Cocoa is Nigeria’s most valuable cash crop and a cornerstone of the country’s agricultural exports, generating $680 million in foreign exchange in 2022 through the export of cocoa products. According to an expert in cocoa processing and global trade, the industry’s potential remains vast but underutilized, with Nigeria currently ranked as the 5th largest cocoa producer worldwide.
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Despite contributing six per cent of global cocoa production, the expert highlights that only a small fraction—about 80,000 metric tonnes—of Nigeria’s cocoa output is processed into semi-finished products, signaling significant untapped opportunities in the value-added segment.

Nigeria is currently the 5th largest producer of cocoa in the world and the 4th largest producer in Africa currently producing 6% of the world’s cocoa and currently behind Ivory Coast, Ghana, Ecuador, and Cameroon at the global level.

Nigeria contributes about 290,000 metric tonnes of cocoa beans annually to the global cocoa production of about 4.82million metric tonnes in 2022/2023 according to Statista, 2024. However, only about 80,000MT of Nigeria cocoa production is processed into semi-finished and other cocoa products such as butter, cake, liquor, and powder in 2022/2023.

The cocoa industry remains vital to the Nigerian economy as it is the number one contributor of export receipt to the economy under the non-oil category. The industry further provides a lot of jobs to Nigerians along every step of the cocoa value chain especially the farmers within rural communities where cocoa is grown. There has been major acquisition, take over and injection of capital by investors in the industries in the last decade due to prominent position of non-oil export to the Nigerian economy.

DEMAND ANALYSIS: There has been increasing demand for semi-finished and intermediate cocoa products due to their importance in the global food security programme especially in the production of food and beverages especially chocolate (one of the largest industries in America, Europe and Asia), personal care, cosmetics, dietary supplement and other confectionaries.

The demand for processed cocoa products (butter, cake and butter) has remained higher than the supply with only about 45-55% demand meet annually. The total output from Nigeria between 2021 to 2023 has been averaging 50,000, 60,000 and 80,000MT respectively out of the total cocoa bean production of about 280,000, 250,000 and 290,000MT per annum respectively.

The increased demand is primarily driven by increased consumer population driven by the growing awareness of the health benefits of consuming cocoa-rich products as it helps reduce hypertension, chronic fatigue syndrome and protection against sunburn etc. Also, increased demand for chocolate and related products such as milk chocolate, sweet chocolate, and dark chocolate and aggressive advertisement by manufacturers has kept the demand for the product on the increase year on year.

In fact, only about 55-65% of yearly demand between 2021 and 2023 are met creating a huge deficit as manufacturer are already going below their minimum stock holding level and they need to keep buying yearly to ensure sustainable processing activities.

The industry practice is to export cocoa butter and cake to international offtakers while 95% of cocoa powder is sold locally to manufacturers that use cocoa powder as part of raw materials for their products. Typically, offtakers/traders/chocolate manufacturers usually enter into a full year or 180 days contract with cocoa processors to ensure sustainable supply of cocoa products to their factories in America, Europe and Asia. Good customer relationship helps to ensure good offtake contracts.

SUPPLY ANALYSIS: Global cocoa production of about 4.82million metric tonnes in 2022/2023 according to Statista with Nigeria only contributing about 290,000MT (6%). Sustainable supply is a key success factor to a processor. Hence, establishment of a strong relationships with farmers or cooperatives/ aggregators and local buying agent is to ensure sustainable supply is very important. Implement effective supply chain management practices to minimize delays, manage inventory, and optimize logistics.

Recently, some processors have commenced backward integration by owning or leasing a cocoa plantation. Backward integration is a key competitive factor and it will guarantee sustainable supply, premium of their cocoa under the Good Agricultural Practices (GAP) and Rainforest Alliance initiatives. New breed of cocoa tree with just 3 years gestation period has further make owning a cocoa plantation attractive to processors.

For processors to trade year-round, they typically build up inventory during the main crop season (Sept to Feb) and blend it up with light crops season (March to July). This gives them a blended cocoa. It is usual for processors to keep minimum 3 months stock level to be able to withstand supply shock.

The significance of this industry within the Nigerian agricultural landscape and its potential to contribute to export receipts, job creation and economic growth cannot be over-emphasized. However, it is obvious that the cocoa industry is still at the infantry stage with fewer players and huge opportunities for growth and expansion in view of high demand for cocoa products globally especially in America, Europe and Asia. Financing need is key at this stage to be able to maximize processing capacity and seize growth opportunities within the ecosystem.
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