Indonesia, the world’s largest producer of palm oil, implemented a policy on May 17 to increase the export tax on crude palm oil (CPO) , aiming to finance biofuel initiatives and replanting activities within the country.
- Indonesia, the world’s largest producer of palm oil, raised its export tax on crude palm oil from 7.5% to 10% starting May 17, 2025.
- African nations, heavily reliant on Indonesian palm oil imports, are anticipated to face increased costs, potentially impacting local markets.
- Local African production remains unable to meet domestic demand, making higher costs inevitable for the region’s consumers.
Indonesia’s recent decision to raise its export tax on crude palm oil (CPO) from 7.5% to 10% is expected to have significant repercussions across global markets, particularly impacting Africa.
Many African countries depend heavily on palm oil imports from Southeast Asia and are likely to face increased costs once the new levy takes effect on May 17, 2025.
According to a statement by the Indonesian Ministry of Finance, the government increased the export levy on CPO from 7.5 percent to 10 percent.
This move is intended to boost productivity and add value to downstream palm oil products, with a special focus on benefiting smallholder farmers.
“The adjustment of the export levy is necessary to enhance the productivity and added value of downstream plantation products, especially for the benefit of farmers,” the regulation states.
The increase has however, raised concerns within the industry.
Eddy Martono, Chairman of the Indonesian Palm Oil Entrepreneurs Association (Gapki), expressed worries that the higher levies could undermine the competitiveness of Indonesian palm oil exports.
“Compared to Malaysian palm oil, our products are already more expensive due to various levies, export taxes, and domestic obligations. All of this is burdensome,” he said, as quoted by Reuters.
Indonesia’s palm oil trade
According to Statista data on global palm oil export volumes for 2024/25, Indonesia remained the leading exporter with approximately 24.2 million metric tons, followed by Malaysia with around 15.9 million metric tons.
In 2023, Indonesia’s main palm oil export destinations included India ($4.86 billion), China ($3.79 billion), Pakistan ($2.56 billion), the United States ($1.71 billion), and Bangladesh ($1.16 billion).
Although African countries are not the largest importers of palm oil, they play a significant role in the consumption and usage of Indonesian palm oil.
Major importing countries in the region include Nigeria, Kenya, Tanzania, Angola, and South Africa.
With a population exceeding one billion, African palm oil producers struggle to meet domestic demand.
According to a 2023 data from the World Agricultural Production, Nigeria produced 1.4 million metric tons of palm oil, making it the top producer in Africa and the fifth-largest globally.
Côte d’Ivoire (Ivory Coast) produced 600,000 metric tons, while Cameroon’s output stood at 465,000 metric tons. Ghana produced 300,000 metric tons of palm oil, and the Democratic Republic of Congo (Congo-Kinshasa) also produced 300,000 metric tons.
The supply shortfall is largely met through imports from major oil crop producers such as Indonesia, Malaysia, Brazil, and the European Union.
Despite this, Malaysia and Indonesia remain the primary suppliers of palm oil to sub-Saharan Africa.
Local production across Africa is currently insufficient to satisfy demand, leaving consumers with little choice but to pay more for the imported product.
Importers are expected to pass on the additional costs resulting from the increased export levy, especially the one imposed by the Indonesian government, which will ultimately raise the price of palm oil in the region.
