Smallholders in Nigeria

In reviewing the situation of oil palm smallholders in Nigeria, Ayodele et al. (2015, p.1-2) writes of a low production (under-invested) palm oil sector dominated by production by 4 million smallholders( largely from wild groves, for domestic consumption):

• Nigeria is the world’s third-largest palm oil producer. It has the world’s largest percentage of smallholder oil palm farmers – around 90 per cent. Smallholder oil palm farmers typically earn higher incomes from oil palm than from other crops. Smallholders generally operate on wild groves. While these groves have relatively poor yields they require lower agricultural inputs. The smallholder sector supplies local markets generally aimed at domestic use. The value chain for smallholders extends to locally based traders and traditional or small-scale processors.
• Larger plantations, while relatively few, are not undergoing the level of expansion seen in other countries in Africa or across Southeast Asia. Subsequently the problems that have been associated with palm oil in high-growth countries are considerably smaller in Nigeria.
• In many ways this situation in relation to palm oil could be regarded as positive. Palm oil should, in theory, provide a significant boon to local livelihoods through a well-established value chain that has existed since the 1960s.
• The potential for oil palm as a crop for export and local use is, however, significant. The crop provides exceptional returns to land and labour for smallholders, of which there are around 4 million. The introduction of large-scale investments would bring significant expertise, infrastructure improvements and extension services that would improve the sector significantly.
• Nigeria in this regard is unique compared with other palm oil producing nations in the region; it is not a matter of the establishment of a new industry – the industry is established, its plantation footprint is significant (in excess of 2.5 million ha) and many people already understand its benefits. It is more a matter of how the existing industry can be improved – and therefore generate better socio-economic outcomes.
• The success of oil palm as a crop is affected by poor and ineffective land tenure laws (legal land tenure often clashes with communal land tenure, creating social FPIC risks), poorly implemented government policy, high costs (poor transport infrastructure and inefficient traditional processing techniques), and lack of investment. They note that “Environmental thresholds on oil palm will not necessarily result in environmental protection. They may simply prompt development of another crop. Oil palm is not a key driver of deforestation in Nigeria; this is because the area for oil palm – although suffering low productivity – is large.”
• In the event that HCS did deter investment, then, what would be the impact? In other words, the trade-off would be the choice between an industry that remains stagnant and dominated by independent smallholders that supply the domestic market or significant productivity gains for the 4 million smallholders in Nigeria.

p. 31:
The results for incomes per hectare in ex-post studies are broadly consistent. They place the incomes from average sized farms in Nigeria (1.5ha) at the level of average incomes for the country as a whole and higher than rural incomes generally. This would indicate two things:  Independent oil palm smallholder farming provides a means to poverty alleviation in Nigeria; Supported smallholder farming – and by extension larger estate developments with an out-grower component – have significant potential to alleviate poverty in Nigeria.

p. 33
The relationship between smallholders and large estates in Nigeria is similar to that found in other parts of the world, although the relationship does not have the strong institutional ties that have been forged in a country like Malaysia. Presco Plc is a Nigerian company, listed on the Nigerian stock exchange. It is the subsidiary of Siat, a Belgian company with interests primarily in palm oil and rubber, with operations in different parts of Africa. Presco has more than 15,000ha of plantations in Nigeria… Presco, when establishing its outgrower scheme in Ologobo, assessed the role that outgrowers could play in conservation of remaining forest areas. However, the study did note the complexities around expecting local communities – whose primary interest in the plantation is economic – to undertake such a role. Subsequently the company’s focus in community development has been on education, roads, water and electricity…. PZ Wilmar has established oil palm plantations and palm oil processing in Nigeria much more recently and is seeking to develop more than 70,000ha of plantations. As a consequence its relationships with Nigeria’s extensive smallholder and informal oil palm sectors are considerably less developed. The company is currently in the process of replanting old stock, which is providing considerable levels of employment for local farmers and additionally providing training for these farmers.

Ayodele, Thompson, Olusegun Sotola, Olajide Damilola, Khalil Hegarty and Ilemobola Obe (2015), Nigeria: A smallholder case study, Consulting Study No. 13 for The High Carbon Stock Science Study 2015 (December 2015), http://www.simedarbyplantation.com/sustainability/high-carbon-stock, accessed 10 Feb. 2017.