Rising demand fuels silent palm oil boom

…Investors seen earmarking $855m for cultivation in Edo

…Delta communities allocate 130,000 hectares to over 145 firms

Rising palm oil demand in Nigeria is quietly driving a boom in the production of the commodity, with Edo and Delta states emerging as major hubs.

The two states have continued to attract new investments in palm plantations and refineries from existing and new players, positioning them as key contributors to Nigeria’s agricultural growth.

The boom in both states has helped to reduce the country’s palm oil imports by boosting local production and creating jobs. It has also helped to reduce pressure on the Nigerian foreign exchange market.

“With foreign exchange volatility, palm oil demand is rising rapidly. There is currently a high demand for palm oil in the country,” said Celestine Ikuenobe, former executive director of the Nigerian Institute for Oil Palm Research (NIFOR), told BusinessDay.

“It is the ready market that is driving more palm oil investments in the country,” Ikuenobe further said, noting that Edo and Delta states account for the bulk of the new investments.

He attributed investor interest in Edo and Delta palm oil to the deliberate efforts made by the governments of both states to spur growth in the sector.

Under the Edo Oil Palm Development Programme, the state has allocated 114,000 hectares of land to palm oil investors – large, medium and small-scale producers – in five years.

Churchill Oboh, general manager of Edo State Oil Palm Programme, said 65,000 hectares of the allocated land have been accessed by the investors, with 18,000 hectares already cultivated.

He said it costs between $7,000 and $8,000 to cultivate a hectare of palm plantation. Going by the average cultivation cost of $7,500, investors are projected to earmark $855 million (114,000 X $7,500) for palm oil development in Edo State, according to BusinessDay analysis.

He noted that existing palm oil makers in the state such as Okomu and Presco are also expanding their cultivated areas, stressing that palm oil produced in the state is done sustainably.

Revolution in Delta

In Delta, 130,000 hectares have been released by communities to investors for palm oil development under the Delta State Commercial Oil Palm Plantations Growers Cooperative Society Limited (DELCOM) initiative.

Currently, 145 companies and 3,080 smallholder palm oil farmers are part of the journey to develop palm plantations in the state.

“Edo State has rigorously pursued the development of oil palm by supporting existing investors and providing an enabling business environment to attract new ones,” said Fatai Afolabi, former executive secretary of the Plantation Owners Forum of Nigeria (POFON).

“Delta is also tapping a cooperative approach in boosting palm oil production and development,” said Afolabi, who is also the managing consultant of Foremost Development Services Limited.

Data from the Food and Agricultural Organisation (FAO) show that Nigeria’s oil palm production has risen steadily since 2014.

It rose from 8.2 million metric tons in 2014 to 11.6 million metric tons in 2023, a 41 percent increase in nine 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.

Chuka Mordi, managing director at Ellah Lakes, told BusinessDay that the supply-demand imbalances, food security concerns and rapidly growing population are major factors driving investments in oil palm production in the country.

Mordi, whose company plans to start oil palm production this year, said the multiplier effects from the increased investments in the sector will enhance Nigeria’s economic growth.

Record profits

Okomu Oil and Presco Plc, two agro-based companies listed on the Nigerian Exchange Group, achieved their highest after-tax profit in a decade in 2024 despite a challenging business environment.

These two agro-based companies were able to weather the storm of inflation and the naira devaluation to record the highest after-tax profit in a decade. Presco recorded 4088.7 percent growth while Okomu Oil reported 1188.3 percent growth from 2015.

According to experts, the record profits declared by the listed palm oil makers in 2024 are also driving investments into the sector.

However, when inflation and FX are factored into the recently declared profits by Presco and Okomu, the actual value signifies that the businesses only made more in naira but not in dollar terms.

“Investors want to put money in sectors with attractive markets,” said Ikuenobe.