• Thursday, March 28, 2024
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BusinessDay

Nigeria misses out on $275m cocoa revenue as low value addition takes toll

cocoa

If local processors had fully processed all of Nigeria’s cocoa, the country’s second-largest export earner after oil, into butter and cake before exporting in 2018, an additional $275 million could have been created by the players in the value chain, BusinessDay’s calculations show.
Africa’s most populous nation currently ranks joint fifth with neighbouring Cameroon with 210,000 metric tonnes production in the 2016-2017 season, data from the International Cocoa Organisation (ICCO) state.

For every 2.6 metric tonnes of raw cocoa beans, a processor gets a tonne of butter and 1.5MT of cake. The average price of processed cocoa intermediate products, such as butter and cake, for 2018 was $7,429 and $ 1,300 per tonne.

This means that processors could have created an additional $275 million in value (total value of 210,000 MT of locally produced cocoa processed into cake of $156 million plus value of butter $600 million, less $480 million price of cocoa input (at $2,290 per tonne) paid to farmers.
“We only process about 15 percent of our raw cocoa beans in 2018,” said Akin Olusuyi, president, Cocoa Processors Association of Nigeria (COPAN).

“Our agriculture has remained at the rudimentary stage because the active players that take the commodity from the farmers do not add any value by processing it. The direction to economic growth is industrialisation and not the exporting of raw agricultural commodities,” Olusuyi, who is also the managing director of Ile Oluji Nigeria Limited, Nigeria’s oldest cocoa processing firm, said.

Nigeria once had 27 cocoa processing factories in the 1970s, but the number fell to eight in the 2000s, with a combined installed capacity of 150,000MT.

Today, Africa’s most populous country has only five functional factories with a combined utilisation capacity of less than 30,000MT per annum, BusinessDay gathers.

“The only thing that can drive our economy is manufacturing through value addition. This is what will sustain the cocoa industry and also drive production,” Dokun Thompson, the Olooni of Eti-Oni and an international cocoa trader, said.

Thompson said the country could generate more revenue and create jobs as well as other spinoffs when cocoa is not only processed into intermediate products, such as butter and cake, but also into finished products like chocolates.

“One major challenge facing Nigeria’s cocoa industry is poor local consumption. Nigeria has no chocolates manufacturer at the moment despite the industry being worth about $10 billion globally,” the international cocoa trader said.

He cited the Ivory Coast model as an example for the country to emulate in developing its cocoa subsector. Ivory Coast was able to improve its production from 800,000MT to 1.2 million MT today because the government focused more on value addition, Thompson said.

Similarly, Nigeria has failed to steadily increase its cocoa production over the years, despite the commodity being the largest single foreign exchange earner after oil.

Last year, floods and disease outbreak in major cocoa producing states cut the output of the product, with the Cocoa Association estimating a large decline.

“The high incidence of last year’s floods would cut down the country’s 2017/2018 production by about 15 percent,” Sayina Rima, national president, Cocoa Association of Nigeria (CAN), said by phone from his farm in Ikom, in the country’s South-South region.

“This might affect our global cocoa rankings for the period,” Rima said.

 

Josephine Okojie