Stakeholders in the cocoa industry are worried about the decline in cocoa production, exportation and foreign dominance of the business in Nigeria. GBENGA ADERANTI writes on the challenges and efforts being made by stakeholders to resuscitate the dying industry.
To Nigerian farmers, cocoa is a golden crop that provides them a means of livelihood and even wealth. Irrespective of the kind of farming they practice, the average Nigerian farmer would still want to plant cocoa, no matter how little.
Cocoa planting being a trans-generational activity, majority of the farmers probably inherited the farms from their forebears. Little wonder Nigeria once ranked among the leading cocoa producing countries in the world.
With the discovery of oil, the interest in cocoa business waned and the once highest revenue earner for the country was supplanted by oil.
Ironically, while the demand for cocoa has continued to spike in the world market, only a few farmers appear to be interested in the business. Many of the farmers who are in the business are operating at subsistence level, barely making ends meet as they are confronted with a plethora of challenges.
Nigeria is currently the fourth largest producer of cocoa globally. The country rakes in about N34 billion annually from exporting cocoa beans alone. This is besides other revenues from cocoa by-products like butter, cake, liquor and powder.
While the country trails Ivory Coast, Ghana and Indonesia behind, its output is still comparatively low. Ivory Coast produces 2,200,000 tons of cocoa beans annually, while Nigeria’s total annual output is about 340,163 tons.
According to a report, in the 1950s, Nigeria’s share of the world cocoa trade increased from roughly 14% to 18%.
In the mid-1960s, the volume of cocoa exports grew from approximately 100,000 tons to 229,000 tons yearly over the 1963-67 period.
Cocoa exports grew at a compound average growth rate of about 7% per year in the 10 years between 1956 and 1967. By the early 1960s, the production of cocoa had risen by about 80% above the previous 1950-51 high following the acreage increase in cocoa cultivation of about 15%.
The increase was attributed to the widespread use of insecticides, fungicides, improved seedlings and other improvements that had been seriously promoted through subsidies, credit schemes and extension services by the Western Regional Marketing Board.
In the ’70s/’80s, Nigeria was the second largest producer of cocoa in the world, producing over 450,000 MT of cocoa. But over the years, Nigeria has continued to experience a slide in cocoa production.
Cocoa production slides
Speaking on the factors responsible for the decline in cocoa production in Nigeria, one of the stakeholders in the cocoa industry and founder of the International Cocoa Diplomacy, who is incidentally the traditional ruler of Eti-Oni, a cocoa producing community in Atakumosa East Local Government, Osun State, Oba Dokun Thompson, believes that the discovery of oil contributed to the decline in cocoa production in Nigeria.
As a result of the revenue that accrued from oil, the government was able to fund several projects, new cities were built, new jobs created and people were required to take up these new roles and opportunities.
However, it was the period when there were more jobs than applicants or qualified applicants, and the government also invested a lot in developing the education sector to respond to the needs of advancement. Oba Thompson recalled that “those who were left behind in the cocoa producing communities started aging as the communities also suffered neglect and those who would have become next generation farmers tried to grasp these emerging opportunities elsewhere, migrating to the new urban centres, leaving behind only those who were perceived old, weak and uneducated to the cocoa farms.
“The effect was reduced production in terms of output as well as productivity in terms of quality, as it is always very difficult to teach older people new ways and methods of doing things that they are used to doing in the same manner for several decades. The gap now led to reduced production to well below 150,000MT per year.”
The monarch stated further that value addition to Cocoa is not just about processing to industrial products of cocoa liquor, cocoa butter or cocoa powder, which is the secondary stage or the tertiary stage of processing into finished and consumable products of chocolate and confectionery, cosmetics or even the pharmaceuticals. “There are a lot of opportunities also being missed on the soft side of value addition in the area of education, research, data gathering and analysis, tourism, entertainment, merchandising, packaging, etc, and the country loses over $2 billion every year.”
He commended the federal government for recognising cocoa as a vehicle that can be used for inclusive development “and to have allocated N100 billion to an Agric Development Fund in the 2024 budget is an indication the government truly means business.”
According to a paper presented by O.S. Afolayan of the Nigerian Army University Biu , Borno State, 14 of Nigeria’s 36 states grow cocoa of which more than 80% are from the Southwest geopolitical zone.
Afolayan posited that the inability of Nigerian farmers to produce cocoa like in Ghana and Côte d’Ivoire is attributed mainly to loss of soil fertility, world price fluctuation, aging plantation and negligence of agriculture in favour of crude oil by the government. Since the 1970s, crude oil has remained the highest source of foreign exchange earnings while cocoa, a versatile, renewable and sustainable source of revenue, is yet to reclaim its lost glory.
The Nation gathered that cocoa production in Nigeria is also retarded by the declining productivity of the existing old cocoa trees. It was also gathered that Cocoa production in Nigeria is undertaken mostly by poor, small scale and low-technical farmers who use neither fertilizer nor manure for soil fertility improvement. These farmers therefore face difficulties in setting up new cocoa farms and rehabilitation of old ones.
Even though Nigeria’s cocoa has continued to suffer one form of rejection or the other, Oba Dokun Thompson maintained that Nigeria has the best species of cocoa in the world. “What we don’t have is the evidence to back it. ICCO in the International Cocoa Agreement, ICA 2010 divided cocoa-producing regions into 2 classes – Bulk Purchase Cocoa Producers and Fine or Partially Fine Flavour Cocoa Producers. This classification is not based on any particular scientific research but on geographical delineation, and those who buy cocoa have used these categories to continue to undermine cocoa depending on the producing region to keep the price as low as possible.”
The monarch said: “What we are seeing today with the cocoa price reaching an all-time high is a result of cocoa production going burst. What I mean by that is there was a lot of enthusiasm and interest to produce as much cocoa as possible without the corresponding manpower to manage the process that will ensure the output achieved can be managed so when there is a simple issue around climate change that could bring about, for instance, the swollen shoot disease, the response time is such that production output is badly affected.”
Last year, ICCO amended the ICA 2010 and included Ghana and Cameroon to produce some degree of fine flavour cocoa, and Nigeria was not included.
“We are currently working on a research project with the Zurich University of Applied Sciences and Teesside University, UK on the quantitative analysis of the flavour profiles of cocoa produced in Nigeria based on agricultural practices.
“I believe the conclusions of this project will give better light on these classifications and also provide the evidence and data that will back the quality of cocoa produced in Nigeria,” Oba Thompson said.
The decline in cocoa production and exportation and the foreign dominance have continued to be a source of concern to all stakeholders. At a recent joint press conference in Lagos, the Managing Director/Chief Executive of Nigerian Export-Import Bank, Abba Bello, represented by Mr Tayo Omidiji, NEXIM Bank’s Head of Strategy and Corporate Communication, said it is time for Nigeria to add value to its cocoa exports as a major step towards maximising the benefits of investments in the sector.
He observed that Nigeria has lost its leading position in the production and export of cocoa over the years to now rank about the 4th producer behind countries like Cote d’Ivoire, Ghana and Indonesia. This problem, he said, can be attributed mainly to the aged plantations and lack of investment in the sector over the years.
According to him, the cocoa industry is worth about $200 billion annually, out of which the entire West African producing region (made up of Cote d’Ivoire, Ghana, Cameron and Nigeria), accounts for about 70 -75% of the global output, earning only $10 billion.
He said while Nigeria has continued to be a major producer of cocoa, a report by the International Trade Centre (ITC) in 2021 revealed that Nigeria produced 208 MT of cocoa beans in 2021 but generated a total income of $628 million. However, Germany, which did not produce cocoa, earned a whopping $57.3 billion from the export of cocoa products.
As a way forward, the Managing Director of Sunbeth Global Concept, Olasunkanmi Owoyemi, called on the Federal Government to put necessary policies in place to prevent the exploitation of cocoa farmers by enhancing the cocoa value chain that would also protect the local cocoa economy players.
Tackling major challenges
To arrest the decline in cocoa production and exportation, stakeholders came together to chart the way forward at the 2024 International Cocoa and Chocolate Forum (ICCF) held in Abuja and Lagos. At the end of the conference, the forum issued a communique in which it observed that the cocoa sector is dominated by a few global players, creating an oligopolistic market which makes trading difficult because they determine the price, sustainability measures and certifications, required training modules for farmers, and so on.
The forum also observed that “although Nigeria remains the 4th largest producer of cocoa with about 6.5% of the world’s production output and remains the 4th largest exporter with receipts of close to US$700 million, the industry continues to decline even though cocoa can be produced in over 24 states in the country with tremendous potential for growth.”
According to the communique, Europe remains the biggest market for West African cocoa and its derivatives, but cocoa from the region will be subjected to the new EUDR policy which will come into effect on January 1, 2025 and will possibly disrupt the industry supply chain and the country’s forex earnings from cocoa and other products namely coffee, soya, timber, palm oil, rubber and cattle and their derivatives.
The forum stated further that the different aspects of the Nigerian cocoa supply chain and the smallholder cocoa farmers appear to be unaware of the new EUDR policy and its compliance requirements and remain unprepared as to who is responsible for what.
“The Nigerian Cocoa Industry does not have any form of policy, mapping, identification or data that can help respond to the EUDR or COP28 resolutions and to also plan for social and economic development purposes.”
According to the stakeholders, the US is the second largest importer of raw cocoa beans and eliminated all tariffs on cocoa and its derivatives exported from Nigeria, which is an important factor for investors and a key market to further explore, adding that “there are several value chain development opportunities within the global cocoa industry that are not being explored due to a lack of the cocoa culture and full appreciation of the value propositions with the country losing over US$2 billion every year.
“The built-up processing capacity in the country is about 200,000MT to convert cocoa to butter, liquor and cake/powder but is operating at about 30% capacity because the cocoa industry and the domestic market are not properly structured in the manner that will attract the right investments to develop the market to compete with western market offerings.
“Africa contributes only 3% to the global trade, and four countries, Nigeria, Egypt, South Africa and Ethiopia, contribute 2% while the remaining 50 countries in the continent together contribute 1%.
“The regional and continental market lacks the right policies, infrastructure and harmonised standardization to take advantage of the market size and the potential it offers.
“There is a lack of proper and creative funding to fully develop the opportunities within the industry. Cocoa Research Institute of Nigeria, CRIN, is underfunded and NEXIM Bank is not structured or funded like its similar counterparts e.g. AFREXIM or EXIM Bank of India to undertake major investments and financing of necessary and required major infrastructure projects to further the export trade.
“Manufacturing has become unattractive due to the lack of necessary infrastructure to support the services rendered that will make the cost of production and quality competitive with imported products, and we need agriculture that must lead into industrialization.
“N100 billion was set aside for an Agric Development Fund out of the 2024 Agric Budget of N900 billion to support endeavours such as the ICD Forum which had world views because the country will be competing with other countries which may have several policies and subsidy regimes to take advantage of market share. And it is important to recalibrate government policies now and again to compensate for gaps and to provide infrastructure that will ensure various sectors of the economy work.
“The average age of the Nigerian cocoa farmer is about 50 years, and the youths are boycotting farming altogether with capacity to apply best agricultural practices reduced at an alarming rate while cocoa plantations are facing several threats including land degradation from illegal miners, and there is no known definition or government policy about land degradation or deforestation and the livelihood of the members of any farming community.”
The forum therefore recommended that cocoa must be de-commoditized as the prerequisite to fully achieve value addition and make cocoa a vehicle for inclusive development, wealth, and prosperity creation with sustained awareness about the economic value of cocoa and its value chain opportunities.
It also advised that the country needs to transition from being a cocoa-producing to a consuming one. There must be deliberate consumption of cocoa products as a way to create the cocoa culture being promoted by ICD, including cocoa derivatives or cocoa beverages in the existing school feeding programme, as this will also encourage domestic and international investments into the sector.
It stated further that there is a need to establish a cocoa development fund in partnership with the private sector to drive all the investment needs and strategies for development of the industry into a self-sustaining model through collaboration with ICD developing a working committee of key stakeholders to develop the plan that will organise and structure the sector, identifying all the different components and putting the right rules in place to attract funding with the goal of creating a cocoa marketing agency that will guide the transformation of the cocoa industry, guarantee farmers income and provide rural infrastructure as key to incentivise the youths.
CRIN, it said, needs to be provided with improved and targeted funding for research and development, flavour profile quantitative analysis, data collection and collation with development of a mechanism in collaboration with ICD for cocoa classification and denomination as well as governance and monitoring protocols to improve the specialty chocolate and cocoa offerings in the country.
It urged the introduction of technology and innovation into the sector by ICD with sustained education and training for farmers and capacity building for entrepreneurs employing ICD modules for market intelligence and ability to properly apply the right skills and understanding to optimise production output and productivity with the highest quality and standards obtained.
Governments were also advised to use tariffs to protect economic activities and it is important to introduce policies that will discourage export of raw cocoa beans, encourage value addition at origin, promote, guide and guard the cocoa industry as well as protect local players.
Improve capitalization of NEXIM to be able to double its investments in value-added projects with the introduction of concessionary finance for export and youth-driven initiatives.
“There is a need for an ICD, NEXIM and CRIN driven strategy session with youth entrepreneurs and selected key players to carefully craft out interventions that will incentivise youth participation in the cocoa industry and agribusiness.
“CRIN should be funded to multiply the production capacity of its new TC- series improved hybrid seedlings and inputs which should be made available to farmers in conjunction with ICD distribution methodology for free to double the country’s annual cocoa production output in the next 3 – 5 years.
“Government intervention should be properly directed. State governments should consider the proximity of proposed industrial hubs for the purpose of cocoa processing activities to the source of raw materials and should develop diagnostic reports in conjunction with ICD of moribund processing plants and escalate to the Federal Government for intervention.
“The FG should look into mutually recognition agreements with regard to the EUDR. There is also an urgent need to map out deforested regions since 1 January 2021 in relation to cocoa production and other affected products so as to be in compliance with the EUDR in collaboration with ICD.
“The FG needs to critically look into the tariff rates quotas for commodity imports and exports to determine market-friendly measures to balance producers and consumers,” it added.
The forum also said there is a need to create a circular and sustainable cocoa economy and also aggressively develop the domestic and continental market to take advantage of and leverage the potential of the market size.
FG should declare an emergency in the cocoa sector with direct intervention to all cocoa-producing states. The FG should also support the creation of state marketing boards in the derivation-sharing formula to fast-track the development of cocoa at the state level.
The Federal Ministry of Agriculture and Food Security should support cocoa-producing states through a World Bank project with a focus on cocoa revival across the producing states.
