August 12, 2013

25,000 jobs lost in Vegetable Oil industry as sector faces extinction

World Heart Day: NHF warns against consumption of unwholesome vegetable oil

Vegetable oil


Vegetable oil and related products industry in Nigeria are nearing total collapse as no fewer than 25, 000 out of the 30,000 direct jobs in the sector have been lost due to the influx of substandard processed oil dumped into the economy.

This near collapse is as a result of government unfavourable policies and policy reversals. This is coming on the heels of government propaganda on job creation in the midst of continued rising unemployment in the country.

It will be recalled that Financial Vanguard had on July 15, raised alarm over the looming collapse of the sector due to government’s import waivers granted to few privileged Nigerian politicians and portfolio businessmen to import refined vegetable oil, Soya bean meal and related products.

One of the few surviving manufacturers of vegetable oil in the country, Sunola Oil Nigeria Limited, owned by Kewalram Chanrai Group, weekend confirmed that the sector is in real danger of imminent collapse and called on Government not to allow the sector go the way of the Textile industry in the country. The company expressed sadness that “out of top eight Oil Mills in Nigeria, only three are working at the moment below installed capacity. If drastic measures are not taken immediately, Oil Mill Industry will go into extinction like the textile industry.”

Group Deputy Managing Director, of Kewalran, Mr. Victor Eburajolo, at a briefing in Lagos, lamented that the industry had lost the capacity to generate employment as “not less than 25,000 direct jobs have been lost in the last few years because of unfavourable operating environment. At its peak, the industry created over 30,000 direct jobs. But today, the sector cannot boast of 5,000 jobs. As a Nigerian, I am very worried because of the increasing growth of idle hands that ordinarily should contribute to the development of the country, but are now being wasted and the unfortunate ones become willing hands and tools for mischief and crimes.”

Vegetable oil

Vegetable oil

According to him, the industry is seriously distressed because of unfavourable policies and policy summersaults and called for total ban on importation of finished products like vegetable oil, drive to improve infrastructure like power, fuel, railway, roads etc to support capacity increase in processing as well as farming inputs. He called for support of private sector by funding at minimal cost storage of soya beans and buying up excess produce at good price from local markets during harvest season to enable farmers benefit.

He lamented that one of the major problems confronting the sector is “import duty waivers on products like oil and cake to compete with the already well developed palm industry in the Far East which has resulted in inability of local manufacturers to compete against such imported oils resulting in huge finished inventory stock of oil and DOC (oil for making cake) running into several billions of naira.

He stated that the cost of funds is also a major burden considering the huge stock held, saying that seed price has now crashed as a result of serious uncertainty in the industry and the inability of local manufacturers to compete with imported oil price. This he said will eventually result in farmers getting discouraged contrary to the drive of the present government transformation agenda.”

Lamenting on duty waiver, import permit of banned edible oil, Eburajolo displayed a copy of such waivers granted to a company (name withheld) with reference number BO/R.10260/107 to import 250,000 metric tons of refined vegetable oil to supposedly cushion the effect of climate change and floods. He equally displayed another waiver of Soya DOC importation, which reads “In order to cushion the present effect of the scarcity and high prices of essential raw materials for feed production in the country.

His Excellency, Mr. President has granted approval for a concessionary rate of 0 per cent duty and 0 per cent VAT on importation of Soya Bean meal for poultry consumption by poultry farmers with effect from 1st March to 31st December 2013.”

Another problem, Mr. Eburajolo said, is inadequate power supply. He said; “We are compelled to generate 70 per cent of the electricity we use for production, and power cost using diesel generators (as currently practiced) is about 20 times higher than power purchased from the national grid. Diesel as fuel is multi dimensional as it affects cost of generating power as well as cost of all activities that require diesel; like very high logistics for evacuating finished products to customers spread all over the country.

He disclosed that the un-availability and high cost of low pour fuel oil LPFO, makes it difficult to run some category of steam generating boilers, hence making the operations significantly more costly. He said coal that would have been a possible option for generating power to operate boiler is practically unavailable though known to exist as untapped reserve.”

According to him, “while competition on level playing ground under same rules and regulations is no doubt good for growth of both industry and economy, we wish to submit that relating to poor infrastructure resulting in very high conversion cost of Soya to products, any imports outside absolute need is literally destroying the industry. He said a continued process of de-industrialising the country will results in direct loss of jobs for the remaining thousands employed in the sector.

He also said that there will be indirect loss of jobs for many more thousands in terms of loss of cultivation by soya beans farmers engaged in the dominant cash crops in the country. He said that there is the consequence of direct loss of income for all three tiers of government and indirect loss of income for machine parts suppliers and technical services providers associated with the industry.

Nigeria, he said, is sadly providing market for oil processors from Far East thereby opening more capacity for production for them and generating more employment for their own people at the expense of Nigeria ever teeming population.”

He said that Sunseed Nigeria Limited and Afcott Nigeria Limited have combined annual installed production capacity of 80,000 tons of Soya Beans, 64,000 tons of DOC production and 13,600 tons of refined edible oil. This capacity he said supports local farmers with the cultivation of about 84,000 hectres of land for Soya beans production. Local producers also provide support for over 42,000 local farmers with a realistic and sustainable source of income thus generating indirect employment in the agric sector of the economy.