Required Report - public distribution

**Date:** 2/1/2004

**GAIN Report Number:** NI4001

NI4001

**Nigeria**

**Oilseeds and Products**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Jamie Rothschild

U.S. Embassy, Lagos

**Prepared by:**

Ali Michael David

**Report Highlights:**

Nigeria\'s annual vegetable oil requirements exceed domestic output by
an estimated 300,000 tons. Despite the shortfall, bulk imports of all
vegetable oil are prohibited by the GON. This is encouraging large scale
undocumented cross-border imports. Market opportunities exist for about
50,000 tons of inedible tallow and 10,000 tons of branded,
consumer-ready vegetable oil annually.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Lagos \[NI1\]

\[NI\]

Executive Summary

Nigeria's overall output of vegetable oil continues to lag behind
national consumption requirements by more than 300,000 tons. Nigeria's
overall vegetable oil requirement is estimated at 1.6 million tons,
while total domestic vegetable oil out is estimated at 1.3 million tons.
The shortfall notwithstanding, the GON banned bulk vegetable oil imports
since 2001, ostensibly to protect local producers. Industry sources
indicate that, the ban is not effective as an estimated 280,000 tons of
the product entered the country unofficially in 2003. Opportunities
exist for U.S. exporters of tallow, and branded vegetable oil in
consumer-ready packs.

Although Nigeria has long since left the export trade in palm produce
and is now a net importer, the oil palm industry remains an important
contributor to the nation's economy. The sector is a major source of
income for farmers in the palm belt, accounts for close to 80 percent of
total vegetable oil consumption in Nigeria, and supplies a growing
demand by the local industry for raw material for the manufacture of
edible oil, soap, and detergents. Other important oilseeds produced in
Nigeria include peanuts, cottonseed and soybeans.

January 23, 2004. Exchange Rate: US\$1=137 Naira

# Production

PSD Table: Oil, Palm

  --------------- ---------- ------------ ---------- ------------- -------- ---------- -- ---------- ------------- ---------- ---------
  PSD Table                                                                                                                   

  Country         Nigeria                                                                                                     

  Commodity       Oil, Palm                                                                          (1000                    
                                                                                                     HA)(1000                 
                                                                                                     TREES)(1000              
                                                                                                     MT)                      

                  2002                    Revised                           2003          Estimate   2004          Forecast   UOM

                  USDA                    Post                              USDA          Post       USDA Official Post       
                  Official                Estimate                          Official      Estimate   \[Old\]       Estimate   
                  \[Old\]                 \[New\]                           \[Old\]       \[New\]                  \[New\]    

  Market Year                             10/2002                                         10/2003                  10/2004    MM/YYYY
  Begin                                                                                                                       

  Area Planted    2710                    2710                              0             2710       0             2715       (1000 HA)

  Area Harvested  2630                    2630                              2630          2632       0             2650       (1000 HA)

  Trees           280000                  280000                            280000        280100     0             280100     (1000
                                                                                                                              TREES)

  Beginning       20                      20                                20            20         20            20         (1000 MT)
  Stocks                                                                                                                      

  Production      770                     770                               780           780        0             790        (1000 MT)

  MY Imports      280                     280                               271           280        0             290        (1000 MT)

  MY Imp. From    0                       0                                 0             0          0             0          (1000 MT)
  U.S.                                                                                                                        

  MY Imp. From    0                       0                                 0             0          0             0          (1000 MT)
  the EC                                                                                                                      

  TOTAL SUPPLY    1070                    1070                              1071          1080       20            1100       (1000 MT)

  MY Exports      0                       0                                 0             0          0             0          (1000 MT)

  MY Exp. to the  0                       0                                 0             0          0             0          (1000 MT)
  EC                                                                                                                          

  Industrial Dom. 200                     200                               204           200        0             210        (1000 MT)
  Consum                                                                                                                      

  Food Use Dom.   840                     840                               847           850        0             860        (1000 MT)
  Consump.                                                                                                                    

  Feed Waste      10                      10                                0             10         0             10         (1000 MT)
  Consumption                                                                                                                 

  TOTAL Dom.      1050                    1050                              1051          1060       0             1080       (1000 MT)
  Consumption                                                                                                                 

  Ending Stocks   20                      20                                20            20         0             20         (1000 MT)

  TOTAL           1070                    1070                              1071          1080       0             1100       (1000 MT)
  DISTRIBUTION                                                                                                                

  Calendar Year   280                     280                               271           280        0             300        (1000 MT)
  Imports                                                                                                                     

  Calendar Yr     0                       0                                 0             0          0             0          (1000 MT)
  Imp. U.S.                                                                                                                   

  Calendar Year   0                       0                                 0             0          0             0          (1000 MT)
  Exports                                                                                                                     

  Calndr Yr Exp.  0                       0                                 0             0          0             0          (1000 MT)
  to U.S.                                                                                                                     

  **Prices                                                                                                                    
  Table**                                                                                                                     

  **Country**                Nigeria                                                                                          

  **Commodity**              Oil, Palm                                                                                        

  Prices in                  Naira                   per uom       Ton                                                        

                                                                                                                              

  Year                       2002                    2003          \%                                                         
                                                                   Change                                                     

  Jan                        80,800                  107,000       32%                                                        

  Feb                        79,400                  109,000       37%                                                        

  Mar                        81,000                  106,000       31%                                                        

  Apr                        82,000                  106,000       29%                                                        

  May                        72,300                  106,000       47%                                                        

  Jun                        70,000                  106,000       51%                                                        

  Jul                        77,000                  110,000       43%                                                        

  Aug                        85,500                  120,000       40%                                                        

  Sep                        86,700                  120,000       38%                                                        

  Oct                        87,000                  120,000       38%                                                        

  Nov                        90,000                  120,000       33%                                                        

  Dec                        95,700                  120,000       25%                                                        

                                                                                                                              

  Exchange Rate              137/1                   Local                                                                    
                                                     Currency/US                                                              
                                                     \$                                                                       

  Date of Quote              01/23/2004              MM/DD/YYYY                                                               
  --------------- ---------- ------------ ---------- ------------- -------- ---------- -- ---------- ------------- ---------- ---------

Nigeria's palm oil production in MY2004 is forecast at 790,000 tons, up
from 780,000 tons this year. Despite a constraint on funds available to
producers, existing farms are undergoing rehabilitation and expansion
due largely to increased profitability offered by oil palm production
due to government protection for the industry. AgOffice field visits
revealed that two new large-scale oil palm operations commenced planting
in 2003. Another large-scale operation successfully offered its shares
to the public to raise funds for its expansion program. Post notes an
increased exploitation of wild palms by rural farmers in the palm belt
spurred by attractive producer prices (see price tables). Additionally,
new small-scale farms are being established and existing farms are being
rehabilitated. This is projected to produce a modest increase in output
during the upcoming year, while the full impact of the expansion
programs will be felt in four years when the new plantings begin to
fruit.

Average Annual Price (Naira/ton)

  ----------------- ------------------ ------------------ ----------------
  **Commodity**     **2002**           **2003**           **Percentage
                                                          Change**

  Palm oil          80,000             110,000            38

  Palm kernel       35,500             51,500             45

  Palm kernel oil   90,000             133,500            48
  ----------------- ------------------ ------------------ ----------------

As part of the overall objective of revitalizing Nigerian agriculture,
the GON announced a new Presidential initiative on oil palm in mid 2003.
The initiative seeks to develop one million hectares of oil palm
plantation within the next five years. Under this program, an existing
125,000 hectares of palm plantation will be rehabilitated. In addition,
existing large palm estates are also being encouraged to assist in
developing smallholders as out-growers in the communities where they are
located.

Nigeria's oil palm production can be categorized into upstream and
downstream sectors.

A. The upstream sector comprises primary production activities, ranging
from the development of seedlings to producing red palm oil and palm
kernel. This includes palm oil and kernel produced from 2.25 million
hectares of wild palm groves, 400,000 hectares of small-scale holdings
and 50,000 hectares from large estates.

> Production of oil palm from unorganized wild groves is under exploited
> because of labor-related harvesting problems and low efficiency
> milling techniques used by local farmers. Yield levels on organized
> estates tend to be low by international standards due largely to poor
> rainfall distribution patterns resulting from distinct wet and dry
> seasons in the palm belt. However, some of the leading estates
> achieved yield levels of up to 18 tons of fresh fruit bunches (ffb) in
> 2003, up from a five-year average of 14 tons of ffb per hectare.
> Inadequate fertilizer application, attributed to high costs and
> periodic shortages, adversely affects industry yield levels.

Smallholder palm production is on the increase, thanks to support from
the government's National Accelerated Industrial Cash Crop Program and
the recently announced Presidential Initiative on oil palm development.
These programs are designed to encourage increased smallholder planting
of improved varieties in order to achieve enhanced rural incomes.
Incentives under the program include: reduced customs duties on imported
agricultural machinery, distribution of palm seedlings at subsidized
rates, and the provision of extension services to small-scale farmers.
Overall, Nigeria's upstream oil palm production is expanding at a
relatively slow pace and output continues to increasingly lag behind
national consumption requirements. Investment in the sector is
constrained by heavy capital investment requirements, Nigeria's land
tenure system which limits access to large contiguous land hampers
plantation agriculture. The relatively long gestation period of 4 years
for palm is unattractive to local investors.

B. Downstream oil palm processing consists of the crushing of palm
kernel, the refining of crude palm kernel oil into vegetable oil, and
red palm oil into palm olein. Despite excess capacity in the downstream
sector, investment is steadily increasing. This is due largely to a
perception of low capital risk and a quick return on investment.
Currently, the industry's annual installed palm kernel crushing capacity
is estimated at more than 600,000 tons, far exceeding total domestic
palm kernel production. Average industrial capacity utilization by
Nigeria's palm kernel processors falls below 55 percent. Soybeans, which
provide a ready substitute for palm kernel processors, have been in
short supply during the last three seasons due to poor harvests. This
has strengthened competition among processors for available supplies of
palm kernel and pushed prices to record high levels. Industry sources
indicate that an estimated 10,000 tons of palm kernel were imported in
CY2003 from Ivory Coast by some crushers to increase their utilized
capacity.

## Production Subcategory

PSD Tables: Oilseed Palm kernel

  ----------------- ---------- ---------- ---------- ---------- ------------- ---------- ---------
  PSD Table                                                                              

  Country           Nigeria                                                              

  Commodity         Oilseed,                                    (1000                    
                    Palm                                        HA)(1000                 
                    Kernel                                      TREES)(1000              
                                                                MT)                      

                    2002       Revised    2003       Estimate   2004          Forecast   UOM

                    USDA       Post       USDA       Post       USDA Official Post       
                    Official   Estimate   Official   Estimate   \[Old\]       Estimate   
                    \[Old\]    \[New\]    \[Old\]    \[New\]                  \[New\]    

  Market Year Begin            10/2002               10/2003                  10/2004    MM/YYYY

  Area Planted      2710       2710       0          2710       0             2710       (1000 HA)

  Area Harvested    2630       2630       2630       2632       0             2640       (1000 HA)

  Trees             281000     281000     281000     281100     0             281200     (1000
                                                                                         TREES)

  Beginning Stocks  10         10         10         10         0             10         (1000 MT)

  Production        350        350        360        360        370           370        (1000 MT)

  MY Imports        10         10         0          10         0             10         (1000 MT)

  MY Imp. from U.S. 0          0          0          0          0             0          (1000 MT)

  MY Imp. from the  0          0          0          0          0             0          (1000 MT)
  EC                                                                                     

  TOTAL SUPPLY      370        370        370        380        370           390        (1000 MT)

  MY Exports        0          0          0          0          0             0          (1000 MT)

  MY Exp. to the EC 0          0          0          0          0             0          (1000 MT)

  Crush Dom.        345        345        360        360        370           370        (1000 MT)
  Consumption                                                                            

  Food Use Dom.     0          0          0          0          0             0          (1000 MT)
  Consump.                                                                               

  Feed,Seed,Waste   15         15         10         10         0             10         (1000 MT)
  Dm.Cn.                                                                                 

  TOTAL Dom.        360        360        370        370        370           380        (1000 MT)
  Consumption                                                                            

  Ending Stocks     10         10         0          10         0             10         (1000 MT)

  TOTAL             370        370        370        380        370           390        (1000 MT)
  DISTRIBUTION                                                                           

  Calendar Year     0          0          0          0          0             0          (1000 MT)
  Imports                                                                                

  Calendar Yr Imp.  0          0          0          0          0             0          (1000 MT)
  U.S.                                                                                   

  Calendar Year     0          0          0          0          0             0          (1000 MT)
  Exports                                                                                

  Calndr Yr Exp. to 0          0          0          0          0             0          (1000 MT)
  U.S.                                                                                   
  ----------------- ---------- ---------- ---------- ---------- ------------- ---------- ---------

Prices Table: Palm Kernel

  ----------------- --------------------- --------------------- ----------
  **Prices Table**                                              

  **Country**       Nigeria                                     

  **Commodity**     Oilseed, Palm Kernel                        

  Prices in         Naira                 per uom               Ton

                                                                

  Year              2002                  2003                  \% Change

  Jan               34,000                42,000                24%

  Feb               34,000                41,000                21%

  Mar               35,500                42,500                20%

  Apr               33,000                52,000                58%

  May               30,000                51,000                70%

  Jun               30,000                46,000                53%

  Jul               34,000                48,000                41%

  Aug               35,500                54,000                52%

  Sep               35,000                60,000                71%

  Oct               41,000                58,000                41%

  Nov               42,500                60,000                41%

  Dec               42,000                60,000                43%

                                                                

  Exchange Rate     137/1                 Local Currency/US \$  

  Date of Quote     01/23/2004            MM/DD/YYYY            
  ----------------- --------------------- --------------------- ----------

# Consumption

Red palm oil is a major component of the diet of most Nigerians. Red
palm oil and palm kernel oil also are refined into palm olein and
refined vegetable oil, respectively for human consumption. Combined,
these two account for more than 80 percent of national vegetable oil
demand for both human and industrial uses. Industrial consumption of red
palm oil and palm kernel oil in MY2003 is estimated at 200,000 tons and
47,000 tons, respectively. Industrial utilization includes; soap,
detergent, bakers fat, margarine, etc. More than 85 percent of all palm
kernel meal produced in Nigeria is exported to the EU because of low
domestic demand by the animal feed industry.

## 

# Trade

Nigeria's total red palm oil and palm olein imports in marketing year
MY2003/04 are forecast at 290,000 tons, up from 280,000 tons a year
earlier. Although bulk vegetable oil is banned for imports, large
quantities are imported unofficially. Many importers reportedly
circumvent the GON's import ban on bulk oil by declaring to local
customs that their red palm oil imports were to be utilized as
industrial raw material. Such a categorization also offered a reduced
duty payment to customs. An estimated 10,000 tons of branded,
consumer-ready vegetable oil enter the country annually.

PSD Table: Palm Kernel Oil

  -------------- ---------- ---------- ---------- ---------- -------------- ---------- -----------
  PSD Table                                                                            

  Country        Nigeria                                                               

  Commodity      Oil, Palm                                   (1000                     
                 Kernel                                      MT)(PERCENT)              

                 2002       Revised    2003       Estimate   2004           Forecast   UOM

                 USDA       Post       USDA       Post       USDA Official  Post       
                 Official   Estimate   Official   Estimate   \[Old\]        Estimate   
                 \[Old\]    \[New\]    \[Old\]    \[New\]                   \[New\]    

  Market Year               10/2002               10/2003                   10/2004    MM/YYYY
  Begin                                                                                

  Crush          345        345        360        360        0              370        (1000 MT)

  Extr. Rate,    0.405797   0.405797   0.402778   0.402778   0              0.402778   (PERCENT)
  999.9999                                                                             

  Beginning      10         10         10         10         10             10         (1000 MT)
  Stocks                                                                               

  Production     140        140        145        145        0              145        (1000 MT)

  MY Imports     0          0          0          0          0              0          (1000 MT)

  MY Imp. from   0          0          0          0          0              0          (1000 MT)
  U.S.                                                                                 

  MY Imp. from   0          0          0          0          0              0          (1000 MT)
  the EC                                                                               

  TOTAL SUPPLY   150        150        155        155        10             155        (1000 MT)

  MY Exports     0          0          0          0          0              0          (1000 MT)

  MY Exp. to the 0          0          0          0          0              0          (1000 MT)
  EC                                                                                   

  Industrial     46         46         47         47         0              48         (1000 MT)
  Dom. Consum                                                                          

  Food Use Dom.  94         94         98         98         0              97         (1000 MT)
  Consump.                                                                             

  Feed Waste     0          0          0          0          0              0          (1000 MT)
  Dom. Consum                                                                          

  TOTAL Dom.     140        140        145        145        0              145        (1000 MT)
  Consumption                                                                          

  Ending Stocks  10         10         10         10         0              10         (1000 MT)

  TOTAL          150        150        155        155        0              155        (1000 MT)
  DISTRIBUTION                                                                         

  Calendar Year  0          0          0          0          0              0          (1000 MT)
  Imports                                                                              

  Calendar Yr    0          0          0          0          0              0          (1000 MT)
  Imp. U.S.                                                                            

  Calendar Year  0          0          0          0          0              0          (1000 MT)
  Exports                                                                              

  Calndr Yr Exp. 0          0          0          0          0              0          (1000 MT)
  To U.S.                                                                              
  -------------- ---------- ---------- ---------- ---------- -------------- ---------- -----------

Prices Table: Palm Kernel Oil

  ------------------ ----------------- ---------------------- -----------
  **Prices Table**                                            

  **Country**        Nigeria                                  

  **Commodity**      Oil, Palm Kernel                         

  Prices in          Naira             per uom                Ton

                                                              

  Year               2002              2003                   \% Change

  Jan                92,000            112,000                22%

  Feb                90,000            110,000                22%

  Mar                93,000            117,000                26%

  Apr                87,000            135,000                55%

  May                75,000            136,000                81%

  Jun                79,000            128,000                62%

  Jul                83,000            134,000                61%

  Aug                91,000            146,000                60%

  Sep                95,000            155,000                63%

  Oct                105,000           151,000                44%

  Nov                110,000           151,000                37%

  Dec                106,000           162,000                53%

                                                              

  Exchange Rate      137/1             Local Currency/US \$   

  Date of Quote      1/22/2004         MM/DD/YYYY             
  ------------------ ----------------- ---------------------- -----------

# Stocks

Nigeria is a net importer of virtually all oilseed products, therefore
stock levels are very low in Nigeria.

# 

# Policy

Beginning in 2001, the GON implemented an import ban on bulk vegetable
oil to support local producers. Branded and consumer-ready vegetable oil
products are allowed for imports at a duty rate of 65 percent.

# Marketing

Marketing opportunities exist for U.S. exporters of inedible tallow,
which is a close and preferred substitute for palm oil in soap
manufacture. Available U.S. export data show 30,800 tons of inedible
tallow entered Nigeria during June 2000 - May 2001 compared to 23,850
tons for the same twelve-month period a year earlier. Nigeria's duty on
tallow imports is 15 percent. Market opportunities also exist for
exporters of branded, consumer-ready vegetable oil products. A prominent
Nigerian importer has distribution rights for branded U.S. \"Butcher
Boy\", soybean oil. The importer is aggressively promoting this product
under USDA's Market Access Program. The importer regularly participates
in FAS Lagos food shows around the country.

PSD Table: Palm Kernel Meal

  -------------- ---------- ---------- ---------- ---------- -------------- ---------- -----------
  Country        Nigeria                                                               

  Commodity      Meal, Palm                                  (1000                     
                 Kernel                                      MT)(PERCENT)              

                 2002       Revised    2003       Estimate   2004           Forecast   UOM

                 USDA       Post       USDA       Post       USDA Official  Post       
                 Official   Estimate   Official   Estimate   \[Old\]        Estimate   
                 \[Old\]    \[New\]    \[Old\]    \[New\]                   \[New\]    

  Market Year               10/2002               10/2003                   10/2004    MM/YYYY
  Begin                                                                                

  Crush          345        345        360        360        0              370        (1000 MT)

  Extr. Rate,    0.553623   0.553623   0.552778   0.552778   0              0.552778   (PERCENT)
  999.9999                                                                             

  Beginning      10         10         6          6          10             10         (1000 MT)
  Stocks                                                                               

  Production     191        191        199        199        0              205        (1000 MT)

  MY Imports     0          0          0          0          0              0          (1000 MT)

  MY Imp. from   0          0          0          0          0              0          (1000 MT)
  U.S.                                                                                 

  MY Imp. from   0          0          0          0          0              0          (1000 MT)
  the EC                                                                               

  TOTAL SUPPLY   201        201        205        205        10             215        (1000 MT)

  MY Exports     175        175        180        180        0              185        (1000 MT)

  MY Exp. to the 175        175        180        180        0              185        (1000 MT)
  EC                                                                                   

  Industrial     0          0          0          0          0              0          (1000 MT)
  Dom. Consum                                                                          

  Food Use Dom.  0          0          0          0          0              0          (1000 MT)
  Consump.                                                                             

  Feed Waste     20         20         15         15         0              20         (1000 MT)
  Dom. Consum                                                                          

  TOTAL Dom.     20         20         15         15         0              20         (1000 MT)
  Consumption                                                                          

  Ending Stocks  6          6          10         10         0              10         (1000 MT)

  TOTAL          201        201        205        205        0              215        (1000 MT)
  DISTRIBUTION                                                                         

  Calendar Year  0          0          0          0          0              0          (1000 MT)
  Imports                                                                              

  Calendar Yr    0          0          0          0          0              0          (1000 MT)
  Imp. U.S.                                                                            

  Calendar Year  0          0          0          0          0              0          (1000 MT)
  Exports                                                                              

  Calndr Yr Exp. 0          0          0          0          0              0          (1000 MT)
  to U.S.                                                                              
  -------------- ---------- ---------- ---------- ---------- -------------- ---------- -----------

# 

#