‘Low incentives impede investments in oil palm sector’
Lack of incentives and governance challenges have been identified as impediments to the realisation of potentials in oil palm sector, both as a crop for export and local use, a study by the Initiative for Public Policy Analysis (IPPA) has shown.
Indeed, findings of a multi-country study on palm oil released by the IPPA titled “Nigeria: A Smallholder Case-study”, showed that small-holder palm oil farmers account for over 90 per cent of palm oil production, which is not sufficient for local consumption.
According to the findings, palm oil ought to provide a significant boom to local livelihoods and play a key role in poverty reduction strategy through a well-established value chain but the commodity remains overshadowed by broader problems.
The study established 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 pre-existing plantations, as is the case with few investors already in the sector”, the study showed.
Furthermore, the study showed that the global environmental concerns surrounding palm oil production has no direct relevance to Nigeria palm oil as there are more significant obstacles to investment aside from complying with the required environmental standard imposed by environmental non-governmental organizations.
“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.