Policy flip-flop threatens palm oil backward integration investments

Nigeria’s game-changing backward integration policy for the palm oil industry is being threatened by policy flip-flop in the country’s agricultural sector.

The federal government had in 2011 introduced the backward integration policy in the country palm oil sector to boost local production and refinery of crude palm oil.

Companies such as Wilmar, Dufil Prima Foods, and Agric Palm Limited among others invested heavily in developing large palm plantations while existing players like Presco and Okomu doubled their productions owing to the backward integration policy.

The country’s largest palm oil producers had their best run in 2025, helped by higher Crude Palm Oil (CPO) prices, which rose to $1,007/metric tonnes (MT) from $923/MT, stronger domestic sales, and sustained volumes.

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The combined net profit of Presco and Okomu Plc nearly doubled to N201.64 billion as revenue jumped 125 percent to N538.69 billion.

However, these billion-dollar investments and millions of jobs created are currently being threatened by cheap palm oil imports that have flooded markets.

Emmanuel Ibru, chairman, Plantation Owners Forum of Nigeria (POFON), described the situation as an existential crisis for an industry that has rebuilt itself over two decades.

“Last year, especially towards the end, we saw a proliferation of imported palm and vegetable oil coming into the country,” Ibru said.

He attributed the surge to the import waiver policy, noting that local producers are unable to compete with cheaper foreign alternatives owing to high production costs.

“Billions of dollars have been invested by foreign and indigenous companies. All these investments are being threatened now by the importation of cheap palm oil,” he said.

Ibru noted that imports of crude palm oil ought to be regulated to ensure it only covers the production gaps and not exceed it.

He explained that palm oil imports should function as a strategic shock absorber rather than a permanent market feature which has been the situation in the country.

Nigeria spent a whopping $154.62 million (N215.1 billion) on importing crude palm oil in 2024, according to the most recent data from the United Nation’s comtrade.

Fatai Afolabi, managing director, Foremost Development Services Limited, said sudden market disruptions emanating from cheap imports are especially damaging, undermining investors’ confidence and discouraging new investments.

Afolabi noted that small and medium scale palm producers are squeezed between cheaper imports and high energy costs, packaging and logistics. “This threatens not only farm incomes but also rural employment and agro-industrial development,” he said.

Mohammed Tahir, chairman of the vegetable oil subsector, Manufacturers Association of Nigeria, urge the government to have a rethink on its import policies.

Tahir noted that low capacity utilisation in many factories reflects the strain on local manufacturers.

“The cost of production is very high, and factories that were operating five to ten years ago are now running far below capacity,” he said.

“When you talk of food security, it is not only about bringing food into the country. If you are not self-reliant, there is a big problem because the same crisis can rise again and we will fall back into the same trap,” he added.

Read also: Nigeria’s palm oil output jumps 12% to 1.57m tons in 2025

Steady production growth may stall

The country has seen a steady rise in its production of palm oil owing to the backward production policy.

Data from the Food and Agricultural Organisation (FAO) shows that Nigeria’s oil palm fruit production has risen steadily since 2013 when the policy was introduced to the sector.

It has risen from 8 million metric tons in 2013 to 11.6 million metric tons in 2024, a 45 percent increase in 11 years, this shows that the country is increasing its local production but not as fast as its population growth rate of 2.1 percent annually.

However, this production surge may stall if new investments are discouraged owing to the influx of cheap imports.

Christopher Uwala, president of the Soyabean Association of Nigeria, said if the influx of imported palm and vegetable oils persist, operators will run into debt and it would discourage further investments to boost output.

“This is seriously affecting farmers and the entire industry, as the stakeholders are running into debt,” he said.

Price crash

Prices of a metric ton of the fresh fruits has dipped by 43 percent from N2.8 million per ton to N1.6 million per ton.

Alphonsus Inyang, president of the National Palm Produce Association of Nigeria, said local prices have crashed even further as the country enters peak production season.

Inyang also alleged that apart from imports, smuggled palm oil is entering into the country through more than 300 entry points across five coastal states.

“They offload every night and morning, and at the end of the day we see lorries and trailers leaving Oron, heading to other parts of the country,” he said.

Inyang noted that the unchecked influx is forcing local producers to sell at prices dictated by foreign smugglers while government loses revenue.