19/09/2013 (THISDAY Live) - Chairman of the Vegetable/Edible Oil Producers Association of Nigeria, Chief Okey Ikoro, spoke with Senator Iroegbu on how the sector, which should have been the best revenue generator for the country after crude oil, is gradually being killed by the federal government's policy of duty waivers, and activities of ECOWAS countries. Excerpts:

As the chairman of Vegetable/Edible Oil Producers Association of Nigeria can you tell us what the association stands for?

The vegetable and edible oil producers association of Nigeria is a body that represents the interest of both the producers of palm oil and processors of palm oil, palm kernel oil, and anything relating to palm produce. However, our key interest is on processing because we have other bodies that deal on the actual cultivation. Therefore, our key objective is to protect local industries in the edible and palm oil sector to see to the growth and create awareness on the need for the development of the sector.

Looking at the current situation in the country, can you say that the association has been able to meet all these objectives of trying to protect the industry?

Well, as a matter of fact we are doing our best but the economic situation in Nigeria as at today is not favourable to the sector. This is one sector that contributed so highly before the advent of crude oil to the Nigeria 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. 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 economic policies are seriously been hindering the sector. The policies created in Nigeria as regards to the sector... you are aware that vegetable oil has been under prohibition.

The importation of vegetable oil has been supposedly been under prohibition since President Olusegun Obasanjo regime and have also been sustained by the present regime but issuance of waiver (to some companies by the present administration), defeated the purpose of the prohibition. But with what is happening today most of the factories are closing down; people are being laid off from their work, primary investors are becoming afraid of investing in plantation 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.

This is surprising that if you go to the Nigeria market, you will see a lot of imported oil despite the ban. What do you think? That is what I am saying that government under their fiscal policy measures has said that refined vegetable oil remains under prohibition. 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 informs government decision to give 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. So it is unhealthy to use it to import refined oil that is being consumed in the country. It has a lot of health implication.

Can say that the waiver was as a result of shortfall on local production of vegetable oil, or what is the capacity of the production of our local palm oil industry. Is it enough to meet the market demands in Nigeria?

In our last meeting, we agreed that there is a short fall of about 200,000 metric tonnes 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 tonnes. This therefore, was what resulted to the lifting of palm oil from prohibition and instead put 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. So 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. However, now even the 35 percent import duty is not working, why? Because of the ECOWAS Trade Liberalisation 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. So what these importers have done now is to use ECOWAS countries as their base for importing oil from Malaysia and Indonesia. They land it in Cotonou or Cote d'Ivoire or Ghana or any of the West African country; change the rule of origin document and move it to Nigeria at zero duty. When this 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 problem 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 per cent and it comes into the country at zero duty. It is sad because this has destabilised the whole sector.

I thought ECOWAS has country of origin status, which they must observe. Do you an idea why this is not being observed?

Yes, but there is a lot of falsification of documents because there is no Common External Tariff (CET), which should apply if Nigeria has 35 per cent prohibition on crude palm oil. It then means that if it is harmonised, there is no way that these things can penetrated from other countries into your own country and then come into Nigeria at zero duty. But the tariff harmonisation has not been achieved, so different countries have different tariff for different products.

The implication is that if you are charging 35 per cent and Ghana is charging five per cent; they will land the product in Ghana and bring it into Nigeria at zero per cent. No other country in the West Africa sub region has the capacity to produce enough to sustain its own consumption. It is ironical that when you look at statistics of import you will see that all these countries exported to Nigeria, which is an indication that the Nigeria economy is being sabotaged by landing these goods in their country, re-branding the origin in their country and then bringing it into Nigeria.

Have your association informed the appropriate authorities for proper investigation and enforcement of the law or appropriate sanctions?

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. There is no tracking of these ships from the place of commencement because when they come in, it is not like they off load these things and again load it. No.

They stand by and change the documents and move straight into Nigeria. So the movements of these ships can easily be tracked by customs to know, that is to say if you are coming in from Cote d'Ivoire, it will be obvious that the ship took off from Malaysia. Shipping position from different countries with the cargoes they are carrying and their final destinations are within the finger tips and system of the Nigerian Customs. If any ship is leaving Malaysia for Cote d'Ivoire or for Ghana or for anything, Nigerian Customs at the point of the button will know that 20,000 metric tonnes of vegetable oil have been loaded in Malaysia and is heading to Ghana. You will notice that it is the same ship that loaded for Ghana that has ended up in Lagos. So they cannot claim to be ignorant of it.

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 2011, and 2012, you will discover that 70 per cent came in through the West Africa 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.

Have the supervisory Ministries and Agencies responded to all these findings and allegations?

The minister of agriculture has responded and the minister has informed us that he is right on top of it and trying to get all the facts from Customs. As at today, local factories are carrying stocks but are not selling yet people are buying commodity from the Warf, it then means that what we are saying is true. So we have also now written that the only answer to our problem now is that 35 per cent duty, which is the highest duty that can be placed under CET, should be placed on palm oil or palm related products coming from West Africa sub region into Nigeria. If they are telling us that their prohibition is not allowed under ETLS but high duty is allowed.

So we are asking the federal government; place the 35 per cent tariff not only on Nigeria Ports but on any commodity relating to palm oil and refined oil that is coming from the ECOWAS countries into Nigeria. That way even if you land it in Cotonou and you want to bring it to Nigeria you will still pay the 35 per cent. If you as well bring it directly to Nigeria you will pay the 35 per cent. This is the only thing that can ensure the protection of this industry.

So if the palm oil can be brought to the level they ought to be, how much do you think it can be generating to Nigerian economy annually?

If you look at Nigeria total revenue today, Malaysia is number one palm oil producer in the world. Nigeria is very far now, and if we don't take time with the program that Ghana has put in place, Ghana will over take us. Ghana now has set aside palm oil development fund, have started implementing their own programme. If a country like Malaysia can revise their trend, we can do it. If palm oil was generating 70 per cent of our revenue before the reliance on crude oil, why can't we do it now. Malaysia as number one has stopped development (of palm oil plantation) because they can no longer expand in terms of acreage and hectare-age.

They are limited by water because they are surrounded by water and their capacity now is like they have reached their peak. But Nigeria on the other hand, has so much land mass and oil Palm can be planted in 24 states out of 37 in Nigeria. Our potential in this sector is unlimited, and largely untapped. We can become once again the number one palm oil producer in the world. We can revise our revenue even to 70 per cent dependant on palm oil.

The potential is enormous and the downstream sector of the Palm Oil is also enormous, because from this product you can make butter, you can make paper, you can make animal feed, and you can make drugs from the refining of fatty acid. We have not even started; fatty acid transformation from the bases that you can produce soap, you can produce glycerin, which is used as base for a lot of drugs. So there is so much to be done with the sector. The potential is enormous and Nigeria has not even scratched it.