Oil Palm in Nigeria -- Not so much of the underdog oilBy Ayoola Brimmo
Published on 27 January 2015
Despite oil palm being widely recognized as native to West-Africa, oil in Nigeria still typically implies the petroleum industry, accompanied with an air of wealth. Without undermining oil palms dietary importance and inherent industrial benefits -- a consumer food-processing, cosmetic, and pharmaceutical ingredient-- the resource continues to shrivel as the underdog oil. This is due to its unrealized potential as a cash and energy crop which inherently exceeds its current merits as a mere food crop.
In the 1960’s, Nigeria beamed as the largest producer of oil palm, providing 43% of global production. However, South-East Asia currently produces 90% while ironically; Nigeria produces only 2% of the global oil palm production and is now a major importer of palm oil. This drastic decline is attributed to the vast destruction of Nigeria’s oil palm plantations during the civil war in the late 1960's and subsequent decline of farming due to the ‘crude oil-doom’ of the mid 1970’s. Although, Nigeria’s dire shift from an agro-based to petroleum-based economy was ill-conceived, the current plunging crude oil price necessitates a comparative evaluation of the benefits that the crude oil and oil palm resources hold for the nation.
Based on recent oil prices published by Deutsche Bank (2015), Nigeria’s maximum daily crude oil production of 2.5 million barrels can generate $50 billion annual revenue. With a $25 per barrel operating cost (including royalties), annual profits may accrue to $27.5 billion. However, if Nigeria utilizes its 24 million hectares of arable land suitable for oil palm production (32% of Nigeria’s total arable land), approximately $75billion revenue and $35billion[i] profit can be generated. This highlights the promise of oil palm as a cash crop for the country.
From an energy point of view, recent research highlighted the possibility to double Nigeria’s current power generation by using the solid biomass by-products from the Crude Palm Oil (CPO) and Palm Kernel Oil (PKO) production processes, as fuel for a steam turbine –by realizing its full potential, the country could produce oil palm based biomass capable of generating up to 8000MW of electricity[ii] which is about twice the current peak generation. Furthermore, automobile fuels such as bio-ethanol and biogas can be produced from the liquid waste product of the CPO and PKO extraction process - palm oil mill effluent. Thus, its sustainable nature, which presents a potential to mitigate the crude oil-induced climate change, makes oil palm an energy crop with enormous opportunities.
Regardless of being the endearing alternative, this article's rationale is not to advocate a crude oil to palm oil production focus-shift in Nigeria or elsewhere. Rather, the aim is to reiterate Nigeria's hackneyed clamor for energy diversification. The combined monetary and energy benefits of both commodities supersedes that of either of them. Hence, rejuvenating the oil palm industry, whilst sustaining the current crude oil production will inevitably blossom the country’s economy.
However, Nigeria's realization of its potential as a major oil palm producing nation is heavily dependent on the strategic address of issues within the industry - eligibly the lack of oil palm cultivation incentives and the relatively low yield of the locally cultivated Dura oil palm breed. Suffice it to say that local producers who cultivate 80% of national oil palm produce are discouraged and compelled to trade oil palm at non-profitable prices due to the current waivers granted by the Nigerian government to importers and their further exploitation of the 75% free trade zone rebate.
Actions have to be taken to increase Nigeria’s current 0.28ton/hectare yield of CPO which is comparatively low to countries like Malaysia (CPO yield of 4ton/hectares). Considering that The Nigerian Institute for Oil Palm Research (NIFOR) has had a reasonable amount of success in improving the yields of local breeds via genetic modification, there should be an increased awareness strategy for these hybrids amongst local farmers. Learning from the mixed cropping and cross breeding practices adapted in Indonesia and Malaysia could also aid rebuilding the Nigeria oil palm industry. If successfully implemented, Nigeria may revive its faded glory as an oil palm giant. Feasibly, oil palm may then cease to be the country's underdog oil after all.
[i] based on the 4.0 ton/hectare CPO production rate and 0.47 ton/hectare PKO production rate of the Tenera breed, the commercial December 2014 prices of PKO and CPO of $960/ton and $624.95/ton respectively and the processing cost of CPO and PKO in Malaysia.
[ii] Nigeria’s current production from 3 Million hectares of the local breed can generate 650GWhr/yr. using steam turbines. Hence, expanding to 24 million hectares and advancing to a breed with approximately 20 times more oil and biomass yield (e.g. the Tenera breed) would result in about 73,000GWhr/yr.