Government at all levels have stressed the need for the diversification of the nation’s revenue away from oil. Sadly, despite the various initiatives aimed at increasing the revenue from the non-oil sector, little has been achieved.
Before the years of the oil boom, Agriculture was the mainstay of the nation’s revenue. During this period, products such as Cocoa, Groundnut, Oil Palm, among others were top on the list of Nigeria’s export items. The years of Petrodollar, however, saw these products relegated to the back end.
According to the World Cocoa Foundation, Africa accounts for 72 percent of the global production. The major producing countries in Africa include Cote d’Ivoire which is also the largest producing country in the world; accounting for 33 percent of global production, other countries include Ghana, Nigeria, and Cameroon.
The global cocoa market value will be worth $14,572 million by 2026 from $10.14million in 2015, due to the rising inclination of younger consumers towards chocolate across the globe.
What is driving the global market?
The demand for it is very high due to its numerous uses. Organic cocoa and chocolate – as chocolates are reputed for its high-calorie food to boost energy; cocoa powder and confectioneries are among the various uses which have strengthened its demand globally, and major confectionery companies like Nestle and Cadbury are some of the largest buyers.
The increasing awareness about the health benefits associated with the consumption of cocoa-rich products, such as dark chocolates, is affecting the market positively. Cocoa provides a large number of benefits. For instance, it decreases hypertension, reduces the indications of chronic fatigue syndrome, provides protection against sunburn, promotes heart health etc.
The value chain in Nigeria comprises of several players which include the fragmented farmers which are spread across states in the southern region, fermenting and drying, marketing, packing and transporting, roasting and grinding, pressing, and chocolate making.
Nigeria currently exports cocoa in the form of raw cocoa beans, fermented cocoa beans, and natural cocoa butter.
Foreign Trade statistics figures for the third quarter of 2018 released by the Bureau of Statistics shows that the country exported N7.59 billion worth of raw cocoa beans, N2.03 billion worth of fermented cocoa beans and N2.55 billion of cocoa butter.
It is estimated that the exporting of raw cocoa will attract about $10bn, the export of chocolates worth $100 billion, while the total value of all finished goods made from cocoa is estimated to be as high as $200 billion a year. This shows the huge opportunities that await investors in the value chain.
Sadly, the export of premium cocoa is at its lowest ebb in Nigeria whereas the global market for premium cocoa is rapidly expanding. The production of chocolates which is a by-product of cocoa constitutes a significant part of the value chain and this is barely developed in Nigeria. That is why globally, the largest processing country is the Netherlands, which handles about 13 percent of the global grinding.
Why is Nigeria Lagging behind?
Nigeria is plagued with dying old cocoa trees, coupled with aging farmers many of them are not exposed to modern farm practice, non-availability of good quality inputs (fertilizer/ chemical). Also worthy of note is the inconsistent quality of beans, high-interest rate and operating costs occasioned by relative lack of backward integration programs by confectioneries in the country.
Also, uncompetitive duty regime in Europe is another challenge as Nigerian cocoa products attract a differential import duty in Europe of 6.1percent for cake and powder 4.2 percent Cocoa Butter attracts around $300 duty for Nigerian Butter and Cake products.
No doubt African countries play a prominent role in the global cocoa market but none of these countries have been able to fill the gap of value addition by processing the raw beans to finished products such as chocolates.
The plan by the producers to set a minimum price for their beans in an attempt to derive more value from growing the chocolate ingredient is not enough. Investors in Nigeria and on the continent must position to benefit from the immense opportunity in the value chain.
