Nigeria’s palm oil import costs are climbing as tightening global supply—largely driven by developments in Indonesia—pushes prices above earlier 2026 projections.
Crude Palm Oil (CPO) futures on the Bursa Malaysia Derivatives Exchange are currently trading between $1,135 and $1,160 per metric ton, reflecting sustained upward pressure. The price rally is being fuelled by a mix of environmental constraints and policy shifts in key producing countries.
Indonesia, the world’s largest palm oil producer, has confirmed plans to raise its palm oil-to-biodiesel blending mandate to 50 percent (B50) in 2026. President Prabowo Subianto’s administration is also maintaining elevated export taxes—recently adjusted to about 10 percent—to fund domestic biofuel programmes. These costs are effectively transferred to import-dependent countries such as Nigeria.
The policy direction is aimed at reducing Indonesia’s reliance on imported fossil fuels at a time when global crude prices remain elevated. Brent crude is hovering around $120 per barrel, reinforcing the linkage between energy markets and palm oil prices, given the commodity’s role in biodiesel production. Analysts say prices are unlikely to fall below $1,135 per ton as long as crude oil remains at current levels.
Supply-side pressures are further compounded by adverse weather conditions. Indonesia is experiencing a severe dry season in 2026, with output projected to decline by up to one million metric tons year-on-year due to El Niño effects and rising fertiliser costs.
Across Southeast Asia, higher biodiesel mandates—including Malaysia’s push toward B15 and Indonesia’s earlier B45 programme—are tightening export availability by diverting supply to domestic energy use. This structural shift continues to underpin global price strength.
Nigeria’s widening supply gap
Nigeria remains heavily reliant on imports to meet domestic demand. Annual consumption exceeds 2.5 million metric tons, while local production is estimated at about 1.4 million metric tons, leaving a deficit of over one million tons.
This imbalance continues to exert pressure on food prices, with the cost of a 25-litre gallon of palm oil contributing significantly to food inflation.
Import expenditure is estimated between $500 million and $600 million annually, underscoring the scale of the supply gap and associated foreign exchange burden.
Global cost pressures are also being amplified by geopolitical tensions in West Asia, which have kept fertiliser prices high and energy markets volatile. These dynamics are influencing the Palm Oil–Gasoil (POGO) spread, a key indicator of biodiesel economics.
The World Bank projects further increases in energy prices this year, a trend that could sustain demand for palm oil as a biofuel feedstock and keep prices elevated.
From global leader to net importer
Nigeria was a dominant force in the global palm oil market in the 1960s, accounting for over 40 percent of global supply. However, decades of underinvestment and structural inefficiencies have eroded its production capacity, turning the country into a net importer.
Industry analysts estimate Nigeria now imports roughly $600 million worth of palm oil annually, representing significant lost economic opportunities.
There are, however, signs of renewed investment in the sector. Presco Plc, largely owned by SIAT Group, has commissioned a 15,000-hectare plantation expansion alongside a 60 metric ton-per-hour processing mill in Edo State. Similarly, Okomu Oil Palm Company, listed on the Nigerian Exchange, reported N34.4 billion in palm oil profits in 2025—an 87 percent increase year-on-year.
Analysts maintain that Nigeria’s ability to reclaim its position in the global palm oil market will depend on the execution of a coherent strategy, backed by clear timelines, measurable targets, and strong accountability frameworks.
