Massive loss as opportunities in cocoa industry remain untapped

Nigeria is losing over $2b yearly due to under explored value chain opportunities within the global Cocoa industry, caused by a lack of the cocoa culture and full appreciation of the value propositions.

It was learnt that the built up processing capacity in the country is about 200,000 metric tonnes (MT) to convert cocoa to butter, liquor and cake/powder, but the country is operating at about 30 per cent capacity because the cocoa industry and the domestic market are not properly structured in the manner that will attract the right investments to develop the market to compete with western market offerings.

These were part of the communiqué of the International Cocoa and Chocolate Forum (ICCF 2024 – Nigeria), held in both Abuja and Lagos, as a follow up on the discussion of ICCF 2023 – UK edition of October 2023, with the theme: The new EU policy, its effect on cocoa producing regions and the way forward for the global cocoa trade and an industry that supports transformation with regard to the resilience of cocoa farmers.

Jointly signed by the Founder, International Cocoa Diplomacy (ICD), HRM Oba Dokun Thompson; ED/CEO, Cocoa Research Institute of Nigeria (CRIN), Dr. Patrick Adebola and MD/CEO NEXIM Bank, Mr Abba Bello, the stakeholders said there is lack of proper and creative funding to fully develop the opportunities within the industry.

“CRIN is underfunded and NEXIM Bank is not structured or funded like its similar counterparts – AFREXIM or EXIM Bank of India to undertake major investments and financing of necessary and required major infrastructure projects to further the export trade.

“Manufacturing has become unattractive due to lack of necessary infrastructure to support the services rendered that will make cost of production and quality competitive with imported products and we need agriculture that must lead into industrialisation.

“N100b was set aside for an Agric Development Fund out of the 2024 Agric Budget of N900b to support endeavours such as the ICD Forum, which had world views because the country will be competing with other countries who may have several policies and subsidy regimes to take advantage of market share and it is important to recalibrate government policies now and again to compensate for gaps and to provide infrastructure that will ensure various sectors of the economy work,” the communiqué read.

The stakeholders disclosed that the cocoa sector is dominated by a few global players creating an oligopolistic market, which makes trading difficult because they determine the price, sustainability measures and certifications, required training modules for farmers, and many more.

“Although, Nigeria remains the fourth largest producer of cocoa with about 6.5 per cent of the world’s production output and remains the fourth largest exporter with receipts of close to $700m, the industry continues to decline even though cocoa can be produced in over 24 states in the country with tremendous potential for growth.

“Europe remains the biggest market for West African cocoa and its derivatives, but cocoa from the region will be subjected to the new European Union Deforestation Regulation (EUDR) policy, which will come into effect on January 1, 2025 and will possibly disrupt the industry supply chain and the country’s forex earnings from cocoa and other products namely coffee, soya, timber, palm oil, rubber and cattle and their derivatives.

“The different aspects of the Nigerian cocoa supply chain and the smallholder cocoa farmers appear to be unaware of the new EUDR policy and its compliance requirements and remain unprepared as to who is responsible for what.”

They recommended the imperative of de-commoditising cocoa as the prerequisite to fully achieve value addition and make cocoa a vehicle for inclusive development, wealth and prosperity creation with sustained awareness about the economic value of cocoa and its value chain opportunities.

The stakeholders opined that the country needs to transit from being a cocoa producing to a consuming one, suggesting that there must be deliberate and intentional consumption of cocoa products as a way to create the cocoa culture being promoted by ICD including cocoa derivatives or cocoa beverage in the existing schools feeding programme, to encourage domestic and international investments into the sector.

“There is need to establish a cocoa development fund in partnership with the private sector to drive all the investments needs and strategies for development of the industry into a self-sustaining model through collaboration with ICD developing a working committee of key stakeholders to develop the plan that will organise and structure the sector, identifying all the different components and putting the right rules in place to attract funding with the goal of creating a cocoa marketing agency that will guide the transformation of the cocoa industry, guarantee farmers income and provide rural infrastructure as key to incentivise the youths.

“CRIN needs to be provided with improved and targeted funding for research and development, flavour profile quantitative analysis, data collection and collation with development of a mechanism in collaboration with ICD for cocoa classification and denomination, as well as governance and monitoring protocols to improve the specialty chocolate and cocoa offerings in the country.

“Introduction of technology and innovation into the sector by ICD with sustained education and training for farmers and capacity building for entrepreneurs employing ICD modules for market intelligence and ability to properly apply the right skills and understanding to optimise production output and productivity with the highest quality and standards obtained.”

They suggested that as governments use tariffs to protect economic activities, it is important to introduce policies that will discourage export of raw cocoa beans, encourage value addition at origin, to promote, guide and guard the cocoa industry, as well as protect local players.