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A milling plant for Crude Palm Oil.
The ECOWAS Free Trade Area also known as the ECOWAS Trade Liberalisation Scheme (ETLS) is expected to give rise to the elimination of custom duties and accompanied by the total elimination of all non–tariff barriers and other administrative measures impeding the free flow of trade in the sub–region.
The ETLS was established as a medium for increasing productivity and market access for products originating from the Region’s domestic economy. The concept was originally intended at benefiting the private sector in particular, and ultimately boosting the West African economy. It was also targeted at reducing the massive importation of goods, which West Africa has been known for. The ETLS’ ultimate goal targets generating employment among the member States of ECOWAS and increase intraregional trade.
Despite its enviable goals, the implementation of the ETLS has however remained shoddy with high level of malpractices among stakeholders.
Having lost its global competitiveness as the world’s largest producer of palm oil, Nigeria has begun to make efforts towards reclaiming its position through a backward integration exercise to drive the production of Crude Palm Oil, but not without challenges.
For instance, the Crude Palm Oil (CPO) under ETLS is classified under processed goods hence enjoys certain concession upon entry into a different ECOWAS state. To however qualify for these concessions, certain conditions must be fulfilled by member states one of which being that the country of origin of such goods shall be from the community with specified percentage of value addition.
Although many of the member countries cultivate oil palms, there is a need to increase potential production of palm oil in order to meet both the domestic and the regional demand, particularly the needs of ECOWAS member countries with vulnerable economies and high rates of hunger.
ECOWAS still experience a deficit of edible oil, which requires the importation of an estimate of 1.5 million metric tons per year and is foreseen to increase to some 2.0 million metric tons by 2020.
Despite the benefits of the ETLS, some stakeholders of the industry have allegedly taken undue advantage of the scheme to indulge in sharp practices by importing CPO from member states through round tripping from other countries. These CPO round tripped into these member states are then imported into Nigeria under ETLS zero duty regime.
According to a United States Department of Agriculture (USDA) review of the agricultural situation in Benin, “Benin serves as a delivery corridor for West Africa, reaching more than 100 million people in the landlocked countries of Niger, Mali, Burkina Faso, Chad and the Northern states of Nigeria.”
Already, a conservative figure estimates that there are over 3,000 entry points into the country from the neighbouring countries such as Benin, Niger, Cameroun, Chad and Gabon, among others.
The USDA observed, “Benin’s relatively efficient port services and liberal trade policies mean it is an important cog in the regional trade flows to nearby countries.”
The report noted that improvements in the country’s port operations as well as some small improvements in the ease of doing business over the past three years aided the flow of imports in the country.
“Benin applies the WAEMU (often known by its francophone name UEMOA) common external tariff (CET) with its four tariff bands (zero, 5%, 10% and 20%) with no quantitative restrictions applied.
“Informal trade between Nigeria and Benin is substantial.” The main products involved in this informal trade include rice, poultry products, refined sugar and a range of other food and agricultural products”, the report added.
Findings however show that most of the palm oil imported from Malaysia, Indonesia and others actually end up in the Nigerian market duty-free; thereby displacing locally produced palm oil from the market and suffocating the Nigerian oil palm plantations
Statistics show that the aggregate of locally produced and imported palm oil in these neighbouring West African nations by far surpasses what they require both for their domestic and industrial consumption, therefore making the massive Nigerian market the dumping ground for these cheap CPO, which also come into Nigeria duty-free under ETLS; making it by far cheaper than the CPO produced within Nigeria.
Worried by these challenges, PZ Wilmar Limited, having staked about $80 million on its crude palm oil refinery in Nigeria, has unveiled its backward integration plan in the sector with a view to assisting the nation become self sufficient in Palm oil production within the next decade.
According to the company, the plan, which is being implemented, would save the country some foreign exchange by eliminating yearly imports of $300 million spent on Palm oil importation, while bringing back the nation’s glory as a primary exporter of oil palm.
With yields from plantation expected within the next five years, the company is optimistic of bridging the demand-supply gap in the nation’s oil palm industry by at least 60 per cent.
The company’s Managing Director, West Africa, Santosh Pillai noted that the company’s investment in the country offers an integrated process of growing and milling crude oil palm with an expansion exercise that sees PZ harnessing the competitive and comparative advantage Nigeria possesses in the sector.
Similarly, DUFIL Prima Foods Plc, a key player in the Nigeria Culinary industry has equally embarked on strategic backward integration to ensure 100 per cent local content in most of the products being produced by the company.
This move includes the establishment of a seasoning plant, flourmills, an oil refinery and a palm tree plantation under the Edo State Government Agribusiness revolution scheme.
In its effort to boost the local production of Palm Oil, the company has also acquired and signed a memorandum of understanding with the Edo State government for 60,000hectares of land for cultivation of Palm trees, which will help in boosting local production for palm oil, thereby bridging the supply gap of palm oil within the country.
Also, Presco Oil Palm Plc has unveiled plans to expand its production capacity by building a new refinery. Indeed, under the expansion plan, the company is expected to stake $30 million on the project to boost oil palm production in the country.
Essentially, for Nigeria, which wields over 60% of the West African economy, and remains not only the strongest manufacturing base and the strongest economy in the region, there is the need for more efforts at facilitating and ensuring the effective implementation of the ETLS.
The effective implementation of the ETLS would secure and create more jobs for the nation’s booming population. It would also go a long way to helping in the long required diversification of the economy as well as promoting further investments in the country especially in the face of dwindling oil revenue. In the end, the Nigeria’s private sector would become the most prolific beneficiary of the regional market.
The ECOWAS Free Trade Area also known as the ECOWAS Trade Liberalisation Scheme (ETLS) is expected to give rise to the elimination of custom duties and accompanied by the total elimination of all non–tariff barriers and other administrative measures impeding the free flow of trade in the sub–region.
The ETLS was established as a medium for increasing productivity and market access for products originating from the Region’s domestic economy. The concept was originally intended at benefiting the private sector in particular, and ultimately boosting the West African economy. It was also targeted at reducing the massive importation of goods, which West Africa has been known for. The ETLS’ ultimate goal targets generating employment among the member States of ECOWAS and increase intraregional trade.
Despite its enviable goals, the implementation of the ETLS has however remained shoddy with high level of malpractices among stakeholders.
Having lost its global competitiveness as the world’s largest producer of palm oil, Nigeria has begun to make efforts towards reclaiming its position through a backward integration exercise to drive the production of Crude Palm Oil, but not without challenges.
For instance, the Crude Palm Oil (CPO) under ETLS is classified under processed goods hence enjoys certain concession upon entry into a different ECOWAS state. To however qualify for these concessions, certain conditions must be fulfilled by member states one of which being that the country of origin of such goods shall be from the community with specified percentage of value addition.
Although many of the member countries cultivate oil palms, there is a need to increase potential production of palm oil in order to meet both the domestic and the regional demand, particularly the needs of ECOWAS member countries with vulnerable economies and high rates of hunger.
ECOWAS still experience a deficit of edible oil, which requires the importation of an estimate of 1.5 million metric tons per year and is foreseen to increase to some 2.0 million metric tons by 2020.
Despite the benefits of the ETLS, some stakeholders of the industry have allegedly taken undue advantage of the scheme to indulge in sharp practices by importing CPO from member states through round tripping from other countries. These CPO round tripped into these member states are then imported into Nigeria under ETLS zero duty regime.
According to a United States Department of Agriculture (USDA) review of the agricultural situation in Benin, “Benin serves as a delivery corridor for West Africa, reaching more than 100 million people in the landlocked countries of Niger, Mali, Burkina Faso, Chad and the Northern states of Nigeria.”
Already, a conservative figure estimates that there are over 3,000 entry points into the country from the neighbouring countries such as Benin, Niger, Cameroun, Chad and Gabon, among others.
The USDA observed, “Benin’s relatively efficient port services and liberal trade policies mean it is an important cog in the regional trade flows to nearby countries.”
The report noted that improvements in the country’s port operations as well as some small improvements in the ease of doing business over the past three years aided the flow of imports in the country.
“Benin applies the WAEMU (often known by its francophone name UEMOA) common external tariff (CET) with its four tariff bands (zero, 5%, 10% and 20%) with no quantitative restrictions applied.
“Informal trade between Nigeria and Benin is substantial.” The main products involved in this informal trade include rice, poultry products, refined sugar and a range of other food and agricultural products”, the report added.
Findings however show that most of the palm oil imported from Malaysia, Indonesia and others actually end up in the Nigerian market duty-free; thereby displacing locally produced palm oil from the market and suffocating the Nigerian oil palm plantations
Statistics show that the aggregate of locally produced and imported palm oil in these neighbouring West African nations by far surpasses what they require both for their domestic and industrial consumption, therefore making the massive Nigerian market the dumping ground for these cheap CPO, which also come into Nigeria duty-free under ETLS; making it by far cheaper than the CPO produced within Nigeria.
Worried by these challenges, PZ Wilmar Limited, having staked about $80 million on its crude palm oil refinery in Nigeria, has unveiled its backward integration plan in the sector with a view to assisting the nation become self sufficient in Palm oil production within the next decade.
According to the company, the plan, which is being implemented, would save the country some foreign exchange by eliminating yearly imports of $300 million spent on Palm oil importation, while bringing back the nation’s glory as a primary exporter of oil palm.
With yields from plantation expected within the next five years, the company is optimistic of bridging the demand-supply gap in the nation’s oil palm industry by at least 60 per cent.
The company’s Managing Director, West Africa, Santosh Pillai noted that the company’s investment in the country offers an integrated process of growing and milling crude oil palm with an expansion exercise that sees PZ harnessing the competitive and comparative advantage Nigeria possesses in the sector.
Similarly, DUFIL Prima Foods Plc, a key player in the Nigeria Culinary industry has equally embarked on strategic backward integration to ensure 100 per cent local content in most of the products being produced by the company.
This move includes the establishment of a seasoning plant, flourmills, an oil refinery and a palm tree plantation under the Edo State Government Agribusiness revolution scheme.
In its effort to boost the local production of Palm Oil, the company has also acquired and signed a memorandum of understanding with the Edo State government for 60,000hectares of land for cultivation of Palm trees, which will help in boosting local production for palm oil, thereby bridging the supply gap of palm oil within the country.
Also, Presco Oil Palm Plc has unveiled plans to expand its production capacity by building a new refinery. Indeed, under the expansion plan, the company is expected to stake $30 million on the project to boost oil palm production in the country.
Essentially, for Nigeria, which wields over 60% of the West African economy, and remains not only the strongest manufacturing base and the strongest economy in the region, there is the need for more efforts at facilitating and ensuring the effective implementation of the ETLS.
The effective implementation of the ETLS would secure and create more jobs for the nation’s booming population. It would also go a long way to helping in the long required diversification of the economy as well as promoting further investments in the country especially in the face of dwindling oil revenue. In the end, the Nigeria’s private sector would become the most prolific beneficiary of the regional market.
By FEMI ADEKOYA, The Guardian
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