Small-scale palm oil millers in south-eastern Nigeria are largely stranded after paying hundreds of millions of naira to the old Adapalm for the supply of oil palm fruits, also known as fresh fruit bunches (FFBs), but did not get what they paid for more than three years after, BusinessDay investigation shows.
Adapalm, managed by Imo State government prior to November 2011, was handed over to Roche Group through a private –public partnership by Rochas Okorocha, Imo State governor.
The company inherited hundreds of millions of naira in obligations to small-scale millers, who had paid the old Adapalm for the supply of FFBs, which were raw materials for them, BusinessDay found.
Many small-scale millers had no plantations, so they relied on Adapalm for the supply of oil palm fruits, paying through designated agents.
Roche Group came in with a promise to fulfil the earlier agreements between the old Adapalm and smallholder millers. Sources told BusinessDay that the company made little progress in meeting the inherited obligations and left in 2016 when a new owner Imo VTU emerged.
After taking over the management of Adapalm in 2017, Imo VTU is yet to listen to the complaint of small-scale millers who are heavily indebted by former Adapalm, smallholder millers based in Ohaji/Egbema axis of Imo State said.
Currently, Imo-VTU does not supply FFBs anymore because it does not even have enough for internal use, insiders told BusinessDay. “This has become a big challenge to communities in Ohaji/Egbema. In Umuagwo, a lot of youths and millers whose money are stuck in Adapalm are no longer in business,” a small-scale miller Lazarus Ifeanyi told BusinessDay.
Jude Oparah, operations manager, Imo-VTU Oil Palm, told BusinessDay that the deal was not between Imo-VTU and small-scale millers. Apart from these debts, thousands of five-litre gallons of palm oil produced by small-scale millers in the country are stored in several warehouses today without buyers due to unbridled smuggling that has kept oil prices abysmally low.
A five-gallon litre of palm oil is currently sold between N7,000 and N9,000. It is even significantly lower in Akwa Ibom and Cross River where prices are below N5,000.
Companies using palm oil for manufacturing are increasingly turning their attention to smuggled palm oil because it is cheaper, but this has an adverse impact on millers, some of which are shutting down.
BusinessDay visited many palm oil millers in Imo, Anambra and Akwa Ibom and found that some of the plantation owners plant a specie of oil palm known as ’Dura’, which does not produce much oil. Only few have ‘Tenera’ specie which is more productive.
For instance, while Dura produces 75 litres of oil at one press of a machine button (in 10 minutes), Tenera produces 125 litres, according to Benson Umeh, CEO of Daddy IK Palm Oil Mills, located in Umuagwo, Imo State.
More so, many small-scale millers are still stuck in crude machines despite being responsible for 70 percent of output in the country. They are willing to buy motorised or mechanised tools and own their own plantations to guarantee regular supply of FFBs but are hindered by poor funding and absence of formal finance scheme.
They claim that the Central Bank of Nigeria (CBN) promised to fund palm oil as part of its Anchor Borrowers Scheme but is reluctant because palm oil has a gestation period of five to seven years.
“Each region has a flagship product. Cocoa is to the South-West what palm oil is to the South-East and South-South,” Remi Emeh, a miller and CEO of Remi Emeh Enterprises, said.
“Palm oil is even more important than many crops, including rice, because nothing in it is lost. You get palm oil, palm wine, palm kernel oil, power, palm olein, stearin, technical palm oil, and many other things. So, we call on the government and the banks to provide cheap funds for this sector. We have the capacity to meet local demand here,” Emeh added.
Nigeria produces 900,000 metric tonnes (MT) to 1.3 million MT of palm oil, with national demand standing at 2.1 million MT. Large and established firms such as PZ Wilmar, Okomu and Presco cultivate about 400,000 hectares of land, while smallholders farm above 900,000, according to Henry Olatujoye, national president, National PalmProduce Association of Nigeria (NIPPAN).
In Akwa Ibom State, particularly in Okim-Ejijor village, Ikom Local Government Area, oil palm plantation owners have a lot of FFBs but no buyers, prompting many of them to sell off their palm trees for less than N20, 000. The industry is disorganised, with a lot of middlemen and speculators buying when prices are low and selling when demand rises. Palm oil peak period is October to March.
When BusinessDay visited Anambra/ Imo Produce Association at Ihiala, it found only few traders complaining of low patronage, saying that Kano traders no longer come to buy because they get smuggled Malaysian oil. Nobody was found at Uli Plam Produce Beach and no transaction was taking place when BusinessDay visited. However, Chinese investor Zhengzhou QI’E Grain and Oil Machinery Co Limited has approached the Oil Palm Growers Association of Nigeria (OPGAN) for partnership.
Igwe Hilary-Uche, president of OPGAN, told BusinessDay exclusively that the company wants to provide hi-tech machineries to small-scale millers, provide funds and enter an off-taker agreement with them. “They are planning to invest something around $10 million and wants to export palm oil from here,” Uche said.
Five states have been picked for a pilot project: Anambra, Imo, Akwa Ibom, Cross River and Ogun, according to Uche.“They want to make oil relevant in Nigeria. Nigeria suffers because we don’t know the use of oil palm.”