Press release

Challenges and Innovations Shaping Nigeria’s Oil Palm Industry

Nigeria, Africa’s most populous nation, relies heavily on rural areas where 90% of the population engages in subsistence farming, with oil palm production playing a significant role.

Oil palm (Elaeis guineensis) has been a vital economic crop in Nigeria since before colonial times. Recognizing its potential, the British established plantations focused on palm oil production during colonial rule, boosting trade with Europe and contributing to regional economic development. Even after gaining independence in 1960, Nigeria remained a major palm oil producer.

With an estimated population of 197 million, Nigeria consumes about 3 million metric tons of fats and oils annually, with palm oil constituting approximately 45% of total consumption in 2018. Nigeria is Africa’s largest consumer of palm oil, consuming 1.34 million metric tons in 2018.

Oil palm cultivation supports livelihoods and employment opportunities for rural families, contributing to economic growth. Its various components—fronds, leaves, trunk, and roots—are utilized for diverse purposes, including livestock feed, construction materials, and traditional crafts. Additionally, oil palm holds cultural significance in Nigerian communities, featuring prominently in ceremonies, rituals, and cuisine.


Current State of Nigeria’s Oil Palm Industry

In the last five years (2014 – 2018), Nigeria consumed 6.6 million MT of CPO. Out of the total consumption, local production represented 75% or 4.93 million MT thereby causing reliance on importation for the shortfall of 25% or 1.67 million MT. 

According to Vegetable and Edible Oil Producers of Nigeria (VEOPAN), palm oil production provides jobs for at least 1.8million Nigerians. Because the local production is not up to demand, Nigeria at present does not export palm oil. The local shortfall is being supplemented by imports from countries such as Malaysia and Indonesia.

In 2023, Nigeria’s palm oil production reached 1.4 million metric tons, marking a steady increase since 2009, with significant growth observed in 2010. According to Statista, Nigeria now ranks among the top five global producers of palm oil.

Despite this, Nigeria’s annual consumption for oil palm produce lies at 2.4 million tons, with local production meeting only 50% of demand leaving FMCGs like Indomie still having to import Oil palm because local demand outstrips supply. Nigeria now produces a meager 1.7 percent of total world production which is inadequate for local consumption put at about 2.7 percent.


Challenges Facing Nigeria’s Oil Palm Industry

Amidst being the largest global Oil palm exporting country at the beginning of the 20th Century, Nigeria’s oil palm industry still faces many challenges that require urgent attention to achieve sustainable palm oil production to cater to and satisfy the local daily needs. Oil palm production is categorized into three groups; smallholders, medium, and large-scale plantations (Ayodele and Ehalomi, 2010). According to a case study by the Initiative for Public Policy Analysis (IPPA), the small holding control over 80% of Nigeria’s palm oil production. The government and a few private companies own fairly large plantations.


Nonetheless, the abundance of resources for palm oil production in Nigeria still is under critical condition due to the long-time palm oil industry producing and competing.


Some of the key challenges include:

Poor Funding and Land Unavailability

After the crude oil discovery in 1950, the agricultural sector has been neglected and poorly funded. Oil palm production which is a capital-intensive industry, requires access to funds, loans, and credit facilities from the government and banks. The high interest rate on borrowed funds is due to the long-term capital outlay for investment in plantations notwithstanding the 9% interest rate offered by the CBN. 

The Executive Director of the Nigerian Institute for Oil Palm Research (NIFOR), Dr Celestine Ikuenobe, said to increase the production of oil palm, land issues should be addressed by governments in production belts so that investors could have access to land and safe production environment.

Price Decline and Market Challenges

The prices of Technical and Special Palm oil (TPO and SPO) in the Nigerian domestic market face stiff competition from groundnut oil and soybean oil due to their close substitutability. The imposition of an embargo on vegetable oil imports in Nigeria led to a peak in TPO and SPO prices in 2007, reaching N280,000 and N300,000 per tonne, respectively. However, following the government’s decision to lift the embargo in 2008, prices plummeted to N200,000 and N220,000 per tonne for TPO and SPO, respectively. Consequently, dealers incurred significant losses due to the lifting of the import ban on vegetable oils (PIND, 2011). Furthermore, the lack of well-defined marketing procedures for locally produced oil palm products and a National Palm Oil council has resulted in poor pricing, adversely affecting the profit margins of rural producers. 

To address these challenges, there is a pressing need for a well-defined market framework, standardized pricing mechanisms, and an efficient distribution network to attract new farmers and ensure uniform marketing and pricing strategies nationwide (Enkenta and Ajala, 2017).

According to Afolabi who spoke with The Guardian “Malaysia has Malaysia Palm Oil Council. It also has a Malaysia Palm Oil Board. Here, what institutional mechanism do we have today? It is the Ministry of Agriculture. So, everything is subsumed under the Ministry of Agriculture and it cannot isolate oil palm and drive it because they don’t have the resources and they don’t want other crops or commodities to suffer. But if we have a palm oil council, it will just focus on palm oil.”

Labor and Transportation Challenges 

Smallholder farmers in Nigeria face significant hurdles in palm oil production, particularly concerning labor costs. The high expense of labor often prevents farmers from hiring help unless they have ample funds, leading to the potential waste of ripe bunches. To address this, implementing mechanization, herbicide use, and better tree management practices is crucial. Poor road infrastructure further increases production costs, making haulage services expensive, especially for transporting fresh fruit bunches to processing centers. Many smallholders, lacking access to processing facilities, are forced to sell their produce outright. Market uncertainties, driven by rising production costs, sluggish exports, and stiff competition, add to their challenges. Sustainable certification efforts are also hindered by high costs and a lack of incentives. 

Compounding these issues, the European Union’s advocacy for sanctioning palm oil imports for the biofuel sector and mandating the adoption of a unified sustainable certification for palm oil entering the European market is poised to significantly impact the livelihoods of over 650,000 palm oil smallholders (Brandi et al., 2015; Ahmad et al., 2020; Zakaria et al., 2020).


Moving Nigeria’s Oil Palm Industry Forward

To tackle the challenges above and move forward, some members of the Plantation Owners Forum of Nigeria (POFON) and other stakeholders have also called for the establishment of a national palm oil council to drive investments, industrialization of the crop, and its value chain development. Sometime in 2014, Dr Akinwumi Adesina, a former minister of agriculture, while lamenting the stagnant state of the sub-sector, said: “… Today, Nigeria is on its way to self-sufficiency in rice production. We have to do the same with the palm oil industry. It is shameful that we are importing crude palm oil. We should be exporting.”

Some of the other ways to overcome challenges and promote value addition:

Support Smallholder Inclusion: Provide smallholder farmers with training, access to finance, and improved farming practices to increase their productivity and income. Promote the formation of cooperatives to enhance bargaining power and market access. Provide training and capacity-building programs for farmers, processors, and industry professionals to improve skills, knowledge, and compliance with sustainability and quality standards.

Market Expansion: Explore new markets and export opportunities for palm oil and its derivatives. Tailor products to meet the specific demands of different markets, including those emphasizing sustainability and health. Growing demand for sustainable palm oil offers opportunities for value-added products (Nweke and Onokala, 2017). 

Infrastructure Development and Technology Adoption: Invest in infrastructure such as transportation networks, processing facilities, and storage capacities to improve supply chain efficiency and reduce logistical bottlenecks.  Embrace modern technology and automation in both farming and processing to improve efficiency, reduce post-harvest losses, and ensure product consistency and quality. The adoption of modern processing technology can improve efficiency and product quality.



At SAO Agro, we are committed to supporting the growth of the Nigeria Oil Palm industry by providing direct investment, on-the-ground technical support, specialist agricultural advisory, and long-term investment opportunities to our investors. Our Investment assessment includes; Value chain analysis, Risk evaluation, Business and regulatory environment analysis, Optimization of yields, Production costs, Environmental Impact Assessment and Social Impact Assessment. Our vision is to empower over 100,000 smallholder farmers by 2025. With our solar-powered commercial farm estate, spanning over 20,000 Hectares, we are set to provide farmers in Nigeria with research-based genetically improved seedlings for higher yield and also quality output.


It is also worth mentioning that we are the lead investor developing the Ondo Special Agro Processing Zone supported by Afdb and the Ondo State Government in the bid to increase State IGR through national and international agricultural trade.