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Imposition of 35% import duty on CPO detrimental to industries – Stakeholders

By on May 20, 2013

The recent imposition of 35 percent duty on importation of Crude Palm Oil, CPO, into the country by the federal government is beginning to take a toll on associated food industries, as they have started to experience acute shortages in supply of the product, industry stakeholders have said.

They lamented that Nigeria produces a meagre 750,000 MT to 800,000 MT of CPO every year as against 1.9-2.1million MT per annum local requirement, which leaves industries in the food sector with no choice than to rely heavily on imports from other countries.

The sectors affected, according to them, are biscuits, vegetable oil market, margarines, cereals, crisps, sweets and baked products, washing powder and cosmetics and other Fast Moving Consumer Goods, FMCG.  According to Tajudeen Olafadi, industry analyst with Index Mundi, a research firm, “Government’s decision to impose duty on palm oil is detrimental to the economy as it will create ripple effect on multiple industries and impact self reliance on food production and agricultural value chain, thereby squeezing the overburdened Nigerian, with higher food retail prices.”

“A critical look at the noodles industry, for instance shows that, on an average, it consumes approximately 72,000 MT of refined bleached and deodorized palm oil (RBDPO) which it does not have access to from the local palm oil companies in the country,” he added.

He lamented that the leading companies in the palm oil industry cannot fulfill the basic requirements for the noodles industry itself as there is an estimated shortage of palm oil amounting to 500,000 MT per. annum.

“To complicate matters, the oil palm producing companies in the country do little or nothing to ensure that they meet the growing demands of the manufacturing sector, which relies heavily on CPO’s for their goods,” said Emeka Ohanyere, an industry analyst.     For instance Okomu Oil Palm Plc produces in the range of 30,000 MT per annum which is just 13 percent of their installed production capacity.

It would be recalled that the company’s previous financial year results saw it declare a high dividend of N6 billion in 2011 and N8.4billion in 2012 along with a bonus split of one new share for every one share previously held, coupled with plans to double production capacity to 60tonnes per hour without completely re-investing profits for fresh pieces of land to produce more fresh finance backup, FFB, a development that sent mixed signals to the Nigerian public on the seriousness to overcome the shortage experienced in the vegetable oil market.

A look at the ownership structure of the oil producing companies show that foreign stakeholders control majority of their stake; in the case of Okomu, 59.27 percent shares in the company is owned by Socfinaf S.A., a Luxembourg based company and 40.73 percent by Nigerian individuals and institutional shareholders.

Another leading oil palm producing company, Presco Plc, also issued out dividends worth N1billion each in 2011 and 2012. Sa siat nv, a Belgium registered company is a major shareholder with 60 percent holding, while 40 percent is shared amongst others.

This however might not be unconnected with the lack of will to shore up oil palm produce by ensuring there is a strategic re-investment in oil palm produce, as Average CPO output in the last three years amount to a paltry 15,000MT p.a. which hardly meets, growing demand of manufacturers. The dividend paid out, no doubt displays the business intent of the concerned stakeholders interest in developing the palm oil market.

 

 

[Vanguard]