The sharp rise in cocoa prices is taking a heavy toll on processors and craft chocolate makers in Nigeria, some of which have been forced to shutter their operations as the key ingredients for their production became pricier.
Cocoa farmers in Africa’s biggest economy are, however, having a field day as they sell to exporters who then take the raw beans to Europe, the United States and Asia at the prevailing market prices.
Read also: Nigeria’s non-oil export seen rising on global cocoa price rally
“Cocoa prices are crazy and we cannot afford to buy at the current price. We haven’t operated this year because of the surging prices,” said Akin Laoye, executive director at FTN Cocoa Processors Plc, which is listed on the Nigerian Exchange Limited.
“Our factory has been shut down because it is dangerous to produce at this stage, coupled with other economic headwinds in the country,” he told BusinessDay.
Cocoa prices have surged by over 567 percent this year, reaching over N12 million per metric tonne (MT) for the first time in the country.
It is bad news for processors and craft chocolate makers as they cannot afford to buy the beans and pass the higher costs on to consumers amid low demand, according to experts.
Laoye projected that prices would start falling in the fourth quarter of this year.
FTN Cocoa Processors, with an installed capacity of 20,000 MT and 38 full-time employees, posted a loss of N10.7 billion in the 2023 financial year as the business did not generate any revenue.
Nigeria’s cocoa industry is operating at less than 20 percent compared with 80 percent in the 90’s, findings show. This has led to a decline in the country’s value addition in recent years, resulting in over $2 billion annual loss, industry data shows.
The sustained record price of the beans has further reduced the industry operating capacity, which industry sources estimated to be less than five percent at the moment.
Read also: How EU new supply Chain Law will impact Africa’s cocoa-producing nations
Aside from hitting those processing the beans into cake, powder, liquor, and butter, the price surge has brought pain to local craft chocolate makers, with most shutting down completely.
“It is better to sell cocoa beans right now than process it to make chocolate,” said Lawrence Afere, founder of Springboard Farmers’ Co-operative of Nigeria and maker of Tiwa Chocolate.
“How does a craft chocolate maker survive by buying a metric tonne at N12 million including all other production costs and still make profits?” he asked.
Semiu Kareem, a cocoa farmer in Idanre, Ondo State, said he has not received any orders since July last year from an Abuja-based craft chocolate maker he usually supplied two metric tonnes to every month.
“There is a chocolate maker I usually send cocoa to every month in Abuja. But she has shut down since last year owing to the continuous surge in the prices of the beans,” he said.
He said the chocolate maker told him it was no longer profitable for her to operate when the price was N2 million late 2023.
Over the past five years, Africa’s most populous nation has seen youths invest in the production of chocolate to tap a fair share of the $100 billion global market opportunity.
Local chocolate makers such as Loshes, Kalabari Gecko, Tiwa, and Loom Chocolates are processing the crispy and sour beans into chocolates to reduce the importation of the commodity while changing the local industry narrative.
In 2021, Euromonitor International estimated the size of the country’s chocolate confectionery industry at $31.1 million.
Read also: FTN Cocoa posts zero revenue for first time in 12 years
Nigeria is currently the world’s fourth largest producer of cocoa, with 280,000MT in the 2022–2023 season, after Ivory Coast, Indonesia, and Ghana, and the third largest exporter, behind Ivory Coast and Ghana, according to the International Cocoa Organization’s latest data on global production,
BusinessDay surveyed some popular retail stores in Lagos and did not find any local chocolate brands on their shelves.
