Agriculture | |
Agriculture | |
1808 VIEWS | |
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Wednesday, September 04, 2019
/08:48AM / By CSL Research / Header Image Credit: GreenBiz
Amid
a mounting movement against deforestation by environmentalists to fight climate
change, the future of the oil palm industry stands threatened. The European
Union passed an act earlier this year to phase out palm oil from renewable fuel
by 2030 due to environmental concerns. Palm oil production is said to have been
responsible for about 8% of the world's deforestation between 1990 and 2008.
The crop has also contributed towards pollution and climate change as land,
including carbon-rich peatlands, have been converted to plantations. While
demand for palm oil used in EU biofuel accounts for a fraction of global
supply, industry heavyweights- Malaysia and Indonesia- worry the law could spur
calls for regulation in its usage in food, which accounts for nearly 70% of
global palm oil consumption. A global upheaval against the use of palm oil in
processed food could further hurt Nigeria's ailing palm oil industry.
Currently,
palm oil produced in Nigeria is not readily accepted in the international
market due to its low quality. In 2016, the European Union suspended some
agricultural food exports from Nigeria which include palm oil, due to its low
quality. This has resulted in excessive discount pricing of Nigerian palm oil
in the global market which has discouraged local oil palm farmers from
producing. Consequently, Nigeria spends about N180bn ($500mn) annually to
import palm oil in order to meet domestic consumption, an anomaly that has
compelled the Central Bank to implement interventionist policies to revive the
sector.
In
our opinion, growing concerns about the environmental damages that come with
cultivating oil palm could limit the end-markets for the crop in the long term.
Although, the Nigerian authorities are implementing policies to increase local
production of palm oil, we believe emphasis should also be placed on
sustainability of production by focusing on increasing yields rather than
expanding plantations. In our view, this can be achieved through collaboration
between the government and the private sector in providing financial and
technical support to smallhold farmers.
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