Presco Plc and Okomu Oil, two biggest palm oil producers in Nigeria, recorded a 95 percent surge in their profits for the first time in 10 years, according to data compiled by BusinessDay.

In the companies’ latest financial statements, combined after-tax profit grew to N39.2 billion in the first three months of 2024 from N20.1 billion in the same period last year.

In terms of revenue, the manufacturers’ earnings surged 86.9 percent to N86 billion from N46.2 billion in the same period last quarter.

While the Nigerian palm oil industry is experiencing a boom due to increased investment, demand and market activity, Henry Olatunoye, former national president of the National Palm Produce Association of Nigeria (NPPAN), highlights a concerning trend

He said the devaluation of the Naira has significantly impacted the cost of essential goods in the country. This devaluation has also made investments denominated in Naira less attractive compared to those in stronger currencies like the dollar.

“Last year, a metric tonne of palm oil was sold for N950,000, but this year, a tonne is between N1.2 million and N1.3 million and is projected to increase to N1.5 million in September due to the naira devaluation,” he said.

“However, during the seasonality of operations in the industry, palm oil consumption increases and production drops, causing a surge in the prices of commodities in naira compared to the dollar ratio,” he added

A further analysis shows that Presco recorded revenue from sales of crude and refined products amounting to N42.5 billion. Presco’s sales on mill by-products stood at N5.1 million in the first quarter of 2024

Okomu Oil recorded N39.3 billion in revenue from local sales (Nigeria) and N4.2 billion from export sales within the period

Presco’s overall revenue increased by 94.1 percent to N42.5 billion in the first quarter (Q1) of 2024 from N21.9 billion in the same period of 2023, while Okumu Oil’s revenue also increased by 79.8 percent to N43.5 billion from N24.2 billion in the corresponding quarter of 2023.

Market conditions appear favorable for Presco in 2024, with the potential for increased domestic crude palm oil prices and stronger refined, bleached, and deodorized production in Q1 2024.

“Based on inflation and the increase in prices of goods, the nominal profit and revenue of palm oil makers have increased. The manufacturers have an advantage of not facing the pressure of importing raw materials or foreign exchange, but prices of other commodities in the cost of production are affected and the prices of their products have increased,” Muda Yusuf, CEO of Centre for the Promotion of Private Enterprise (CPPE), said

Average crude palm oil (CPO) prices in Nigeria traded at an 89.24 percent premium, from 76.54 in 2023 to global prices in the nine months of 2024, primarily due to the impact of persistent Naira weakness in the parallel market,” CardinalStone stated in a note

Palm oil producers have had to deal with insecurity and poor transportation, including high fertilizer prices, in 2024.

Experts say the devaluation of the Naira may have limited direct effects on Nigerian palm oil producers since they might not heavily rely on foreign exchange. However, the depreciating Naira could potentially boost their earnings by making their exports more attractive to foreign buyers.

Palm oil is an essential food product but also a raw material for several food companies, especially for the production of soaps, cosmetics, resins, among others