Remarks By Godwin Emefiele, CBN Governor At a Stakeholders Meeting on The Palm Oil Value Chain

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Monday, March 18, 2019    05:33 PM / By Godwin Emefiele, Governor of the Central Bank of Nigeria 

 

Good morning Distinguished Ladies and Gentlemen, I am pleased to be speaking to you today on resuscitating Nigeria’s Palm Oil sector, which is vital to our growth objectives as a nation, and to our efforts at creating jobs for Nigerians. This meeting is indeed an important one as it brings together key players across the palm oil value chain, state governments, banks, and officials of the CBN, in order to examine the challenges faced by palm oil operators. We also hope to identify promising approaches that will help in revitalizing this key sector and also enable Nigeria to regain its position as one of the leading global producers of palm oil.

 

As some of you may recall, in the late 50’s and 60’s, Nigeria was not only the world’s leading producer of palm oil, it was also the largest exporter of palm oil, with close to 40% of the global market share. Today we are a distant 5th among leading producers of palm oil; we barely produce up to 3% of the global supply of palm oil, with estimated production of 800,000 MT of palm oil, while countries like Malaysia and Indonesia produce 25million and 41 million tonnes of palm oil respectively. We have also become a net importer of palm oil, importing between 400,000 – 600,000 MT of palm oil in order to meet local demand for this commodity. Despite the availability of over 3m hectares of farmland for palm oil cultivation, production remains low at close to 2 tonnes per hectare, relative to a global benchmark of 25 tonnes per hectare. This is as a result of the maturation of existing palm trees, as some of these trees were planted in the 50’s, as well as low investment in replanting high yielding palm oil seeds. As some of you may know, the usual life cycle for optimum palm production is 25 years.

 

Ladies and gentlemen, if we had kept pace with our peers in supporting improved cultivation of palm oil, at the current global market price of $600 per tonne, and an assumed production level of 16m tonnes, Nigeria could have generated close to $10bn worth of foreign exchange for the country. This analysis does not take into consideration the amount of jobs that could have been created in our rural communities from large scale small holder developments.

 

Distinguished ladies and gentlemen, this conversation is indeed important as it forms part of our overall strategy to reduce our reliance on crude oil imports, diversify the productive base of our economy, create jobs and conserve our foreign exchange. Despite placing oil palm in the forex exclusion list, official figures indicate that importation of palm oil had declined by about 40 per cent from the peak of 506,000 MTs in 2014 to 302,000 MT in 2017. This indicates that Nigeria still expends close to $500 million on oil palm importation annually and we are determined to change this narrative. We intend to support improved production of palm oil to meet not only the domestic needs of the market, but to also increase our exports in order to improve our forex earnings.

 

Two weeks ago, we met with stakeholders in the Cotton, Textile & Garment sector where we announced some policy measures. These measures included the reinforcement of the ban on the use of forex from official sources to finance import of textiles. Steps are currently being taken to penalize smugglers of textile materials who are utilizing our financial system to conduct these illegal activities. We also agreed that textile manufacturers will be allowed to import cotton in 2019, but they must engage in backward integration efforts that will support local cultivation of cotton, in order to feed their factories by 2020. Efforts are also being made to fast-track the financing of 100,000 cotton farmers for the 2019 farming season, in order to meet the needs of our ginneries. These measures have started bearing fruit with enquiries by various stakeholders and investors on how they can support improved production of textiles locally.  Distinguished Ladies and gentlemen, these steps   are necessary in order to address the loss of over $4 billion expended on textile importation annually.

 

Your Excellencies, this renewed focus by the CBN to support improved growth in the Agriculture and Manufacturing Sectors in Nigeria, is clearly in line with the Federal Government’s determination to diversify the base of Nigeria’s economy away from a reliance on crude oil, so as to insulate our economy from the vagaries and shocks associated with volatility in crude oil prices. Let me stress that we are not unmindful that our current focus to make life difficult for smugglers of the products being targeted under our intervention will be resisted by unpatriotic and recalcitrant beneficiaries of the status quo. We will not be deterred by their criticisms but will appeal to Nigerians to support these initiatives. No doubt, there will be initial pain caused by this new focus, but the medium and long run benefits remain unassailable and glorious for our dear country.

 

In due course, we intend to also address challenges in the cocoa, cassava, beef/cattle ranching, dairy and fish sectors. Soon every region of our beloved country will feel the positive impact of our intervention in the agricultural sector.  These efforts we hope will not only enable us to conserve our foreign exchange, but also create jobs on a mass scale. As these measures begin to bear fruits, we are very optimistic that our states will become more economically viable, given the massive economic activities that will occur from catalysing activities in our agricultural and manufacturing sectors.

 

Although the economy has recorded some investments in the oil palm value chain over the last three years, these investments fall short of our expectations, and our expected target of self-sufficiency in oil palm production is far from being achieved. Prospective investors, both local and foreign, have at different fora identified the factors preventing investments in the sector to include, among others, difficulty in acquiring farmlands and the dearth of long term funding sources at affordable costs.

 

Today’s meeting was enlarged to include Executive Governors and other top government functionaries from the oil palm producing states to elicit their buy-in and set a partnership model that would, with immediate effect, stimulate investments in the palm oil plantations, such that within the next 3-5 years, the global share of the country’s oil palm production would more than double. Our ultimate vision is to overtake Thailand and Columbia to become the 3rd largest producer over the next few years.

 

With regards to improving access to finance for small holder farmers focused on cultivation of palm oil, the Bankers’ Committee had established a special sub-committee to make recommendations on sustainable financing models for oil palm and four other critical agricultural commodities that include cocoa, sesame seed, shea-butter, animal husbandry and cashew. This was in addition to a seminar sponsored by the Bank with the theme “Developing a Framework for the Sustainable Financing of Smallholders in the Oil Palm Value Chain in Nigeria” held in Asaba, Delta State on December 6, 2017. We expect to develop a funding model that will take into consideration the 3 – 4-year gestation period required in cultivating palm oil.

 

As part of our Anchor Borrowers Program (ABP) and our Commercial Agriculture Credit Scheme (CACS), the CBN will work with large corporate stakeholders and small holder farmers to ensure availability of quality seeds for this year’s planting season and agro-chemicals in order to enable improved cultivation of palm oil. We will also work to encourage viable off taker agreements between farmers and large-scale palm producing companies. Loans will be granted through our ABP and CACS programs at no more than 9% p.a to identified core borrowers. Some of the targeted large scale farmers are in our midst today and we shall use the opportunity of this engagement to achieve concrete results.

 

Indeed with an estimated 3 million hectares of land under cultivation, abundance of suitable arable land, we need the cooperation of our state Governments in the oil palm producing zone to make land available to investors with proven financial and technical capabilities, who will be able to support developments of large scale palm oil plantations in the country. I am happy to announce that all the states in the South-South and South- East regions have agreed to provide at least 100,000 hectares for the initiative. This program is also expected to accommodate the small holder farmers.

 

Your Excellencies, distinguished ladies and gentlemen, the issues we will be discussing today are critical to everyone with an interest in the success of our nation’s palm oil industry and by extension our economy as a whole. As a result, I would urge stakeholders here today to think carefully about how, in the current economic environment, our nation can best provide operators in the palm oil sector with the support they need to support improved production of palm oil, while expanding job opportunities for Nigerians. We are open to any suggestion that will enable us to realize this objective. It is our expectation that a stakeholder committee will be established to monitor the progress made as a result of these discussions today. 

I thank you very much for your attention. And thank you once again, for being here today.

 

Godwin I. Emefiele, CON
Governor, Central Bank of Nigeria

18th March, 2019

 

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