‘We have invested over N65bn in developing local palm oil industry’
Santosh Pillai is the managing director of PZ Wilmar, which has made considerable investment in oil palm plantations and palm oil mills in Nigeria. In this interview with ODINAKA ANUDU, he calls for increased support for local investors and provides step by step solutions to challenges facing the industry.
You have planted almost 26,500 hectares of oil palm in Cross River State. You have two processing plants at Calaro Estate on the pipeline and a refinery in Lagos. How much have you invested in the industry so far?
Our investments in oil palm plantations and associated infrastructures in Cross River State currently stand at around N45 billion (approximately $150 million). We are continuing with these investments and looking for opportunities to expand our plantations in the state. We have also invested around N20 billion in an oil palm refinery in Lagos.
Tell us about your new processing plants at Calaro Estate in Cross River State.
One is a 45 ton per hour palm oil mill (POM) and the other is a 2.5 ton per hour kernel crushing plant (KCP). The POM is expected to be completed by the end of April, 2018. Full operations should start in early May.
The POM basically converts fresh fruit bunches (FFB) into palm oil. This process involves extracting red palm oil from the fleshy outer mesocarp of the palm fruit. The product is known as Crude Palm Oil (CPO), similar to the red palm oil that is sold on the local market.
The KCP, on the other hand, extracts palm kernel oil (PKO) from the palm kernels.
What is your production capacity?
We have one palm oil mill at Ibad Oil Palm Estate in Cross River. It has the capacity of 20 tons per hour o in terms of FFB processing. We are commissioning the new palm oil mill in the Calaro Estate, which will put our capacity to 45 tons per hour of FFB and 2.5 tons per hour in terms of kernel crushing.
You are investing so much in the industry; what is your motivation for this?
Plantation establishment and palm oil production are our core business and we have vast experience doing this business in Malaysia, Indonesia, Ivory Coast, Ghana, Uganda and other countries. Nigeria has the biggest market in Africa and is the largest consumer of the palm oil in the region. Currently, there is a massive gap between demand and supply. Estimates of this deficit are around 600,000 to 700,000 tons per annum. Nigeria has a history of oil palm production, was a pioneer of this industry and has all that it takes to establish and maintain a viable palm oil industry. Most importantly, palm oil is a very important food ingredient in Nigeria and in West Africa. Our motivation is to help close this gap between demand and supply of a vital food commodity in the country, help in import substitution, save foreign exchange for the country, create employment opportunities especially in rural areas, and also contribute to the development of agro-allied industries in the country.
Tell us about your relationship with smallholder farmers.
In 2017, we launched our Pilot Outgrowers Scheme. The goal is to support local farmers to develop viable and sustainable oil palm businesses. As part of the programme, we are making available, high quality seedlings for farmers, training them on Best Management Practices (BMPs) to optimise their yields. We are also making patient capital available for the investment. Smallholders are extremely important for the oil palm sector in West Africa, as they supply over 80 percent of all FFB production. However, their yields tend to be very low in the region, with some obtaining just under two to three tons of FFB per hectare. With the right planting stock and good agronomic practices, they can increase this to several folds. We anticipate that the smallholders in our pilot project would be making about 18 tons of FFB per hectare. It is expected that they will be able to use the skills they have gained from this project on their other farms. We are creating a model where several small holder schemes can be initiated with the right support.
What’s your relationship with communities in Cross River and the government?
We maintain a good relationship with the host communities in all our operational areas. It is important for us to sustain this cordial relationship, as our host communities are vital to us for various reasons. The role of the communities in securing our investments in the state cannot be over-emphasised. Most of our workers also come from these host communities. We strive to contribute towards improving the quality of life and capacity development in our communities through various means. We have scholarship programmes that seek to award good students in tertiary institutions. We are providing invaluable technical skills to smallholders in our pilot programme and also equipping several of our workers with practical skill sets that enable them to work in various departments in our operations. These are lifelong employable skills that will be of use to the workers throughout their working lives.
Additionally, we are making direct contributions to community development through our corporate social responsibility (CSR) programmes, where we are making potable water available, constructing new schools, renovating and equipping old schools, constructing roads, and providing free medical care.
There are allegations that few multinationals are planning to cut corners to import CPO. How will such practice affect investors like you?
There is currently a significant gap between demand and supply of palm oil in Nigeria. There is massive smuggling of palm oil across the borders to the tune of 400,000 tons per annum due to which the federal government loses millions of dollars in revenue from duty and tax collection. There are also illegal and questionable imports into the country, which means that genuine investors like us do not have a level playing field. Visit any supermarket or traditional market in Nigeria and plenty of imported vegetable oil which is banned in the country is easily available. The current policies are only aiding cross-border trade and smuggling. The leading domestic refineries in Nigeria are facing a crisis and many in the country are not operational.
Palm oil is an important food commodity in the country and it is the most readily available vegetable oil. While it is important to create conducive environment for the development of plantations to improve CPO production, we also need to meet the present need for palm oil. The only viable means of bridging that gap now is to develop the domestic plantation industry and to support the local refineries to the extent the demand gap is present by allowing the importation of the CPO for further processing within Nigeria. However, critical long-term goals should aim at supporting development of palm oil plantations within Nigeria by providing time-bound critical infrastructural and policy support , developing the palm oil supply chain by implementing a robust smallholder scheme.
Do you think that Nigeria will ever be sufficient in palm oil production?
Definitely, Nigeria has all that is required to be self-sufficient in palm oil production. Indeed, the country should be among the top global producers of the commodity. We have good agro-climatic conditions, manpower is readily available, and we have land and the market. Most importantly, the oil palm originated here. Nigeria has a competitive advantage in producing oil palm. To address the current and future demand, Nigeria will need to plant at least 300,000 hectares in the near future, which is an investment of over N700 billion and it will take us several years. It is a crop which has a long gestation period and takes three to four years to yield fruits and seven to eight years to achieve maturity. The industry requires massive investments and the government has to come with policies which will support development of the oil palm industry in a holistic manner.
However, we need to make sure that any future development of plantations is done in a sustainable manner to ensure that there are limited adverse environmental and social impacts. As members of the Roundtable on Sustainable Palm Oil (RSPO), we strive to develop our plantations in line with international best practices. Stakeholders in Nigeria should demand that all new developments in the country are done in line with the requirements of RSPO. This way, we will be safeguarding the future of our environment while at the same time empowering local communities to actively engage in the business and take advantage of the opportunities made available by the presence of the big industry players.
What are the challenges you encounter in Cross River. What solutions do you havefor them?
Cross River State is an excellent location to do business. Generally, we are very happy with the level of government commitment and support to our business. We expect the state and the federal government to address critical infrastructural gaps .The challenges with Nigeria’s land tenure system are well-known and documented. The situation is no different in Cross River State, and we constantly need to deal with land tenure related litigations in areas where we have valid land titles. Additionally, despite the good investor climate in the region, the cost of doing business here is generally very high compared to other countries in the region. Significant costs go into security, nuisance taxes, levies and infrastructural development. We are constantly learning and engaging with the relevant authorities and stakeholders to see how we can address some of these well-known challenges. Having said that, we enjoy a strong goodwill from communities and state government and happy with the support that we enjoy from all our stakeholders.
Big Read |