A kitchen staple in millions of Nigerian homes may soon get more expensive. Indonesia—the world’s largest producer of palm oil, has increased its export tax on crude palm oil (CPO) from 7.5% to 10%, effective May 17. This is in a move that could ripple across global markets, including Nigeria, which is its fifth-largest producer globally.
The tax hike is part of Jakarta’s broader strategy to fund its expanding biofuel program and replant aging trees, many of which are no longer yielding optimally. It also reflects Indonesia’s growing focus on energy security and sustainability, as the country recently raised the palm oil mix in biodiesel from 35% to 40%, with plans to reach 50% by 2026.
In spite of Nigeria’s status in the global crude palm oil production, it still remains heavily dependent on imports to meet local demand. Nearly half of the two million metric tons consumed annually are brought in from countries like Indonesia and Malaysia, the latter being the second-largest producer.
But global supply is tightening. Malaysia is facing its own production hurdles, and now, with higher Indonesian levies, the price of the oil—a core ingredient in everything from cooking oil to soap and margarine—is likely to rise even further. This development comes at a time when food inflation is already straining many Nigerian households.
Indonesia’s revised tax structure also includes levies on a range of palm oil derivatives. The proceeds will be channeled into smallholder support programs, replanting initiatives, and the development of renewable energy alternatives such as biodiesel and even jet fuel blends.
To further combat declining yields, Indonesia is exploring biological solutions. This year, the country plans to release about one million weevils—tiny pollinating insects imported from Tanzania—onto select plantations. The weevils are expected to improve fruit development and help rejuvenate aging oil palm trees.
Despite the economic benefits, environmental groups have raised concerns. President Prabowo Subianto recently argued that oil palms, being trees, should not be associated with deforestation. However, critics point to significant evidence linking palm oil cultivation to deforestation, biodiversity loss, and increased carbon emissions. Experts are urging Indonesia to focus on improving yields within existing plantations rather than clearing more forest land.
Nigeria pushes for palm oil revival
Back home, Nigeria is not sitting idle. Edo State, long regarded as the country’s palm oil hub, is home to industry leaders like Presco and Okomu Oil—both listed on the Nigerian Stock Exchange. Despite economic challenges, these firms reported record after-tax profits in 2024, signaling resilience and potential for growth.
Now, the Oil Palm Growers Association of Nigeria (OPGAN) is leading an ambitious plan to revive the country’s once-thriving palm oil industry. Under the newly developed Oil Palm Development Strategy for Nigeria (2024–2029), the goal is to replant 1.5 million hectares of oil palm and elevate Nigeria’s global production rank from fifth to third.
The strategy emphasizes modern technology, sustainable practices, inclusive growth models, and better investment planning to restore Nigeria’s leadership in palm oil—once a major export commodity before crude oil took center stage.
As international prices climb, Nigeria’s efforts to boost domestic production could not be more timely. For millions of Nigerians, stabilizing the cost of palm oil isn’t just an economic issue—it’s a matter of food security.
