In June 2013, “a coalition of associations of people doing business with palm oil in Nigeria” met the Minister for Agriculture, Akinwunmi Adesina, to demand increased government protection and support for Nigerian palm oil producers, according to an article in the Nigerian press.
The leader of the coalition reported “increased importation of crude palm oil and refined products into Nigeria” in the first quarter of 2013, “[crushing] the domestic trade”. Representatives of Nigerian palm oil processors claimed that “several importers change the country of origin of their products to that of other West African countries”, in order to benefit from lower tariffs under the ECOWAS Trade Liberalisation Scheme (ETLS). The coalition leader also called for the Nigerian government to “apply the exemption clauses in the ETLS regulation” in order to apply tariffs on imports from West Africa “on the same 35% tariff as applicable to imports from other regions”.
The coalition maintained that plans to expand palm oil production in Nigeria were being put on hold as a result of the current market situation. The Minister of Agriculture undertook to raise the issues at the next ECOWAS meeting.
This issue needs to be seen against the background of declining global palm oil prices. Average palm oil prices in the first quarter of 2013 were 17% lower than the average monthly price level in June 2012, and 38% lower than the peak average price level of March 2011.
The issue also needs to be seen against the background of the expansion of investment in palm oil production in West and Central Africa. Production in Côte d’Ivoire grew by 21% in 2011 to reach a level of 400,000 tonnes, with record exports of 245,000 tonnes. (For the current expansion in Côte d’Ivoire and the wider West African region, see Agritrade articles ‘ The fast-growing palm oil sector defends itself against an attack by lar...’, 9 September 2012 and ‘ New era dawning for palm oil producers’, 6 February 2012.)
In 2011, as part of its reform policy and in line with the ECOWAS Trade Liberalisation Scheme (ETLS), the Nigerian government lifted its ban on the importation of crude palm oil, instead imposing a 35% tariff. This policy was intended to increase the availability of palm oil for local processing and for use in the manufacture of value-added food products.
However, as a result of the policy change, local producers have faced increased competition from palm oil imports, often at very low prices. It is against this general background that the allegations have emerged of relabelling of third country palm oil by neighbouring ECOWAS traders. A review of trade data suggests that when taken together, imports and local production in the neighbouring ECOWAS countries from which Nigeria imports palm oil far surpass what is required for the domestic and industrial consumption in these neighbouring countries. In the case of Benin, for example, between 2003 and 2013 palm oil production was static, while exports increased more than tenfold. Similarly, while production in Ghana was also unchanged, its exports rose by 62%, while Côte d’Ivoire’s production declined by 20% during the period, but its exports rose by 74%.
This suggests there could be some substance to the relabelling concerns expressed by Nigerian palm oil producers. With global prices declining, there are fears that current trends could threaten the future of the Nigerian palm oil industry, which provides a livelihood for smallholder farmers across 24 states of the Nigerian federation. This would be inconsistent with the government’s agricultural transformation agenda.