Trending News

Cocoa: Abundance availability in Nigeria

Cocoa was first discovered in the Amazon region of South America. Nigeria is currently the 5th largest world producer while Cote d’Ivoire, also in the West African sub-region, maintains a commanding lead of more than 1,200,000 metric tons annually, followed by Ghana, Indonesia and Cameroon.

Cocoa bean is Nigeria’s 2?d largest foreign exchange earner, next to crude oil and gas. Export of the commodity has evolved over time since the dissolution of the Commodity Boards more than any other exportable commodity.

READ ALSO: Gum Arabic: Uses and Economic Importance To The Economy

Annual Production Of Cocoa

Nigeria’s annual output is about 350 metric tons. Government has now set a target for Cocoa producing states to volume to 600 tons in the next five years

By-Products/Uses

By-products are cocoa butter, liquor and cocoa cake. Cocoa is the main ingredient for the manufacture of chocolate and beverage drinks. Due to its flavour and aroma, cocoa butter of Nigerian origin is used in blending cocoa products from other countries for the manufacture of chocolates.

Cocoa shell is used as raw materials for production of animal feeds and fertilizer. Its nutrient/fertilizer is more than that of farm yard manure.

Availability/ Producing States Of Cocoa

Cocoa can be readily sourced in the entire South West states, except Lagos, namely: Ondo, Ekiti, Oyo, Osun, Ogun including Abia, Edo, Cross River and Akwa Ibom States.

South West States account for about 70% of Nigeria’s annual cocoa production. Ondo State is the largest producer of cocoa beans with about 55% of the country’s annual production.

Cross River and Akwa Ibom States have taken a giant stride in large scale cultivation, which is expected to boost national production within the next 5 years.

Export Price

Price is quoted in international terminal markets: London and New York. The commodity commands higher price than any other agricultural export commodity. It is sold in foreign currencies, pounds sterling and dollars, internationally quoted and stable currencies

Payment for export of the commodity is now effected in foreign currencies in reputable warehouses in Lagos and Akure. Nigeria’s grade 1 cocoa sells for premium price at the international market.

Marketability

Cocoa is readily marketable. There are many buyers and sellers of the commodity. When stuck with a buyer, there are usually other willing buyers, no matter the quality, only the price will differ.

Stability is gradually returning to the trade after the consolidation in the banking industry, unlike the pre-consolidated era when all sorts of unauthorized local and foreign banks’ loans found their way into the industry thereby causing price instability especially at the farm gates.

Trade Volume

The commodity commands fairly reasonable volume, enough to engage traders during the main crop and light crop seasons. The foreign buyers are mainly from European countries and the United States.

Reference Markets

Reference local markets are Lagos, Akure, Ondo and, of late, Ikom. Internationally, it is London and New York terminal markets. Activities in the business are dictated and driven by the pace at the terminal markets

Business Variables price, exchange rate, seasonality and International price, constitute local the business variables for which weather conditions traders have no control.

The variables fluctuate from time to time either in favour of or against traders. Trade is dynamic and can sometimes be volatile if there are adverse movements in business variables.

Trade Contracts/ Quality Issues

There are well established trade contracts stipulating quality, packing/marking, quality/weight, price, payment terms, transportation, shipment time and other special conditions that must be acceptable to both exporter and importer.

Cocoa has well defined quality grades which are determined by physical characteristics, flavour, and processing yield. Poor quality attracts discount, while good quality attracts premium price.

Profitability

Trade is profitable. Profitability in the business, however, depends on quality of goods, prudent management of trade overheads, favourable movement in business variables, and market forces (demand and supply).

Export Potentials

Cocoa has huge export potentials: It is used to be the number one foreign exchange earner before the discovery of crude oil and gas. It is now Number 2 in terms of foreign exchange generation.

Cote d’Ivoire (1.2 metric tons) and Ghana (over 400,000 metric tons) are currently ahead of Nigeria in terms of annual volume. With a land mass, which far exceeds that of Cote d’Ivoire and Ghana put together and the on-going Government efforts and initiatives to boost volume of exportable commodities, the future looks bright for export of the commodity.

Mode Of Export

Trade in the commodity is largely formal, through the Nigerian Sea Ports. Shipments are effected based on duly executed export contracts. However, unscrupulous exporters often indulge in smuggling to evade payment of the mandatory one percent preshipment fees and NXP fees of about $20 per ton.

Exports are financed by banks (local & foreign) and proceeds repatriated in accordance with Government stipulated guidelines.

Packaging

The commodity is packaged for export in hydrocarbon-free jute bags and exported on FOB, CFR or CIF arrangement as per contract requirements.

Weight of 300 beans over 310grams.

Quality that falls short of these parameters attracts discount in price.Conversely, higher quality attracts premium price.

Trade Associations

The government approved Trade Associations are Cocoa Association of Nigeria (CAN), and Cocoa Processors Association of Nigeria (COPAN).

The day-to-day running of the Associations rests with the Presidents and Secretaries. More information about these associations can be obtained from the Federal Ministry of Commerce, Abuja.

Business Risk

Trade is prone to dupes especially at the farm gates. Utmost vigilance is required to distinguish between fraudsters and genuine merchants. It is advisable to deal with well known merchants with good reputation and track records.

Fluctuation in local and international price, quality issues, exchange rate and non payment constitute other major risks.

Seasonality/Trade Cycle

There are 2 seasons: main crop and light crop. The main crop season runs from September to March while light crop season runs from May to August.

The difference between cocoa harvested during the main crop and light crop season is the weight of the beans. The cocoa beans harvested during the main crop season weigh more than those of the light crop season and attract higher price.

Leave a Reply

Your email address will not be published.

%d bloggers like this: