Lagos – Wilmar International, the Singapore-listed agribusiness, plans to boost its palm oil business in Nigeria, wooed by policies that have helped stabilise the naira and bolstered the availability of US dollars in Africa’s most populous nation.
The company, led by billionaire Kuok Khoon Hong, last week announced a plan to acquire all the shares in a palm oil venture with PZ Cussons for US$70 million (S$90 million). Wilmar also acquired 8,500ha of old rubber plantations to grow crops that will produce edible oil, according to Mr Santosh Pillai, chief executive officer of Wilmar’s African unit.
The investment shows confidence that the steps Nigerian President Bola Tinubu has taken to revive economic growth and improve government finances may be working. Nigeria’s foreign exchange reserves have increased, inflation has moderated and the naira has stabilised.
In May, Moody’s upgraded the country’s foreign currency debt rating. It raised its credit rating for the nation to B3, six notches below investment grade, from Caa1, and changed the outlook to stable.
“The landscape is beginning to shift,” Mr Pillai said in an e-mail response. “Policy changes, particularly greater stability in the naira and improved access to foreign exchange – are creating a more viable environment for long-term investment. Wilmar remains committed to driving sustainable growth in Nigeria’s palm oil sector.”
Wilmar is growing its palm oil plantations in Nigeria’s Cross River state as it focuses on supplying the local market with the edible oil that is used to cook everything from jollof rice to yam porridge.
The West African nation – with a population of more than 200 million – has a palm oil supply gap of 1.13 million tonnes annually, according to the Central Bank of Nigeria, which in 2019, introduced a financing programme to increase production by farmers and boost economic diversification.
Still, Nigeria has struggled to boost output while rivals including Thailand and Colombia have seen production jump. The African nation has also been trying to solve farmer-herder clashes in its main food-growing regions and Islamist extremists in the north-east seem to be making a comeback.
“A significant portion of Nigeria’s palm oil production still comes from small-holder farmers,” Mr Pillai said. “Many of these plantations are over 25 years old to 30 years old, and yields are steadily declining.” “If these older plantations are replanted with high-yielding seedlings”, Nigeria could increase its oil palm production even faster, he said.
For years, Nigeria’s struggle with an acute dollar shortage deterred investors, with the central bank rationing the greenback to businesses even as international companies including GSK, Bayer and Sanofi shrank their operations in the country or left altogether.
The Nigerian President’s move to devalue the currency and allow it to trade more freely, scrap fuel subsidies and boost revenue are now helping to brighten the outlook. BLOOMBERG
Join ST’s Telegram channel and get the latest breaking news delivered to you.
