Theobroma Cacao better known as Cocoa is a crop that has been in the consciousness of Nigerians long before independence and one that is capable of stimulating Agricultural growth if we remove politics and look at it strictly from the prism of economics.
We need to establish and agree as a first step the production figures we bandy around year in year out and thereafter chart a proper course to encourage production and processing as well as Cocoa Beans trading and exports.
As a background, it is important to situate Nigeria’s ranking in the Cocoa Comity Of Nations in Africa. The number one producer on the continent is Cote d’ivoire with 1, 980 million tons, followed by Ghana which is about 950 thousand tons, Cameroon and Nigeria respectively with 240 and 220 thousand tons respectively come a distant 3rd and 4th. All these figures are for the 2016/2017 season. One other important point to note here is that in the last 5 years Nigeria’s production has been yoyo like- 2012/13 – 225, 2013/14 – 248, 2014/15 – 195 and of course as earlier stated for 2016/17 – 220; the question you are wont to ask is what is responsible for this unsavory development.
I would say a plethora of reasons. A cursory look at the Cocoa industry reveals that despite Nigerian Cocoa farmers getting one of the highest prices for cocoa in the world, Nigeria has not been able to maintain its erstwhile dominance in the world cocoa market on account of numerous challenges some of which are listed below. With regards to domestic production, Nigeria is plagued with stagnant crop size- old cocoa trees, old and ageing farmers, not many new plantations, lower yields per hectare, as well as lack of awareness of good practices by farmers and non-availability of good quality inputs (fertilizer/ chemical). Also worthy of note is inconsistent quality of beans, high interest rate and operating costs occasioned by relative lack of investment in cocoa sustainability initiatives by the chocolate industry mainly due to insecurity perception.
On the cocoa processing segment of the value chain, the following challenges are prevalent. Inconsistent availability of power (PHCN) – High cost of fuel – High Cost Structure; Spare parts – Non availability, shortage of domain expertise, high local interest rate, lack of currency hedging options, no economy of scale, very high security costs, inconsistent application of Export expansion grant (EEG) Policy and lack of coordination between regulatory authorities. Presently, NDCC Certificates discount rate has shot up from 7-8% to 40%, there is no liquidity for NDCCs leading to capital constraints and higher interest cost. Limited markets is also an issue.. Other flashpoints are the inability to target US Butter Markets due to pesticide residue issues, logistics costs also makes it difficult to compete against Malaysian / Indonesian manufacturers in the Far East Markets. Uncompetitive Duty Regime in Europe is a bane as Nigerian cocoa products attract a differential import duty in Europe of 6.1% for Cake and Powder 4.2% Cocoa Butter attracts around 300 USD PMT duty for Nigerian Butter / Cake Vs Cote d’ivoire/Ghana products This has led to the current sorry state of cocoa processing in Nigeria which is hampered by two major factors:
No Economy of Scale- Nigerian cocoa processing factories operate at very small scale as compared to their other West African and global counterparts which leads to zero economies of scale which most non Nigerian factories enjoy. Global competitiveness is low.
Low Operating Capacity- Nigerian processing industry operates at about 40% which is much lower than ideal capacity of 85% and above whilst CIV processes about 492,000 of its 1.980 million metric tons, Nigeria is struggling with lack of beans to process optimally.
Vision for Nigeria Cocoa:
There is need to allow companies that are global and have scale and expertise to set up and operate state of the art processing facilities with global competitiveness, thus bringing the Nigerian processing industry to the forefront of the global map. Nigeria needs to meet consumer demand in Europe/America & Asia with high quality products. Develop local products consumption and most critically support processing operations through plantations in specialized Staple Crop Production/Processing Zones (SCPZs) in this case for Cocoa. I am an apostle of production first before processing as you can only process what you produce enough of. This Large scale manufacturing set up to give economies of scale and global competitiveness adds to direct employment and improves the economy of the country. For this to happen, Federal government and Subnational (State governments) support & assistance is needed to achieve this objective.
In addition, the below is a sine qua non for us to deepen the sector..
License to export Cocoa Beans should be given mainly to Cocoa Processors who have up to two times based on the bean equivalent export production quantity over the last three years.
Non Processors of cocoa beans be given licence for up to 5000 MT of Cocoa Beans with export tax of 15%.
New Manufacturing plant set up by any investor or the capacity improvement to be given to only two or three organizations with minimum incremental investment of not less than $75 Million dollars and minimum investment in plantation of not less than 5,000 hectares
First right of refusal of beans for processing. Fiscal Benefit / Duty / Local Duties / Registration Cost and waivers to be provided on fresh investment, free land for factory and plantation, input and research support from government agencies .Sustainability efforts should be supported with funding in the range of $10 Million dollars thereabout. Financial support from govt. basis export earnings to compensate for operational disadvantages. Agri-Fund or other intervention funds be provided at a concessional rate of @4% for about 20 years. Moratorium on interest on loans for the period of 10 years.
The government already knows the major players and large behemoths and as such encouragement and policy enablement is all that is needed and only then can they strive to take their rightful place in the global cocoa production and processing ecosystem. We must put a stop to political statements and rhetoric and put our money where our mouth is. Talk is cheap and Capital will always be mobile.
All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express written permission from LEADERSHIP Nigeria Newspapers. Contact: [email protected]
NEWS22 hours ago
2019: Dankwambo, Turaki Disagree With Wike’s Claim Over APC Sponsorship
NEWS19 hours ago
Ambode’s Fate Hangs In The Balance As GAC Adjourns Sitting
COVER STORIES22 hours ago
Air Nigeria: FG Backtracks, Suspends Planned National Carrier
NEWS9 hours ago
Bauchi APC Primaries: Party’s Decision Sacrosanct, Says Chieftain
NEWS19 hours ago
Primaries: Forum Frowns At Kebbi APC Consensus Arrangement
COVER STORIES22 hours ago
Lagosians Stage Protest In Support Of Ambode’s Re-election Bid
OPINION4 hours ago
Why President Buhari Will Triumph In 2019
NEWS19 hours ago
Fayemi Names 37-member Inauguration Committee