Okomu Nigeria: Subdued 2018 For Palm Oil Market… Illegal shipments, weaker consumer income affecting sales

Okomu Oil Palm Plc, Nigeria’s second-largest producer of palm oil, expects sales of palm oil to slow for the rest of the year due to a supply glut and weak consumer demand.

The company currently mills 30 metric tons of palm oil per hour, plans to double its capacity by 2020 on the completion of a $50 million plant. The company operates 33,000 hectares (82,000 acres) of oil palm and rubber trees, according to its website.

However, a surge in illegal shipments from neighbouring West African countries in recent months, has contributed to an oversupply of the domestic market.

Okomu’s Chief Executive Officer, Graham Hefer said there are fears the situation may get worse if the government gives import waivers ‘to some people for political reasons’ ahead of 2019 general elections, as happened in the past.

The Central bank of Nigeria(CBN) in 2015, had stopped the importation of 41 items, including palm oil, from getting the foreign exchange from official channels. That helped to support local producers, and also to conserve dollars after the price of crude, the nation’s major revenue earner, plunged in mid-2014. The measure was a boon to Okomu as its revenue surged 47 percent and profit rose to 85 percent in 2016.

While the restriction remains, palm-oil shipments increased last year as importers gained more access to foreign exchange following a new trading window introduced by the central bank for investors.

“There hasn’t been enough demand to absorb all that supply as Nigeria recovers from its worst economic slump in 25 years.

“We hope that the bottom line will be more or less in line with what we had before because we are closely monitoring our costs.

“We make sure we find the cheapest supplier in the market and that which can give us the best quality and the best returns on input.

“With a drop in demand for rubber from China, Okomu is seeking new markets in other countries” Hefer said.

The company sells palm oil locally and exports rubber.