Nigeria losing grip on cocoa market as Côte d’Ivoire,Ghana maintain dominance

Onome Amuge

The start of the new year has seen a positive trend in cocoa futures on international markets, as prices approach the record highs reached in 2023. Technical indicators suggest that the market is tight, with the forward curve for cocoa futures showing an increasing degree of inversion. This is due to the continuing strength of major players, who are enjoying a bumper ride on the back of strong demand and limited supply.

It is worth noting that Côte d’Ivoire and Ghana,as the world’s largest and second largest cocoa producers, are key players in the global cocoa supply chain and earnings with Côte d’Ivoire producing about 40 per cent of the world’s cocoa and Ghana producing around 20 per cent.

In contrast to the thriving cocoa industries of Côte d’Ivoire and Ghana, Nigeria’s cocoa production remains relatively minor. Despite being the world’s fourth largest producer, Nigeria accounts for just 5 per cent of global cocoa production, paling in comparison to the massive cocoa operations of its two West African neighbours.

While Côte d’Ivoire and Ghana have been able to increase their market share through initiatives like the Living Income Differential (LID), Nigeria’s cocoa sector has failed to keep pace.

Nigeria’s failure to capitalise on its potential as a major cocoa producer has raised serious questions about the country’s competitiveness in the global market. Compared to its neighbours, Nigeria’s cocoa sector has underperformed. This has raised concerns about the competitive position of the Nigerian cocoa sector and the need for measures to boost its performance.

Abba Bello, director general of the Nigeria Export and Import Bank (NEXIM), described the situation of the Nigerian cocoa sector as worrying. He pointed out that despite the significant resources and efforts put into the sector, its performance has been subpar, with challenges ranging from lack of infrastructure to low levels of technology adoption and processing capacity.

Bello also identified a lack of government policies and research and development as major barriers to Nigeria’s ability to benefit from the global cocoa market, which is worth an estimated $200 billion.

Industry experts have pointed to Nigeria’s lack of processing facilities as a major factor behind its poor performance in the global cocoa market. Côte d’Ivoire, on the other hand, has a robust cocoa processing industry, allowing it to derive more value from its cocoa production and earn more revenue than Nigeria.

During the International Cocoa and Chocolate Forum (ICCF) 2024, the managing director of NEXIM, delivered a paper titled “Expand Thinking Beyond Cocoa Beans and the Opportunities for Investment and Job Creation.” The presentation highlighted the bank’s efforts to support the development of Nigeria’s cocoa sector, including financial and risk-bearing support for cocoa processing companies and exporters.

According to Bello, NEXIM Bank has invested over $71 million in 15 cocoa processing companies. In addition, the bank has provided financial and risk-bearing support to more than 200 cocoa exporters. Despite these efforts, Bello noted that the impact of these initiatives has been far from impressive.

“Out of the 20 cocoa processing factories in Nigeria, only eight are in some form of operation due to a myriad of challenges,” he stated.

Bello identified several  other challenges facing the cocoa sector, including lack of infrastructure, logistics problems, demand and supply constraints, and inadequate financing.

Experts at the forum also pointed out other issues, such as aging plantations, low productivity, high energy costs, port congestion, and a lack of adequate packaging materials. They further noted that the sector is experiencing slow growth in product output, a lack of access to finance for small-scale producers, and inadequate financial structures.

Babajide Sanwo-Olu, the Lagos State governor, observed that  Nigeria’s 287,000 metric tonnes of cocoa production is only a fraction of the sector’s full potential. He explained that the country has a huge opportunity to add value to its cocoa by turning the raw material into a wide range of products, from chocolate and cocoa butter to beauty products and medicines. However, he said that this potential has been largely untapped, and called for greater investment and support for the sector.

“Much of our cocoa is exported as raw beans, with limited local processing.This represents a missed opportunity for higher revenue generation, job creation, poverty alleviation, economic diversification, and development,” he said.

Given the current economic challenges, such as the devaluation of the Nigerian currency, the governor stressed the need for policies to promote value addition in the cocoa sector. He noted that Lagos is already a major trade hub and has the potential to become a center for value-added cocoa products.

The governor, who was represented at the ICCF event by Folashade Ambrose-Medebem, the Lagos State commissioner for commerce, cooperative, trade, and investment, outlined specific initiatives to multiply the benefits of cocoa production. These include infrastructure development to improve access to markets, research and development to improve yields, training and capacity building to improve productivity, financial incentives and market access to improve profitability, and trade facilitation to reduce barriers to trade.

Governor Sanwo-Olu stated, “Lagos, with its strategic geographical position and robust infrastructure, is poised to become a central hub for cocoa processing and trade.

“Our ports, coupled with an efficient transportation network, provide an excellent platform for exporting processed cocoa products to Africa and the world.

“The statistics and roadmaps are quite exciting to know; by 2026, we aim to increase local cocoa processing to 40 per cent of our total cocoa production.”

According to the governor,in order to support the sector, the Lagos state government plans to establish three major cocoa processing plants, each with a capacity of 10,000 metric tonnes per year.  He also noted that the state intends to train and empower 20,000 cocoa farmers and small and medium-sized businesses by 2025 through various programmes.

In a separate address, Ademola Adeleke, the governor of Osun state, highlighted the state’s role as a major cocoa producer in Nigeria. He noted that Osun state is the third largest producer of cocoa in the country behind Ondo and Cross River states, with the potential to produce 80,000 metric tonnes of cocoa each year. However, he acknowledged that the current production figure is only 22,000 metric tons, and expressed the need to increase output in order to meet the full potential of the sector.

Tola Faseru, the Osun State commissioner for agriculture and food security, who represented Governor Adeleke, highlighted the state’s plans to rehabilitate old cocoa plantations and create new ones. He said that these efforts would include providing infrastructure and replanting, as well as training and support for young farmers.

The governor mentioned that the state’s plans include reviving the cocoa processing plant in Ede, which would add value to cocoa products and increase the economic benefits of the sector. He also noted the plan to create smaller-scale cocoa processing facilities across the state, as part of a larger initiative to promote the industry and improve the livelihoods of local communities.

“In our revenue profile, Cocoa is a major source of foreign exchange earnings and contributes significantly to the state treasury.

“The graded figure for the year 2023 is 13,000 metric tonnes with the state earning N180 million.

“In my administration’s drive to attain number one position in the community of cocoa producing states, and we are doubling down on the implementation of our agenda by focusing on the following,” he said.

The governor called on the federal government to declare an emergency in the cocoa sector and provide direct financial support for the revitalisation of cocoa production in the states. He also advocated for the creation of state marketing boards to facilitate the development of the cocoa sector at the state level.

The governor commended the Western Region Development Initiative’s efforts to revitalise the cocoa sector through a regional framework. However, he emphasised the importance of each state in the South West developing its own local plan for reviving the sector, noting that the problem is a local one, and cannot be solved from the top down.

In a keynote address, titled: “The Link Between Investments and Sustainability in a Global Market ,Balarabe Lawal, the minister of environment,pointed out  the need for a balance between investments for economic success, social well-being, and environmental sustainability in order to achieve a sustainable viable future for cocoa production.

The minister called for advocacy, partnership, and collaborations for optimal results. He also enjoined players in the cocoa industry to adopt following sustainable practices:

-Sustainable farming practices such as agro-forestry initiative and a sustainable land-use system that prevents deforestation.

-The use of eco-friendly pest control methods to reduce chemical load released into the environment.

-Investments into new technologies and adoption by cocoa farmers to enhance value addition to cocoa products at the global market.

-Technologies for efficient drying of cocoa beans to meet international export standards and certifications which would give cocoa farmers a comparative edge at the global market.