Two major Nigerian exports – crude oil and cocoa – are expected to remain substantially at higher prices over extended period, raising hopes on the country’s fiscal outlook.
Cocoa, which accounted for more than a quarter of Nigeria’s agricultural exports by third quarter 2023, has almost doubled its price with a year-to-date increase of 95.27 per cent to $8,348 per metric tonne (pmt) from $4,275pmt.
Brent rose further by 0.49 per cent to $87.28 per barrel (pb) on Tuesday as supply cut continued to moderate prices. Iraq, the second-largest producer of crude in the Organisation of Petroleum Exporting Countries (OPEC) announced it would cut its crude exports by 21.42 per cent to 3.3 million barrels per day (mbpd) from 4.2mbpd in the coming month.
Iraq’s decision complies with the OPEC+ decision to extend production cuts into the second quarter of 2024.
Senior Analyst, Financial Derivatives Company (FDC), Dr Desola Sunmoni, said oil and cocoa would remain elevated in the near term citing high demand in the face of supply constraints.
According to FDC, oil prices will remain elevated on tight supplies from OPEC+, further supported by stronger economic growth in China and the United States, signaling higher energy consumption.
FDC noted that the significant cocoa price increase was due to reduced supply from West African cocoa-producing countries, which are facing adverse weather conditions.
“Cocoa exports accounted for 26.23 per cent of total agricultural products in Nigeria in the first nine months of 2023. An increase in cocoa prices bodes well for cocoa farmers and Nigeria’s fiscal earnings,” FDC stated.
Analysts however pointed out that Nigeria, the fourth largest global cocoa producer and exporter, may be unable to benefit from the elevated global cocoa prices to boost export earnings due to low output.
Data from the International Cocoa Organisation showed that Nigeria’s cocoa exports declined by 3.45 per cent to 280,000 metric tons in 2022 to 2023 season.
“The price of cocoa is expected to remain high on strong demand for cocoa by chocolate manufacturers and poor weather conditions, contracting supply in the short term,” FDC stated.
Managing Director, Cadbury Nigeria Plc, Oyeyimika Adeboye, in an interview with The Nation, had underlined the need to incentivise the development of the cocoa industry as a major foreign exchange earner.
She said the absence of globally accepted marketing structure and incentives for large-scale development was hampering the growth of the cocoa industry.
“I asked our cocoa people to get some information about cocoa in Ghana and Cote d’Ivoire, two of the biggest cocoa exporters in the world and was wondering why Nigerian was not there in the top chart. What I found out, I was disheartened.”
We exported cocoa to Ghana, some of the seedlings that Ghana used to grow, came from Nigeria, but Ghana organised itself, focused on what it needed to do, established a cocoa board and put a structure in place to manage their exports. In Nigeria, we don’t have that. Many years ago, we had a cocoa board that was working and we were able to manage things better, but that board has literally disappeared and has no power.
“The people that are importing cocoa globally want structure, they want quality, they want to know who they are paying to; that’s what Ghana has done, that’s what Cote d’Ivoire has done, same for Brazil, all the countries of the world that are the biggest cocoa exporters have a structure; Nigeria can get in there because we have the land, but we are not focused on the structure.
”For us at Mondelēz for instance, last year we brought our Cocoa Life project to Nigeria to support farmers, to teach them how to grow, how to treat, how to preserve, how to dry, all the things they do in cocoa farming, we taught them. But you see, that’s like a drop in the ocean, because you can have the best cocoa in the world, if you don’t have people coming to buy their cocoa in the right way, the government will not be benefiting from it.
“Today, most of the cocoa money that is coming is not going to the government, it’s going to buying agents and middlemen that are working with farmers. In Ghana, Cote d’Ivoire, there are no middlemen, you sell your cocoa to government, who exports the cocoa to all the buyers, that way the revenue is in the hand of the government. Government pays the farmers, in fact, the farmers are well looked after. About four to five years ago when cocoa price dropped significantly, the big cocoa countries-Ghana, Cote d’Ivoire, came and demanded that they should be given an amount to be added to the cost of cocoa, so that their farmers could get a bit more, they got an extra pay beyond the price of cocoa then. Those governments could do that because they took charge of the processes.
“We still have the cocoa factory in Ondo, we just removed it from being subsidiary for convenience to be part of us. So, it is still processing cocoa beans, some we export, some we use internally, it’s still there, there is backward integration for us. The reality is that the export business benefits from our factory in Ondo, we buy cocoa beans from local farmers, we process these, and we are supporting local farmers who are on Cocoa Life scheme as well,” Adeboye said.
