The economic landscape in Nigeria has faced considerable challenges following the implementation of the Federal Government’s decision to remove the petrol subsidy and float the naira in 2023. Many businesses, especially those in agriculture, are feeling the adverse effects of these changes. In an exclusive interview, Felix Nwabuko, Managing Director of Presco Plc, a leading player in Nigeria’s oil palm industry, shared insights on the impact of these policies on businesses, the oil palm sector, and the government’s role in facilitating a more conducive business environment. He also discussed Presco’s resilience in navigating these obstacles.
Government Reforms and Agricultural Impact
As the agricultural sector is crucial to Nigeria’s economic diversification, the government has introduced several reforms to enhance its development, including the National Agricultural Technology and Innovation Policy (NATIP) and a 50% rebate on agricultural inputs for farmers. Nwabuko acknowledges that these reforms are well-conceived but emphasizes the critical role of effective implementation. He stressed that the success of any policy hinges not just on its design but also on how it is executed at ground level.
“In theory, these reforms sound promising, but the challenge lies in their execution. From a policy perspective, the intention behind these reforms is commendable, yet the impact is diluted by issues such as poor data collection, political interference, and inefficient distribution channels,” Nwabuko explained. While he supports the overarching goals of the policies, he highlighted that implementation remains a significant hurdle that hampers the full potential of these initiatives.
Challenges of Petrol Subsidy Removal and Naira Float
One of the most significant hurdles facing businesses today is the removal of the petrol subsidy, which has driven up transportation and operational costs. Presco, a company heavily reliant on transportation for the movement of goods and workers, has seen a sharp increase in fuel-related expenses. However, Nwabuko pointed out that businesses in the agriculture sector, particularly those dealing with raw materials such as oil palm, are unable to fully pass these increased costs onto consumers, as many are dealing with their own production constraints.
The second challenge is the free float of the naira, which, according to Nwabuko, has put businesses in a difficult position. “While a free market economy might theoretically justify a floating currency, the current state of Nigeria’s forex market doesn’t reflect the basic economic principles of supply and demand,” he said. The naira’s value continues to struggle due to a lack of diversification in foreign exchange sources, with oil being the primary earner for the country. This situation, Nwabuko believes, needs urgent rethinking.
“At this stage, we need to evaluate if a floating naira truly aligns with Nigeria’s current economic realities. If it doesn’t, then perhaps alternative solutions should be explored,” he argued.
Support for a National Oil Palm Council
The issue of adulteration and smuggling within the oil palm sector has prompted industry stakeholders to call for the establishment of an Oil Palm Development Council. Nwabuko fully supports this initiative, believing it would provide regulatory oversight, improve industry standards, and tackle challenges such as adulteration and smuggling, which currently plague the sector.
“A dedicated Oil Palm Council would bring together key stakeholders—industry experts, farmers, and government representatives—to create a more structured and effective regulatory environment,” he explained. Furthermore, the council could play a pivotal role in facilitating collaboration between the government and private enterprises to strengthen the value chain and support sustainable growth in the oil palm sector.
Addressing Barriers to Entry in Oil Palm Production
While the oil palm sector holds substantial potential for economic growth, Nwabuko highlighted that high barriers to entry—especially in financing and land acquisition—discourage many potential investors. “The high cost of entry into the oil palm business, coupled with the challenge of securing affordable financing, makes it difficult for small and medium-sized businesses to thrive in this space,” he said.
He recommended targeted financing initiatives, like the Central Bank’s oil palm development fund, but stressed that the financing structure must be better tailored to the long-term nature of oil palm farming, which takes several years to yield returns. He also pointed to the need for more affordable and accessible input supplies, such as quality seedlings, which would help lower the barriers for new entrants.
“Government interventions must focus on providing the right type of financing with favorable terms, as well as ensuring that key inputs, like seedlings and fertilizers, are affordable to all, especially smallholder farmers,” Nwabuko urged.
Land Acquisition and Support for Investors
In addition to financing and input availability, Nwabuko emphasized the importance of land acquisition processes. “In some states, like Edo, we are seeing efforts to streamline land access for investors, which is encouraging. The government’s proactive stance in addressing land acquisition challenges is critical to ensuring that investors can quickly move from planning to production,” he noted.
He highlighted the success of the Edo State Oil Palm Program (ESOPP), which helps investors navigate the complexities of land access, especially in rural areas, and ensures that local communities are fully engaged in the process.
Leveling the Playing Field for Oil Palm Producers
Another pressing issue facing the industry is the level of competition from foreign producers, particularly in the face of smuggling and unfair practices in the local market. Nwabuko cited instances where imported palm oil, often from countries with lower production costs, floods the market at a disadvantageous price to local producers. He stressed the need for the government to ensure a level playing field by tightening regulations on imports and enforcing existing policies aimed at supporting local production.
“Smuggling is a major issue, but so is the disparity between local and foreign producers in the Nigerian market. Free trade zones and waivers for certain companies that enjoy significant advantages over local players create an uneven playing field,” Nwabuko stated.
The Future of the Oil Palm Industry
Despite these numerous challenges, Nwabuko remains optimistic about the future of the oil palm industry in Nigeria. Presco’s long-term commitment to the sector, established since 1991, has contributed to its success, even in tough times. The company is currently expanding its operations, with plans for a new mill to accommodate increased production volumes.
“The outlook for the oil palm industry remains positive, especially given the growing domestic demand for palm oil. We are investing in our infrastructure to ensure that we can meet this demand while navigating the external challenges that come with operating in Nigeria,” Nwabuko said.
Looking ahead, Nwabuko urged the government to continue its support for the sector by addressing critical challenges such as financing, smuggling, and land acquisition. With the right policies and effective implementation, the oil palm industry could contribute significantly to Nigeria’s economic growth and diversification.
