Pressured by the slide of crude oil prices, Nigeria's government has introduced a slew of reforms targeted towards diversification of the economy, with agriculture being a focus sector.
In July 2016, the agriculture ministry released the Agricultural Promotion Policy to double the growth rate of agriculture against overall GDP growth on an annual basis from 2016-20.
The policy prioritises access to land, soil fertility, storage, agribusiness investment development and access to finance to support the sector.
Employing about 70% of the country's labour force, agriculture can play a strong role in Nigeria's economic recovery.
Nigeria has over 84m hectares of arable land, out of which only 40% is cultivated. It also has significant manpower, with a population of over 170m people.
In the 1960s, Nigeria was the largest producer of palm oil globally, exporting an average of 150,000 tonnes per year. But now it imports about 500,000 tonnes annually.
The Nigerian palm oil industry is fragmented and dominated by smallholder farmers, who account for more than 90% of the crude palm oil production locally.
"With a supply gap of about 500,000 tonnes and fertile arable land for cultivation, the untapped potential of the Nigerian palm oil sector is large," said Lagos-based broker FBNQuest.
Recognising the potential, the state government for Abia is reported to have acquired 8,000 hectares of land for palm oil production.
The federal government has also stressed the need to return Nigeria to being a net exporter of palm oil.
Earlier this year, PZ Wilmar – a joint venture between soap-to-property group PZ Cussons and agricultural trading giant Wilmar International - signed a memorandum of understanding with the Nigerian Institute for Oil Palm Research.
The memorandum covers research and development, capacity building and knowledge sharing on innovative ways of driving the palm oil industry forward.
The state government has also planned a social intervention programme to feed primary school children aged 5-13. To achieve this, it has contracted Nasco Foods to produce biscuits for an estimated 25m children.
"Since palm oil is an ingredient used in making biscuits, we expect this programme to provide a boost to the domestic palm oil industry," said FBNQuest.
Egypt and Nigeria are the largest consumers of palm oil in Africa, with Nigeria importing 36% of its total consumption.
While Malaysia and Indonesia account for 85% of global production and more than 50% of exports, unfavourable weather conditions, such as the El Nino have led exports to decline by 21% in Malaysia and 29% in Indonesia last season.
Although the US Department of Agriculture forecasts a recovery next year, Nigeria can make up for some of the lost production.
However, despite optimism, challenges remain to palm oil production and the agricultural sector overall. Security challenges have driven away farmers, transporters and middlemen.
Nigeria's huge infrastructure deficit also leads to higher costs of production, as manufacturing companies have to generate their own power.
"A huge investment in machinery is needed to help companies manage energy costs and increase operational efficiency," said FBNQuest.
Still, the broker sees progress in Nigeria raising palm oil output saying that Okomu Oil and Presco, the country's two biggest producers, "have continued to increase their plantation area".
Indeed the groups, which are both listed, are "on course to meet their 2018 and 2020 targets of growing their respective land area to 12,000 hectares and 20,000 hectares".
Their growth is being helped by restrictions on currency movements, besides any support from agriculture policy, with restrictions on foreign exchange spurring demand for domestic supplies, cutting down even on smuggled import alternatives.
"Importers of crude palm oil have been forced to source their [foreign currency] from alternative and more expensive channels.
"The devaluation of the naira, first from circa 165 naira to 199 naira [per $1] last year, and then to circa 280 naira in June, worsened their plight."
However, such dynamics "have benefitted the domestic palm oil producers - Okomu and Presco grew their topline by 51.2% year on year and 60.5% year on year respectively in the first half of 2016".
By Tanya Ashreena