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Border closure triggered high demand for palm oil –MD, Okomu Oil

The Managing Director/Chief Executive Officer, Okomu Oil Palm Plc, producers of Banga Palm Oil and NOKO10 rubber brands, Dr Graham Hefer, talks about the gains of the recent border closure on the palm oil sector and other sundry issues in this interview with ANNA OKON

The borders between Nigeria and her neighbours have been closed for the past four months. Would you say the development has been refreshing for the local palm oil sector?

Yes. I would say that the closure of the borders has been a blessing. I am of the opinion that the exercise should be continued.

How has the development impacted your local market share, sales and profits within these few months?

The effect it has had on our local market share is that  there have been some new companies requesting for Crude Palm Oil  that we have not had on our books previously since the land borders were closed;

Equally to answer your question about the border closure’s effect on our sales over the past few months; since the land borders were closed, sales have normalised again.

In terms of the effect of the border closure on our profits, apart from the illegal imports initially, prices also affected our profit and the prices were down for most of 2019.

However, the border closure did not dictate these lower prices as Crude Palm Oil prices are determined by the world market.

Has there been any negative fallout from the border closure in terms of cross- border trade where you have to move your palm oil to other countries? Could you tell us if the gains are more than the losses?

There has not been fallout out in terms of cross- border trade. We do not export any CPO.  It is all consumed within Nigeria, so we had no impact.

For a company as big as Okomu oil operating in rural communities, there must have been numerous challenges,  could you tell us some of them and tell us how you cope?

Operating a business in rural communities has its challenges. For us, these challenges are numerous but the main ones are; poor infrastructure, like roads, port delays and lack of stable electricity.

These result in higher costs due to having to use generators and increased costs of repairs and maintenance on vehicles. Also, we have to cope with higher costs of transport as lorries are held up at the port.

We also face challenge with multiple and illegal taxes and tolls; It is either you pay or your business suffers even more than it does now.

Another challenge associated with our kind of business is insecurity. This arises from militancy, theft and  kidnappings.

It means that we have to pay for army and the police to protect lives of employees and infrastructure. This, in turn, makes our product more expensive and makes us less competitive.

Also we are challenged with lack of semi-skilled, skilled and unskilled people.  Believe it, or not, there is a lack of unskilled manpower as nobody wants to work in the field.

Yet semi-skilled and skilled workers are also having to be re-skilled as they do not have the necessary technical qualifications-maths, science and/or computer experience necessary for positions requiring skilled people.

Another factor that poses challenge to our business is illegal importation of banned products and CPO through the Economic Community of West African States.

The practice creates a situation where the company is unable to compete with these illegal goods and the likes of the National Agency for Food and Drug Administration and Control and the Standards Organisation of Nigeria are unable to, or incapable of, deterring the sale of these illegal products in the country.

Yours is only one of two palm oil firms listed on the Nigerian Stock Exchange, how have you been able to remain there for this long when so many other companies have delisted?

The reason why many have delisted is because of the huge time and effort required to be on the exchange these days.  Even our company is unhappy with the onerous conditions that listed companies are obliged to comply with, and the costs associated with them.

Also, the likes of Securities and Exchange Commission, Financial Reporting Council and other parastatals and organisations that do have a role to play, don’t always seem to work constructively with companies.

Does listing at the exchange come with pressure from shareholders and government, if yes how do you handle them?

Yes, listing on the exchange certainly comes with pressures from the government and shareholders.

However,  shareholders, being the owners and risk holders in the company have a right to ask and to pressurise, whilst government has the right to pressure us into ensuring that we do everything legally and correctly in law.

What has been the benefit of being listed?

Potentially, the benefit is the ability to obtain equity from our shareholders, if and when, this is required.

What is Okomu oil’s share of the global market?

Our share of the global market is so small that it is insignificant.

How do you cope with competition from Malaysia and other oil producing countries?

If we did not have import duties on imported CPO from these countries, we would not be here as the playing fields are not level, what with the extra costs of doing business.

Also, these countries subsidise and give their companies tax incentives, which make it difficult to compete with them.

Over the years what corporate social responsibility initiatives has Okomu oil undertaken in its host communities?

There are numerous project that we handle in the host communities to empower indigenes. We spend more than N150m per annum on 29 communities around our various plantations assisting them with road grading, boreholes, police stations, schools and clinic refurbishments, corpers’ and teachers’ lodges, bursaries and skills development courses among numerous other activities.

Many people complain of interference from community dwellers when they operate agricultural projects, how do you handle resistance from the community dwellers while trying to expand the business?

We believe in having ongoing communication between ourselves and our communities.  In this regard then, we have Community Liaison Officers who are the ones managing issues between the company and the communities on an ongoing basis.

We also have free, prior and informed consent agreements with our communities which include the likes of grievance mechanisms and details of what each of the stakeholders will do in order to ensure an ongoing partnership between the two parties going forward.

How do you handle environmental concerns? 

We are the first company in Edo State to be Roundtable on Sustainable Palm Oil-certified.  We are also ISO14,001 certified for environmental safety which means that we are obliged to follow very strict guidelines on environmental management practices.

We also have quarterly environmental impact assessments done by the Federal Ministry of Environment that monitors our company through these reports as well.

Briefly shed light on the background of Okomu Oil Palm Company PLC

The  Okomu Oil Palm Company was established in 1976 as a Federal Government pilot project aimed at rehabilitating palm oil production in Nigeria. At inception, the pilot project covered a surveyed area of 15, 580 hectares out of which 12, 500 hectares could be planted with oil palm trees.

It was incorporated on December 3, 1979 as a limited liability company.

As part of efforts to shore up its revenue base, the company acquired and installed a 1.5 tonnes per hectare of Fresh Fruit Bunches mill in 1985 to begin to process its FFB.

Prior to the installation of the mill, the company derived its revenue from the sale of FFB.

Okomu has since grown to become Nigeria’s leading oil palm company with total area of 33, 112 ha of which 18, 879 ha is currently planted with oil palm trees and 7, 335 ha with rubber trees. Another 4, 000 ha of oil palm trees has been planted.

Also, 1, 500 ha of rubber trees would be planted by this year, 2020.

The Okomu Oil Palm Company Plc is ranked 10th among listed companies with the largest turnovers quoted on the Nigerian Stock Exchange.

It is the only agro-business in the NSE’s top 16 companies with the largest turnovers. According to the Bottomline magazine,

What are your plans for the year and what projects do you have in the pipeline?

We are working on doing a smallholder oil palm programme; we are busy erecting the first of two 30t/hr oil mills on our newest plantation to be inaugurated early 2021.