Palm oil growers cry foul as imports eat into profits

Nigeria’s push to rebuild its palm oil industry through backward integration is facing its most serious test in more than a decade, as import waivers and cheaper foreign oil trigger a price crash that producers say could stall new investments and weaken rural employment.

After years of expansion driven by the 2011 backward integration policy, large producers such as Presco and Okomu delivered record performances in 2025. Combined net profit nearly doubled to N201.64 billion, while revenue jumped 125 percent to N538.69 billion, supported by higher crude palm oil (CPO) prices of $1,007 per metric ton, up from $923 per ton.

But industry leaders warn that those gains are now at risk.

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Nigeria spent $154.62 million importing crude palm oil in 2024, according to United Nations Comtrade data, even as domestic production has expanded steadily over the past decade.

Fresh fruit bunch prices have fallen 43 percent from N2.8 million per ton to N1.6 million, reflecting what producers describe as a surge in imported and allegedly smuggled vegetable oils.

“This is an existential moment for the industry,” said Emmanuel Ibru, chairman of the Plantation Owners Forum of Nigeria (POFON).

“Billions of dollars have been invested by foreign and indigenous companies. All these investments are being threatened now by the importation of cheap palm oil.”

Ibru noted that imports of crude palm oil ought to be regulated to ensure it only covers the production gaps and not exceed it.

He explained that palm oil imports should function as a strategic shock absorber rather than a permanent market feature, which has been the situation in the country.

A policy contradiction

The backward integration programme was introduced to reduce Nigeria’s dependence on imports, encourage large-scale plantations and support domestic refining.

Since 2013, oil palm fruit production has increased from 8 million metric tons to 11.6 million metric tons in 2024, according to Food and Agriculture Organisation data — a 45 percent rise in 11 years.

Major players, including Wilmar, Dufil Prima Foods and Agric Palm expanded plantation footprints, while listed firms Presco and Okomu scaled output aggressively.

However, industry operators argue that recent import waivers are undermining those gains by allowing cheaper foreign oil to compete directly with higher-cost domestic production.

Local producers face elevated energy, logistics and financing costs, making it difficult to compete with imports priced in foreign markets with lower production costs.

Fatai Afolabi, managing director of Foremost Development Services Limited, said sudden import surges create instability that discourages long-term capital allocation. “When investors cannot predict policy direction, confidence erodes. That slows expansion and new planting,” he said.

Capacity strain and food security risks

Manufacturers say the pressure is already visible in factory utilisation rates.

Mohammed Tahir, chairman of the vegetable oil subsector of the Manufacturers Association of Nigeria, said several processors are operating below capacity as imported oil undercuts domestic supply.

“When you talk about food security, it is not just about bringing food into the country,” Tahir said. “If you are not self-reliant, you remain exposed to external shocks.”

Industry groups argue that imports should be used strictly to close production gaps rather than become a structural feature of the market. Nigeria’s population is expanding at roughly 2.1 percent annually, increasing edible oil demand and widening the supply-demand gap.

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However, operators warn that if price collapses persist during peak harvest season, smaller producers could face rising debt burdens, leading to underinvestment in replanting and expansion.

Christopher Uwala, president of the Soybean Association of Nigeria, said continued import pressure risks pushing farmers into financial distress. “Stakeholders are running into debt,” he said.

What happens next

At stake is not only corporate profitability but the credibility of Nigeria’s industrial policy.

Backward integration programmes rely on predictable tariff regimes and import controls to justify large upfront capital expenditure in plantations that take years to mature. Policy reversals or temporary waivers, even if intended to ease short-term food price pressures, can alter investor calculations.

If import volumes continue to rise without a clearly defined quota or gap-filling framework, analysts say Nigeria could slow the production gains achieved over the past decade and re-entrench dependence on foreign supply.

For an industry that has rebuilt itself over two decades, the next policy move may determine whether 2028 marks a peak.