Wednesday, March 21, 2018 07.55PM / Industry Research
1. Nigeria Edible Oil Supply and Demand
Nigeria is the fourth largest producer of palm oil in the world accounting for 3% of global production. The Nigerian Institute for Oil Palm Research (NIFOR) estimates that upstream palm oil production is 0.98 million tons.
Groundnut is second largest source of domestic edible oil. With the assumption of 1 million tons of unshelled groundnut crushed annually, estimated production and consumption of Groundnut Oil per annum is 0.4 million tons. Other oils like Soybean, Cottonseed and Sesame oil, in total contribute to the production of maximum 0.1m MT.
Total domestic edible oil production is estimated at about 1.5million tons.
Considering Nigeria’s population of about 194m [as per FAOSTAT] and per capita consumption of 12.5 Kg per person per annum against the world average of about 20 Kg per person per annum, estimated annual consumption is 2.4 million tons.
Domestic Supply and Demand Gap
Hence, Nigeria has deficit of 0.9 million tons worth of more than USD 800 million.
Mechanisms to fulfill this Gap
Import of refined palm oil / vegetable oil is prohibited and there is a duty of 35% on the import of Crude Palm Oil / Crude Vegetable Oil.
By adopting this policy, country is able to generate employment in manufacturing / refining industry and also supports oil palm plantation by protecting them with an additional margin of more than $300 per ton on and above sales price realized by Malaysia and Indonesia’s palm oil plantation.
2 largest organized oil palm plantations in Nigeria has continuously reported a gross profit margin of more than 50% and operating profit in the range of 30-40%. In the year 2016, while the economy was in recession, inflation was sky rocketing, these companies has booked best ever performance, reported gross profit margin more than 70%. On an absolute basis this represents a gross profit margin of 280,000 Naira per ton on CPO sales price of 400,000 Naira per ton – which is highest in the world.
As per Market Analysis and Research wing of International Trade Centre (ITC), Geneva, Switzerland, who compiles data for trade statistics for international business development, out of total estimated deficit of 800 million USD, the recorded legal import is only in the range of 224 to 546 million USD.
Most of unaccounted import is happening through long porous border and estimated total revenue loss for the period of 2012-2016 is 901.6 million USD and 275 billion Naira (converted at CBN official exchange rate of 306 Naira per USD).
Legal Import of Palm Oil / Vegetable Oil by Country
Distribution of legal import of palm oil in terms of value is as follows
Volume share of import from Cote d’Ivoire in 2016 has come down to less than 5% of total import from 27% in 2013.
The demand for palm oil is primarily driven by the household consumption for food use as 90% of palm oil consumption in Nigeria is by the food industry while the non-food industry accounts for 10%. Products like noodles, vegetable oil, biscuits, margarines, shortenings, cereals, baked items and cosmetics thrive on palm oil. This is complemented by an increasing demand for the special palm oil which is used to meet the needs of industrial processors. Therefore, the large and rapidly growing population will continue to be a major driver of demand.
2. Cote d’Ivoire Edible Oil Supply and Demand
Cote d’Ivoire is the 11th largest producer of palm oil in the world accounting for about 0.7% of global production. As per AIPH, total palm oil production in year 2017 was 0.48 million tons.
Considering Cote d’Ivoire population of about 23m and per capita consumption of 14 Kg [as compare to 12.5 Kg for Nigeria] per person per annum against the world average of about 20 Kg per person per annum, estimated annual consumption of palm oil / vegetable oil is 0.32 million tons.
Domestic Supply and Demand Gap
Cote d’Ivoire has exportable surplus of 0.16 million tons.
As per Market Analysis and Research wing of International Trade Centre (ITC), Geneva, Switzerland, who compiles data for trade statistics for international business development, production, import and export data in value term, is as follows.
Cote d’Ivoire is the only exportable surplus country in West Africa.
Cote d’Ivoire production figures can be well estimated as most of the produce comes from top 4 organized oil palm plantation as per following details.
3. ECOWAS and its Objective(s)
ECOWAS is 43 year old regional group of 15 West African countries, founded on May 28th, 1975 by signing on the Treaty of Lagos. Its mission is to promote economic integration in all fields of economic activity with the objective of establishing an economic and monetary union through the total integration of the national economies of member states as a result raising the living standards of its peoples by maintenance and enhancement of economic stability of member states.
Under ECOWAS Trade Liberalization Scheme [ETLS], with the objective of reducing trade barriers among member nations, import duty on trade of produce with origin within these member nations are waived.
As per Market Analysis and Research wing of International Trade Centre (ITC), Geneva, Switzerland, under ETLS, Nigeria export and import in value terms is as follows –
Nigeria exports value under ETLS is 3 to 18 times more than import value under ETLS.
Cote d’Ivoire is an important trade partner among ECOWAS member nation to Nigeria. Nigeria’s export to Cote d’Ivoire is about 40-55% of total export under ETLS.
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