Nigerian palm oil to soar as Indonesia increases export levy

Prices of Nigeria’s palm oil may rise as Indonesia – top grower of the crop has increased its Crude Palm Oil (CPO) export levy to 10 percent from 7.5 percent.

The Indonesian Ministry of Finance disclosed this recently and explained that the move is aimed at enhancing productivity and adding value to downstream palm oil products, particularly for smallholder farmers.

Indonesia is the highest global producer of palm oil, and one of Nigeria’s top exporters; hence, this policy shift will hamper Nigeria’s palm oil export from the country. It might also lead to a price rise in the commodity across the country.

“The adjustment of the export levy is necessary to enhance the productivity and added value of downstream plantation products, especially for the benefit of farmers,” the regulation states.

According to the National Bureau of Statistics (NBS), between 2019 and 2023, Nigeria imported over 1.3 million metric tons of palm oil from Malaysia, reflecting the gap in local production.

Nigeria presently produces an average of 4,000 metric tons of palm oil daily, roughly 1.4 million metric tons annually, but stakeholders in the value chain argue that it is insufficient to meet its 2.5 million metric tons demand from industries and consumers.

Currently, in local markets, palm oil prices have eased from N59,000 for a 25-litre keg to an average of N52,000. While it now costs about N9,000 for a 5-litre as against N11,000 last year.

The levy applies to the export of palm oil, CPO, and their derivative products.

Despite concerns from stakeholders in the value chain, the Indonesian government maintains that such measures are necessary to ensure sustainability and long-term resilience in the oil palm sector.

Last year, Alphonsus Inyang, president of the National Palm Produce Association in Nigeria, told BusinessDay that the global palm oil market is experiencing shocks due to new policies in Malaysia and Indonesia.

“Plans are in the works for Indonesia to further raise the bar on the types of palm oil products for export to B50 or B60 standard,” he said.

Therefore, he warned that Africa’s most populous nation’s dependence on Indonesia’s palm oil is at risk if local production is not bolstered.

Tags: export, Indonesia, prices, Crude palm oil, palm oil, Nigeria, export levy