The desire for personal care products in Ghana and Nigeria is driving palm oil production in Africa and has even led to palm oil being imported as the local markets fail to keep up with the demand.
New analysis from Frost & Sullivan finds that Ghana and Nigeria earned revenues of $53.2 million (€41.0m) and $205.3 million (158.1m) in 2011 respectively, and estimates this to reach $72.8 million and $290.4 million in 2016.
The report states that due to local production being unable to keep pace with escalating demand, Ghana remains a net importer of palm oil. Similarly, Nigeria, is also still a net importer of palm oil, despite being the 3rd largest producer of palm oil globally.
"The growing demand for personal care products is boosting the palm oil industry in Ghana," noted Frost & Sullivan's Chemicals Materials & Food Research analyst, Mariam Royker.
"Strong economic growth has resulted in an expanding middle-class who is willing to spend more on personal care products."
The recession hit the Ghanaian economy hard in 2008, however the toilet soap industry remained profitable despite this, which Frost & Sullivan says revealed the resilience of a product which those consumers consider part of their everyday lives.
Dealing with the issues
In Nigeria, FMCG manufacturers face several different challenges due to an unstable infrastructure as well as uncertainty over the country’s leadership.
Unreliable power supply and poor infrastructure systems resulted in high production costs for personal care products in the country, forcing manufacturers to look to cheaper raw materials in order to drive down the cost of production, decreasing the demand for high quality materials and thus opening up the market for cheap, low-quality imports.
There were also concerns over the leadership in Nigeria; however, new Government policies are expected to boost local production, such as high import taxes on finished goods
External investments in Nigeria's palm oil sector are also expected to boost local production and promote market growth.
In Ghana, government initiatives have sought to develop the agricultural sector and increase local palm oil production, while decreasing the need for imports.