Nigeria will continue to under-achieve her potentials in palm oil both as a crop for export and local use, says a report. It also said there are significant barriers to investment beyond the global environmental concerns.
The incentives to invest in agriculture are low, dysfunctional land tenure system, transaction costs and risks arising from poor governance are high. These are the key findings in a multi-country study on palm oil released today by the Initiative for Public Policy Analysis (IPPA).
The study entitled: “Nigeria: A Smallholder Case-study” is authored by
IPPA’s team of researchers as part of a global study of key palm oil
producing countries assessing the Socio Economic Impact of High Carbon
Stock (HCS). The study finds that small-holders palm oil farmers account
for over 90 per cent of palm oil production which is not enough for local
consumption alone. It finds that palm oil ought to provide a significant
boon to local livelihoods and play a key role in poverty reduction
strategy through a well-established value chain but this is overshadowed
by broader problems.
The study establishes that the sector is plagued by dysfunctional land
tenure regime which works as a disincentive for longer term investment by
both smallholders and large estates. There is also lack of coordination
between state and federal authorities and a general disregard by local
communities of federal laws relating to land tenure. This prevents
investors to be wary are of making a large-scale investment in the sector.
This is exacerbated given a range of government policies targeting the
sector are either poorly implemented or grossly inadequate to tackle the
challenges. The available option for investors is the purchase of a
pre-existing plantations, as is the case with few investors already in the
In addition, the study further finds that the global environmental
concerns surrounding palm oil production has no direct relevance to
Nigeria palm oil as there are much more significant obstacles to
investment aside from complying with the required environmental standard
imposed by environmental non-governmental organizations. The question of
the impact of environmental regulations on palm oil – whether through
private sector (e.g. Roundtable on Sustainable Palm Oil) or state or
national laws – on smallholders is and has to this point been a non-issue.
Environment driven regulatory frameworks such as High Carbon Stock (HCS)
or Roundtable on Sustainable Palm Oil (RSPO) is likely to provide some
level of assurance to assuage environmental organizations but their
imposition or adoption is an additional burden on small-holders who can
barely produce enough for the local economy. Mandating palm oil farmer to
comply with certain environmental requirements would be ineffectual in the
face of poor environmental management in Nigeria which is hamstrung by
lack of enforcement capacity.
“The land tenure system is perhaps the biggest disincentive for investment
particularly for palm plantation. The risks associated with the land
tenure system have necessitated companies to undertake extensive community
consultations which have achieved positive results. However, there will
always be levels of dissatisfaction in any community where consultation is
one-sided with government. This will lead to some level of conflict which
requires constructive engagement of all the stakeholders,” says Thompson
Ayodele, one of the authors of the study.
“Oil palm is not a key driver of deforestation in Nigeria. Environmental
thresholds on oil palm will not necessarily result in environmental
protection. They may simply prompt development of another crop, this is
because the area available for oil palm – although suffering low
productivity – is large,” Ayodele concludes.
The study concludes that environmental threshold on oil palm will not
necessarily result in environmental protection largely because oil palm is
not a key driver of deforestation in Nigeria. The population’s reliance on
firewood for fuel is likely to worsen deforestation, as a weakened economy
will force more Nigerians to chop down trees for cooking fuel and shelter.
And government policy needs to aid smallholders in order to achieve
self-sufficiency in palm oil production as well as reforming the land
tenure system which dis-incentivizes private large-scale plantation.