Nigeria’s Palm Oil Price to Rise, Import Declines
Nigeria’s crude palm price is expected to rise in the first half of 2023, then fall thereafter as global supply is projected to improve in the second quarter, according to latest report in the industry.
With a double digit food inflation pressure, Nigerians continue to face persistent increase in prices. Though, the outlook for palm oil demand growth has been boosted by Indonesia’s decision in December 2022 to increase the share of palm-oil based fuel in diesel, according to Fitch Ratings note.
To reduce pressures on foreign exchange demand, Nigeria banned the importation of palm oil, helping local producer to leverage on the large market size, Unfortunately, the decision has worsened prices of consumables on account of lack competition and production costs disadvantage.
In 2019, government also closed the nation’s borders, and food inflation rate spikes unabated since then amidst lack of locally produce substitutes products with comparative costs advantage.
In the local market, price of palm oil has increased significantly amidst worrisome inflation condition and rising poverty index ahead of 2023 election. A 5 litre keg of edible palm oil was sold as high as N4,000 as insecurity continues to affect food supply into the local market.
Global palm oil production is likely to grow by 5% in the 2022-2023 marketing year, as per forecasts by the US Department of Agriculture (USDA), after being largely flat since 2020.
The view is supported by the latest production data, which show that output in Indonesia is on an uptrend since June 2022 and Malaysian volumes are up year on year in the second half of 2022 despite the impact of a labour shortage.
Malaysian benchmark crude palm oil (CPO) spot prices will average USD850 per tonne (t) in 2023, significantly lower than USD1,175/t in 2022, Fitch Ratings says in a new report.
It is noted that benchmark prices have rebounded to above USD850 per tonne in the fourth quarter of 2022, from the end-September level of around USD700 per tonne.
“We expect prices to strengthen further in the first half of 2023 to above the USD900 per tonne level”. The outlook for palm oil demand growth has been boosted by Indonesia’s decision in December 2022 to increase the share of palm-oil based fuel in diesel.
However, Fitch analysts indicate expectation that supply to increase from the second quarter of 2023, and cause prices to drop in the second half.
“Foreign worker availability in Malaysia is gradually improving, and we expect the situation to normalise by mid-2023. We also expect healthy soil moisture conditions and lower flooding-related disruptions to support output”.
In 2022, Nigeria’s crude palm oil imports from Malaysia – second top grower of the crop have declined by 34.7 percent year on year as local production rises on increased investments, data from the Malaysian Palm oil Council (MPOC) shows. >>PEBEC Completes 7th National Action Plan
Specifically, Nigeria crude palm oil import from Malaysia declined from 262,065 metric tons in the first nine months in 2021 to 171,011 metric tons in the same period in 2022.
Big players like PZ Wilmar, Dufil Prima Foods, Agri Palm Limited, Presco, and Okomu Oil Plc among others are investing massively and developing backward integration projects in oil palm across the country.
Though producers benefited from the blacklisting of some 44 items including oil palm by the Central Bank of Nigeria in 2016 when FX shortage fostered local demand of the agro-product. #Nigeria’s Palm Oil Price to Rise, Import Declines
