05/07/2013 (AllAfrica.com) - Chief Okey Ikoro is the chairman of the Vegetable/Edible Oil Producers Association of Nigeria. In this interview, he talks on how the sector, which should have been the best revenue generator for the country after crude oil, is gradually being killed by federal government's selective policy of duty waivers, and the activities of member countries of the Economic Community of West African States (ECOWAS) which allegedly sabotage Nigeria's economy through cross border smuggling. Excerpts: Looking at the current situation in the country, can you say that the association has been able to meet the objectives of trying to protect the industry?

Well, as a matter of fact we are doing our best but the economic situation in Nigeria today is not favourable to the sector. This is one sector that contributed so highly before the advent of crude oil to the Nigerian economy. In fact, it is on record that the palm oil sector contributed at least 65 to 70 per cent of the country's total revenue before the advent of crude oil and Nigeria as at then stood as number one in production but today we don't even have a bench mark.

I don't even think we are counted among the people that export oil. We don't export palm oil anymore, neither do we export refined one from Nigeria because the sector is one of those that has been abandoned by the federal government. And bear in mind that it is the only sector that can form an alternative revenue base to the country in this era where crude oil is gradually becoming less attractive. There is a lot of emphasis now on bio-fuel, there is a lot of alternative energy coming out but Nigeria as a matter of fact has not started developing this sector which eventually we may have to fall back on. So, we have done our best but Nigeria's economic policies are seriously hindering this sector.

Talking about policies created in Nigeria as regards this sector, you are aware that the importation of vegetable oil has supposedly been under prohibition since President Olusegun Obasanjo's regime and has also been sustained by the present regime, but the issuance of waiver to some companies by the present administration defeated the purpose of the prohibition. When you say that a product is under prohibition and you are giving waiver to a particular individual to bring in thousands of metric tons of that same commodity, it defeats the purpose of the prohibition. Prohibition was granted in order to encourage investment into the sector and it is done in order to encourage backward integration so that people can start going back to the farm for palm plantation, more production capacity will come up, and more employment generation will be done. This is the only sector that is capable of employing over 5,000 to 10,000 Nigerians. But with what is happening today, most of the factories are closing down; people are being laid off from work, primary investors are becoming afraid of investing in plantations and you know that investing in oil palm plantation has long gestation period. If there is no stable economic policy, nobody wants to put his money where he is not sure of getting it back after four or five years.

It is surprising that if you go to the markets, you see a lot of imported vegetable oil despite the ban. What do you think?

That is what I am saying, that government under its fiscal policy measures has said that refined vegetable oil remains prohibited. Unfortunately, the same government has issued waiver to companies like BUA and few others; one or two Indian companies, to import the same product that is under prohibition. This has therefore totally defeated the purpose of prohibition and it is adversely affecting the sector.

What do you think informed government's decision to grant waiver to these companies?

This is what we have been trying to find out. Some of them have recycled old waiver given to them, and some of them claimed that the old waiver given to them has been renewed for the fiscal year of 2013 and they are still using it to import vegetable oil into the country and we do not know why double standard should be created. You will recall that in the presidential statement for the year, he said that presidency will no longer approve any waiver for any company. Also, in our fiscal policy meeting with the Minister for Finance last year, we were assured that the era of duty waiver and the era of granting waiver for the importation of prohibited product is over. But as at today, if you go to Port Harcourt Warf or if you go to Lagos, there are lots of refined palm oil products from all over the world, and a lot of storage tanks that are filled with refined oil.

If you go there, it's the trailers that are supposed to be buying from the factory that are loading there, not minding the health hazards involved in bulk importation of vegetable oil because as at the time before bulk import was banned it was discovered that some of the ships that are bringing bulk vegetable oil into the country are multi-purpose vehicles that are used for carrying chemicals, and so many other things. So, it is unhealthy to use it to import refined oil that is being consumed in the country. It has a lot of health implications.

But waiver came as a result of shortfall on local production of cooking oil when the capacity of the production of our local palm oil industries went low. Don't you think government granted the waivers to address the shortfall?

In our last meeting, we agreed that there is a short fall of about 200,000 metric tons annually between demand and supply of oil in Nigeria. We also agreed that that was what warranted not putting the raw materials of palm oil under prohibition, rather to protect and encourage investment in the sector, we say allow import of raw materials. We have the capacity to refine it but there are short fall of raw materials, which is palm oil; remove it from prohibition list and let it come in under duty, so that there will be enough raw materials to refine and meet up with the short fall of the 200,000 metric tons. This therefore, was what resulted to the lifting of palm oil from prohibition and instead putting it on high tariff of 35 per cent. It is now no longer an issue of availability of raw materials, as people can import these raw materials at 35 percent duty to augment what is available without destabilizing the local investors who are now going into massive plantation in the country.

There must be equilibrium, there must be balance. If oil is coming into Nigeria at 35 percent duty, we the processors will have enough oil to process and give to the people who are using it. Even the people who are doing noodles use it as their raw materials...yes they use bleached palm oil as their raw material. Therefore, those people that are using it are the ones crying that they don't have enough raw materials and it was based on this that the raw material for processing was removed from prohibition and placed under 35 percent import duty. However, now even the 35 percent import duty is not working, why? Because of the ECOWAS Trade Liberalization Scheme (ETLS), which allows the importation of the oil into Nigeria at zero duty, provided the oil is imported from the ECOWAS region.

Unfortunately, there is no ECOWAS country that has the capacity to bring in the volume of oil that is coming into Nigeria from ECOWAS countries. So what these importers do is to use ECOWAS countries as their base for importing oil from Malaysia and Indonesia. They land it in Cotonou or Cote d'Ivore or Ghana or any of the West African countries; change the rule of origin document and move it to Nigeria at zero duty. When these oil comes into Nigeria at zero duty, the local industries cannot compete with them, it is not possible, because we have a lot of infrastructural problems in Nigeria. There is no power; the people who are processing locally are on generators, on high cost of diesel and other inputs. Unfortunately, because of this, the local prices are always higher than the international price; and these people exploit this situation to bring it into Cote d'Ivoire, Cotonou or Ghana at maybe five or maximum 10 percent and it comes into the country at zero duty. It is sad because this has destabilized the whole sector. Now, the refiners have products in their factories but they cannot sell it. We have stocks in all the factories because people are now going to the warf to buy the imported oil that come at a cheaper price because this oil came in at zero duty because they are coming from ECOWAS while we all know that they are coming from Indonesia and Malaysia.

What was government's reaction after you had brought all these to their knowledge?

Trade and Finance have investigated this and have established through statistics of import that the economy is being sabotaged. That is why in one of our letters, we indicted the Nigeria Customs Service of complicity and our letter to the President stated it, because you cannot do this without connivance of Customs. When these things come in, Customs look the other way and say 'we have seen the documents'. There is no proper verification done on these documents to confirm the actual origin of these goods. In our meeting now with the Minister for Agriculture, we asked the minister to tell the Nigerian Customs to give him statistics of the volume of palm oil and refined palm oil that has come into Nigeria in 2011 and 2012, you will discover that 70 per cent came in through the West African sub region. Not only is Nigeria losing money because they are coming on zero duty but the ECOWAS countries are benefiting at the expense of Nigeria because even the five or 10 per cent they charge, is being paid there, and we are losing revenue here and Customs is not worried about it.

Those companies you alleged were given waivers may be importing to cover up their shortfalls. Did you investigate that?

Let us look at companies like BUA. BUA bought Kano Oil Mill, BUA bought Nigeria Constellation Oil in Lagos, and none of these factories are working. BUA is busy importing with waiver, then why can't federal government give all of us that have factories waiver to import. BUA is importing Refined Bleached and Deodorized (RBD) oil, a finished product. They are importing Palmolive, and it is a finished product as well. If federal government is going to give waiver, even if there is a short fall in the market and you want to give him waiver, then give all of us in the sector as we should all be entitled to waiver to bring it in so that we can all close down our factories and import the finished products and sell. In a nutshell, what we are saying is that what the federal government is doing is bad. It is double standard and it is destroying the industry. It is discouraging investment in the sector. The era of waiver like president informed us should be over, if anybody is holding any waiver it should be cancelled and the industry will grow at its own pace but as at now PZWillma is doing everything to bring down the price of duties even from 35 to 5 percent.

This has been an issue in contention, which we have contended even in the fiscal policy meeting. It was like a war between the other manufacturers and PZWillma and you know that Wilma is the highest plantation owner in Malaysia and they have gone in alliance with Nigeria PZ for importation of palm oil into Nigeria and they are fighting to bring down the duty from 35 percent to 5 percent. What does that say, Wilma is looking for a place to sell their products while creating employment in their country, Malaysia. Some of these things we cannot allow even though they have now said they have built 1,000 metric tons per day oil refining in Lagos; one knows that the basic thing in establishment of industry is availability of raw material. When you are doing a feasibility study they ask you availability of raw materials, nearness to raw materials, nearness to power, and nearness to market. So one cannot say I have built a 1000 metric tons a day palm oil factory refining in Lagos, while you have the plantation in Calabar, where is the economics of that. If not that the factory was built solely to get oil from Malaysia into Apapa Warf and then off-load it in your factory. So, as far as I am concerned, these activities are economic sabotage.