered importation, which could damage not only the palm oil industry but other agricultural sectors as well. You can already see similar complaints coming from rice millers, tomato producers, and other commodity groups.

Industry stakeholders say palm oil prices have dropped sharply in recent months. How is this affecting Okomu’s pricing strategy and profitability outlook?

The price drop has had a significant impact. Since December, our product price has declined by nearly 30 percent. At the same time, we are still dealing with inflationary pressures on our input costs. If you look at the Consumer Price Index (CPI), inflation may appear to be moderating slightly, but if you examine the Producer Price Index (PPI), which is more relevant for industrial producers, inflation remains high, still in the upper teens.

That means we are experiencing a situation where our product prices are falling while our costs continue to rise. Economically, that is what you would describe as a stagflationary environment.

To make matters more difficult, many of the imported products we compete against come from countries where palm oil production is heavily subsidised. Nigerian producers receive no such subsidies. Instead, we have to deal with security challenges, infrastructure deficits, logistics bottlenecks and inefficiencies at the ports.

Read also: Nigeria’s edible oil producers seek protection as import surge threatens local market

All of these factors add to our operating costs. When you combine falling commodity prices with rising input costs and unfair competition from illegal imports, it becomes extremely challenging for domestic producers.

Despite these challenges, Okomu’s revenue rose 52 percent to about N198.15 billion in 2025. What drove that performance?

Last year was indeed a strong year for us, and that performance was largely driven by two key factors. First, we experienced a very good year in terms of agricultural yield and production volumes. Higher yields naturally translate into stronger output and sales.

Second, global palm oil prices were relatively favourable during that period. It is important to understand that companies like Okomu are price takers in the global market. We do not determine the price of palm oil ourselves; we follow international commodity prices. When the global market price is strong and your production volumes are high, it naturally leads to better revenue performance.

However, the situation has changed recently. Even though international prices remain relevant, illegal imports have forced local prices downward below global market levels, which distorts the demand–supply dynamics in the Nigerian market.

Okomu’s share price has also risen by over 60 percent year-to-date on the stock market. What do you think is driving investor interest?

The increase in our share price is largely a reflection of the strong performance the company delivered last year. Investors are always looking for companies that demonstrate stability and the potential to generate value over time. The palm oil sector has attracted attention recently because of increased activity, including significant acquisitions and investments by major agribusiness players.

That said, we have already indicated in our forecasts that the second quarter may not be as strong as the same period last year because of the market challenges we are currently facing. So the future performance will depend largely on how these external pressures evolve.

The federal government introduced a backward integration policy for the palm oil sector in 2011. From your perspective, how transformative has government policy been for the industry?

There have been several policy initiatives over the years, but very few have been implemented effectively enough to make a lasting difference.
One positive example was the intervention by the Central Bank of Nigeria in previous years, where the agricultural sector was given access to financing at preferential interest rates. That helped stimulate investment in oil palm plantations and processing facilities.

Beyond that, many policies exist on paper but have not been enforced or implemented properly. For example, the duties and levies on palm oil imports are part of established regulations, yet enforcement has been inconsistent.

There are also structural issues with policies like the pioneer status incentive. A new oil palm plantation takes three to four years before it produces its first crop and roughly eight to ten years before it breaks even. If tax incentives only last for five years, they do not align with the long investment cycle of this crop.

In my view, the industry would benefit from something similar to the Sugar Council model. A formal palm oil council, backed by legislation, could bring together government and industry stakeholders to manage the sector in a more coordinated and transparent manner.

The government sometimes grants import waivers to reduce food inflation. What policy approach would you recommend to balance consumer interests and investor protection?

Waivers may provide temporary relief, but they are not sustainable in the long term. They might reduce prices for consumers for a short period, but they also create distortions that can eventually destroy the domestic production base. If processors cannot cover their costs because imported products are artificially cheaper, they will eventually stop producing.

The same applies across agriculture. If tomato farmers cannot transport their produce profitably or millers cannot process grains economically, the supply chain collapses.

The real solution is not waivers but addressing the root causes of inflation. The government must focus on stabilising the macroeconomic environment, controlling inflation and ensuring that the business environment supports local production.

If waivers undermine local industries, the long-term result could be job losses and factory closures. That would ultimately hurt consumers as well.

So it’s a utopia for a while. But at the end of the day, those people who are going to get to buy the cheaper product may be out of a job because the mills and the like have to close down because they are no longer able to process.

If you recall what I mentioned earlier, we have to deal with inflationary pressures. And the government made the inflation, not us. So we are sitting now with an inflation issue, prices that are basically being subsidised because that’s what a waiver is.

 

And it’s not sustainable as far as we are concerned. And what worries us is that businesses that have been built up over many years of hard work could be destroyed in the flash because of that.

The more sustainable approach is to address the root cause of inflation. The government needs to focus on bringing inflation under control, particularly by managing spending and macroeconomic pressures.

At the same time, policies that affect industries should not be introduced unilaterally. Stakeholders should be consulted before such decisions are made so that solutions balance consumer needs with the survival of local industries.

 

Based on industry estimates, what is the current national supply gap between domestic production and consumption, and how quickly could that gap be closed with the right policies?

The numbers are approximate, but broadly speaking, Nigeria consumes around 2 million tonnes of crude palm oil per year.

Domestic production accounts for roughly half of that. That means we have a deficit of around 800,000 to one million tonnes annually.

It is important to note that about 70 percent of Nigeria’s palm oil production comes from smallholder farmers. These farmers are critical to the sector because they help reduce rural poverty and support local livelihoods.

Unfortunately, policies such as import waivers can hit smallholders the hardest. When prices fall sharply because of cheap imports, small farmers often cannot cover their costs. Some simply stop harvesting their crops because it is no longer profitable.

The industry already understands that there is a supply gap. What we need is better coordination between producers, processors, and the government. For example, if a council oversees the sector, it can track how much palm oil is produced locally each year and determine the actual supply deficit. If the deficit is one million tonnes, the council could allow controlled imports to cover that shortfall after local producers have sold their output.

Importers could then apply for approval to bring in specific volumes under a regulated framework. That way, the market remains balanced while ensuring domestic production is not undermined.

 

What is Okomu’s current plantation size and production capacity, and are there concrete expansion targets over the next five to ten years?

 

At present, Okomu has a plantation area of just over 34,000 hectares. Roughly 20,000 hectares are dedicated to oil palm cultivation, while about 8,000 hectares are used for rubber production.
In terms of output, we produced about 80,000 tonnes of crude palm oil (CPO) last year.

That said, the industry as a whole does not meet Nigeria’s domestic demand. The country is still short by roughly one million tonnes of crude palm oil annually, which explains why imports occur.

However, imports should ideally happen within a controlled and transparent framework. We understand that supply gaps exist, and we are not opposed to imports where necessary. But they should be legal, regulated, and structured so that the government can collect the appropriate duties and taxes.

In terms of employment, we have between 2,000 and 3,000 direct employees working within the company. When you include contractors, smallholders and other indirect workers in the value chain, that number rises to around 10,000 people.

The oil palm industry has significant employment potential because it involves a long value chain, from plantation development to harvesting, processing, logistics and final product distribution.

For now, our main focus is on improving efficiency within our existing plantations.
We are investing in better management practices, improving yields, and ensuring our operational efficiencies continue to improve. There is still significant room to increase productivity from the assets we already have.
Land is also a finite resource, so expansion is not always straightforward. At present, we are not actively pursuing the acquisition of new land or plantations.

That said, if opportunities arise and the board determines that expansion makes strategic sense, such as acquiring additional plantations, we would certainly consider it seriously. But for the time being, our priority is to maximise efficiency and productivity within our current operations.

 

Nigeria was once a global leader in palm oil production but has fallen behind countries like Malaysia and Indonesia. What steps are needed to restore competitiveness?

 

The oil palm value chain is extremely long, and there are many stages between planting and the final consumer product. That means there are numerous opportunities for employment and investment along the pipeline.

However, investors require certainty. Policy inconsistency, particularly sudden waivers or changes in import rules, creates uncertainty and discourages investment.

If we establish a structured framework, such as an industry council backed by legislation, everyone will know the rules of engagement. There will be transparency about how the sector operates and who is responsible for what.

That kind of structure can boost investor confidence because people will see that the system is organised and predictable.
There are also structural issues that must be addressed. First is insecurity. In many plantations, workers operate in large, isolated areas. Some employees are afraid to go into the fields because of security risks. We simply do not have enough security personnel to cover these areas.

Second is infrastructure. Transportation costs remain extremely high because of multiple checkpoints and illegal toll collections along major routes. A tanker transporting goods across several states can end up paying significant unofficial charges along the way. At one point, the total cost could reach around N100,000 per tanker before it reaches its destination.

Then there are the poor road conditions. Some roads leading to plantations are so bad that they cause severe wear and tear on transport vehicles. These are abnormal operating conditions that increase logistics costs significantly.

Ports and logistics systems also need improvement. Palm oil exports are time-sensitive because the product can lose quality if it is not handled correctly and shipped promptly. All of these issues must be addressed if Nigeria is to rebuild a competitive palm oil industry.

Nigeria actually developed a roadmap for the palm oil sector about 15 years ago, which was later updated. Unfortunately, very little has been implemented since then.

 

The naira has recently strengthened against the US dollar. How does that affect Okomu’s operations, especially exports?

Foreign exchange movements are a double-edged sword. When the naira weakens, companies complain. When it strengthens, there are also implications.

We are essentially a naira-based company, so most of our expenses are in local currency. We do import some machinery for our mills and rubber processing operations, but those imports are not very large.

On the other hand, we export rubber, which gives us access to foreign exchange earnings.

But the key issue for us is not whether the currency is strong or weak, it is stability. A stable exchange rate allows companies to plan their operations, budgets, and investments effectively.
If the exchange rate fluctuates wildly, it becomes extremely difficult for businesses to plan ahead.

Oil palm accounts for the bulk of Okomu’s revenue. Is the company planning to expand its rubber operations?

Yes, we are looking at expanding rubber production gradually. We currently operate a rubber processing factory with a capacity of about 2.5 tonnes per hour, but it is not yet running at full capacity. At the moment, we operate about two shifts daily, which means the factory is running at roughly 66 percent capacity.

To maximise utilisation, we would ideally run three shifts per day. We also have around 1,200 hectares of land that are not yet developed, and we are considering planting rubber there in the future. Over the next seven to ten years, this could increase raw material supply and raise factory utilisation to around 75 to 80 percent.

Finally, would you support a total ban on crude palm oil imports into Nigeria?

No, I would not support a total ban. The current policy framework is actually workable. Nigeria does have a production deficit, so some level of importation is necessary. What we are asking for is simply that the existing rules be implemented properly.

Imports should occur legally, with the appropriate duties and levies paid, and in a manner that complements domestic production rather than undermining it.

If the industry, government and regulators work together, perhaps through a formal palm oil council, we could manage the supply gap in a structured way. That would allow imports to fill temporary deficits while still encouraging local investment and expansion.

Nigeria has enormous agricultural potential. With the right structures and collaboration between government and industry, the country could once again become a major force in the global palm oil market.