Nigeria’s chocolate industry is projected to reach a value of $31.1 million by the end of this year on the back of rising cost of foreign exchange (FX), according to an analysis by Euromonitor International, a leading independent provider of strategic market research.
The data, made exclusively available to BusinessDay, mean that the high import cost for both raw materials and finished products is encouraging local production of chocolates, which would encourage more local players in the industry that used to be dominated by international players.
Femi Oyedipe, founder of Loshes Chocolates, says the rising exchange rate and the unchanged weak purchasing power of consumers make the imported ones more expensive now.
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“If consumers find a local substitute that is competitive in terms of quality, price and more affordable, it is common sense that they purchase it since it is cheaper and offers the same value that they experience from the imported one,” Oyedipe states.
Since the emergence of the COVID-19 pandemic, Africa’s biggest economy, which depends on oil proceeds, has been riddled with weak foreign inflows, resulting in a liquidity challenge in the country’s FX market.
Last year, the Central Bank of Nigeria (CBN) devalued the naira twice from N306/$ to N361/$, and to N379/$, weakening the value of the naira against the dollar. More recently, the apex bank officially adopted the NAFEX rate, which is a market-determined rate. This has a serious pass-through effect on imported commodities.
According to data from the International Trade Centre, cocoa and cocoa preparations imports rose by 38.8 percent to $22.9 million in 2020 from $16.5 million in 2019.
“Even if FX gets back to what it used to be before or it becomes cheaper, it will not impact local production because we have been able to prove that we can produce world-class chocolates and as such the local demand will continue to rise,” Uzoamaka Igweike, CEO, Loom Chocolate, says.
Cocoa is a major ingredient for the production of chocolates and Nigeria is among the top producers of the commodity. But major challenges such as high cost of production, dearth of skilled labour, government regulations, high cost of raw materials, among others, have limited the growth of the industry.
Also, Nigeria’s large young population makes the country an attractive market for chocolates, which are seen as an alternative to sugary confectioneries and sweet biscuits. However, chocolates are perceived to be expensive.
“Chocolate confectionery remains niche in Nigeria, but a growing presence on the shelves of modern grocery retailers will help to boost its visibility, as local consumers seek out new sweet snacks,” Euromintor International highlights in the report.
In 2019, local players at the Eko Chocolate show, which was organised to promote chocolate production and consumption in Nigeria, called on the government to invest heavily on research and development. The industry participants advised government to empower research institutes and technological institutions to build equipment for the industry rather than importing them.
Princess Odiakosa, founder, Kalabari Gecko Chocolates, expressed the view that institutions like the Yaba College of Technology (YABATECH) should be encouraged to build machines that manufacturers could use for production.
“We as a country should start producing things like chocolate where we will see foreigners come to Nigeria supermarkets and be confused with what to buy because of the good things that are made here in Nigeria,” Odiakosa said.
