The World Bank: Floating on the Nigerian Palm Oil Mess

Posted on October 20, 2010 in GlobeScope

By Pradyut Hande:

The International Monetary Fund (IMF) and the World Bank Group met for its Annual meeting that spanned over three days; October 5-8. The highly anticipated meeting involving the crème de la crème of global economists, analysts and policy formulators alike resulted in fruitful discussions revolving around currently germane issues such as currency wars, trade imbalances, policy formulation shortcomings and other miscellaneous factors impeding the swift socio-economic progression in “troubled states”; most notably in the Black Continent.

Africa for long has been a major recipient and consequent beneficiary of the World Bank’s loans that have gone a long way in charting a course towards the establishment of a more self-reliant, self-sustaining and socio-economically stable future. Nigeria is one such nation that has greatly benefited from the World Bank’s unstinting efforts and commitment to usher in a paradigm shift with regards to its once crippled economy. The Bank’s loans for predominantly plantation agriculture have been humanitarian and economic triumphs. Thus, in a development that ought to have caused a palpable degree of disappointment and consternation in equal measure, especially amongst the Nigerian top brass, there was no discussion regarding the matter of the Nigerian palm oil industry.

After years of political instability, implementation of myopic economic policies and gross mismanagement of foreign exchange reserves; the African nation of Nigeria has embarked on a slow albeit steady course of economic development over the past decade. Presently growing at a respectable GDP rate of 3.9%, the Nigerian economy continues to exude latent vibrancy and abundant promise. However, the economy is grossly over dependent on the capital intensive petroleum sector that contributes less than 25% to the GDP despite generating 95% of its foreign exchange revenues. The agricultural sector that contributes about 33% to the GDP has failed to come to grips with the ever burgeoning domestic demand and consequently, Nigeria is forced to import many of its food products.

Set in this background, the World Bank had undertaken a long term agricultural sector lending program with the objective to aid many of the sub-Saharan states increase agricultural output in order to cater to a continually increasing populace and reduce dependence on imports. Nigeria in particular has turned out to become a significant beneficiary of the World Bank’s program. Consequently, its embattled palm oil industry that was dying a gradual death at the end of the last century has scripted a remarkable turnaround over the last decade. Both small scale and large scale land owners have utilized the World Bank’s loans to judiciously invest in Higher Yielding Varieties (HYV) of seeds, more efficient production and harvesting techniques. Nigeria is one of the largest producers of palm oil in the world; after Indonesia and Malaysia.

The World Bank has always stood by and suitably acted along its basic tenet; i.e. providing low interest loans from rich nations to fund development projects in developing nations. However, off late the Bank, under the leadership of Robert Zoellick, has been accused of wavering from its “mission of poverty alleviation” and instead channelising its energies and resources to accomplish “fashionable political and social objectives”. The Bank’s decision to turn its back on the agricultural sector lending program is bound to have adverse ramifications for the Nigerian economy. Many quarters believe that the Bank has pulled the plug on the program after being grossly misguided and proselytized by environmental groups who claim that palm oil production in Nigeria results in deforestation.

One would be naïve if one were to say that the scourge of human-activity induced and accelerated deforestation does not plague Nigeria. But the problem remains predominantly in the North of the country (on account of climatic vagaries and an over reliance on firewood for fuel) while the palm oil plantations lie in the South. Concomitantly, the Bank has failed to grasp the fact that by cutting off the monetary support to the program, the ensuing drop in palm oil production may only exacerbate the problem of deforestation as a “fuel starved” population resorts to cutting down more trees to “fuel” their needs. Also, it will cause a domestic production deficit that will adversely impact the nation’s nutritional requirements. Palm oil is a vital source of vitamins and calories and assumes ever greater nutritional significance in a developing nation like Nigeria. The World Bank’s decision will also render thousands of low-skilled Nigerian workers unemployed — a portent that does not augur well for a nation that is already grappling with high levels of unemployment. The Bank has also conveniently overlooked the glaring fact that the reduction in palm oil production will only increase Nigeria’s dependence on its already burdened petroleum industry.

The aforementioned are the potential ramifications of the World Bank’s contentious decision to cease its agricultural lending to Nigeria in the face of vociferous concerns raised by environmentalist factions regarding escalating deforestation. This is not to say that environmental concerns ought not to be taken cognizance of while tackling mass poverty alleviation; but these concerns over time certainly impede the entire process; ultimately rendering long term efforts futile. Some may argue that the World Bank’s focus appears to have wavered for a bit. However, even a solitary momentary lapse or purported change in focus can prove to be detrimental to the interests of the developing world at large.

The writer is a Correspondent of Youth Ki Awaaz and a business student with wide ranging interests. He strives to address myriad issues of national and global consequence.