Repositioning the cocoa industry for maximum economic growth


Jide Ayobolu


The Federal Government (FG) is collaborating with the Governors of cocoa-producing states and other stakeholders to enable Nigeria benefits from the projected $67.22 billion global cocoa market. This was announced by a senior official of the Nigerian Export Promotion Council (NEPC), the agency responsible for developing and promoting non-oil exports. The NEPC official, said, “I am happy to inform you and the public that President Muhammadu Buhari-led administration has continues to drive the diversification process. Also, efforts to reposition the country’s cocoa export with a view to increasing production and meeting the requisite internationally accepted standards for export into the European Union and the US are gradually yielding results. At present, cocoa is the leading major agricultural export of our nation. “The commodity is one of the 13 National Strategic Export Products (NSEP) of the Federal Government and very prominent in the NEPC’s Zero Oil Plan initiative.  It was integrated into Government’s Economic Recovery and Growth Plan (ERGP), 2017-2020 because the government is serious with its diversification agenda. “But unless the state government supports the efforts of the Federal Government, the country may lose its global ranking, due to poor production practices and non-compliance to Importing countries’ requirements, among others.”

As stated by the NEPC official, the global cocoa market size, which was $43.13 billion in 2018, is expected to be worth $67.22 billion in the next five years. This is due to the high demand from the chocolate confectionery sector which is also expected to rise in the coming years. Therefore, when the demand for cocoa and chocolate escalates, the chocolate and cocoa market revenue would also see growth. This is why it is important that the government and stakeholders work hand in hand in the industry. It was reported when AFEX Commodities Exchange disclosed in its latest report that cocoa was one of the leading non-oil export products alongside Sesame and cashew. This was by the end of the third quarter of 2019. Cocoa had grossed a total of $30.03 million with Sesame and Cashew grossing $41.19 million and $13.75 million each.

Besides, Nigeria earned over N103 billion from cocoa commodity export in the year 2018. This was disclosed by Mr. Segun Awolowo, the Chief Executive Officer of the Nigerian Export Promotion Council (NEPC). While speaking recently at a capacity building programme on cocoa grading and regulations in Lagos, Mr. Segun Awolowo reportedly disclosed that the country earned $338.17 million or N103.8 billion from Cocoa commodity export in 2018. Cocoa, which is one of Nigeria’s leading agricultural exports and the second highest foreign exchange earner next to crude oil production capacity, lurks around 245 metric tons.

According to the Chief Executive Officer of NEPC, “the low levels of production is a result of many factors including poor grading and quality-related issues.” While disclosing the efforts made by NEPC to boost cocoa production, he said, “We have donated seedlings and agro-inputs including sprayers, agrochemicals as well as organizing capacity building on integrated pest management for our cocoa farmers and processors. Workshops for cocoa farmers and stakeholders were held in Akure, Ondo State; Oshogbo, Osun State, Umuahia, Abia State, Uyo, Akwa Ibom State and Ikom, Cross River State.”

In a bid to boost revenue from cocoa exports, the Nigerian government is planning to team up with Cameroon to influence international cocoa prices. Both countries currently account for 10% of global cocoa production. Mr Sayina Riman, President of the Cocoa Association of Nigeria, recently stated that Nigeria and Cameroon were looking to see if they could become a regional bloc and see if buyers who knew the quality of both countries cocoa were willing to give better prices differentials. However, all of these are still informal talks between the two countries and a bilateral approach would be taken to establish it formally. According to the foreign trade report recently released by the National Bureau of Statistics (NBS), as at Q2 2019, Nigeria’s  cocoa commodity export was to the tune of N18 billion, as against N14.2 billion the recorded in Q2 2018. This represents a 29.65% increase in the value of cocoa commodity exports year-on-year. The breakdown of cocoa exports in the NBS report showed that Nigeria exports different types of Cocoa products. Specifically, Nigeria’s cocoa exports include fermented cocoa beans, natural cocoa butter, other quality cocoa butter, and other quality raw cocoa beans.

Cocoa was a major agricultural export crop and a top foreign exchange earner in the 1950s and 60s. Prior to the discovery of crude oil in commercial quantities in the 1970s, Nigeria was the world’s second-largest producer of cocoa. Average cocoa production declined from 420,000 tonnes in the ‘60s to 170,000 tonnes in 1999. Production climbed to 389,272 tonnes between 2000 and 2010 but fell back to 192,000 tonnes in 2015 and 2016. After dropping to fourth place, Nigeria is now the sixth-largest producer. Cocoa is a household cash crop and key agriculture produce in Nigeria. It is used for local consumption and is also exported which generates foreign exchange for the country. According to statistics, Nigeria produced 367,000 tonnes of Cocoa in 2017. The export data from 2017 shows that Nigeria exported 161,285.72 metric tonnes of agricultural produce. Cocoa export accounted for 33,294 out of this figure. Given these figures, Nigeria is yet to tap into the potential of the cocoa industry in the continent when compared to Cote d’ Ivoire and Ghana. This makes Nigeria the third producer of cocoa beans on the continent and fourth behind Indonesia in the world.

Cocoa farming in Nigeria is predominantly carried out by smallscale farmers who have outdated skills and limited access to finance and technology. Cocoa is grown in the southern region due to the favourable soil and climate condition. The top growing states Ondo, Ogun, Osun, Oyo and Ekiti account for about 60% of the cocoa production and makeup at least 30% of the total cocoa export in Nigeria. Ondo is rated the largest cocoa producing state with an output capacity of about 77,000 tons per annum.

 Other producing states include Cross River, Kwara, Akwa Ibom, Ebonyi, Abia, Rivers, and Adamawa. After oil and gas exports, the largest revenue earners, cocoa beans, are the second most exported commodity. However, cocoa merely contributed 0.05% to GDP in 2016 from 0.3% in 2010. The cocoa industry has significant potential but is still underutilized. For instance, in the South-West and South-South region, thousands of acres of fertile lands suitable for cocoa cultivation are currently idle and wasting away.

 In Nigeria, about 80% of cocoa produced is exported as cocoa beans while the other 20% is processed into powder, butter, cake and liquor before being exported. Nigeria is yet to fully capitalize on cocoa production, as most of the beans are sold unprocessed. There are eight cocoa processing factories in Nigeria with a combined installed capacity of 150,000 metric tons. Only four of the eight are functional with a combined total volume of 50,000 metric tons per annum.

These processing companies are often faced with challenges such as insufficient capital, irregular power supply, high cost of cocoa beans, and ineffective and unfavourable government policies.

The industry is reducing in rank in the world market due to poor production practices and non-compliance to importing countries’ specification. There is also the need to address low quality and poor packaging. This should be done by the export promotion council. There is a need to increase the grinding and consumption of cocoa by-products in the country. We also need a private sector driven cocoa value chain, a regulatory institution that will address many distortions along the value chain for the benefit of the local industry. There is also the need for education of many investors on the investment opportunities along the value chain for the local industry and to bring more farmers into both cocoa farming and value-added cocoa processing.

Nigeria could perhaps take a closer look at the success of Ivory Coast, Ghana, and others, and consider emulating and hopefully repeating their success in the processing of cocoa beans into chocolate and other products to earn more money. The Government has taken note of this and, along with the Cocoa Association of Nigeria (CAN), has set out a 10-year action plan to boost the agriculture sector. The Buhari administration wants to revive agriculture even more so as a result of the massive drop in crude oil prices, which has negated the country’s economy. “We have made laudable recommendations that can change the cocoa story in Nigeria, we hope those recommendations will be faithfully implemented in the interests of the industry.” CAN President Sayina Riman.

It must be noted that, the major challenges facing the cocoa industry, as experts synthesised, include rapid population growth in Nigeria, leading to large-scale conversion of agricultural land to non-agricultural uses; low productivity emanating from old and low-yielding cocoa varieties/farms; inadequate information on cocoa farm assets; small-holding production of farmers; low income and limited level of diversification; weak and poorly coordinated organizations of farmers; inadequate support services; land tenure system which impairs transfer of farm ownership; increasing demand for certification and traceability in the global cocoa market; need to improve research and development infrastructure and low capacity utilisation among cocoa processors.