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Nigerian cocoa sector expands in response to higher prices

20 July 2014

In a report published in May 2014, USDA noted a 7% increase in Nigerian cocoa production forecasts to almost 300,000 tonnes for 2013/14, adding that the success of Nigerian cocoa farmers in achieving UTZ certification was “shoring up demand and prices for Nigerian cocoa at the international market”. The increased compliance with internationally recognised certification schemes is important, given the compromised state of quality-control mechanisms in the sector following the dissolution of the Cocoa Board in 1986. Increased UTZ certification is closely linked in the report to intensified cooperation between leading private sector players in the Nigerian and the international cocoa supply chain.

According to USDA, “over the last five years, Nigerian grower prices increased more than 50 per cent to the current average” of US$3,000/tonne. This is supporting efforts to rehabilitate abandoned farms and extend the area under cocoa.

Under its Cocoa Transformation Action Plan, the Nigerian government is looking to expand cocoa production by 40% to 500,000 tonnes by 2015. The country has vast land resources suitable for cocoa production, but the broader innovations that government programmes have tried to promote have not yet taken off.

USDA identifies a range of factors limiting cocoa production in Nigeria including:

  • the scarcity and high costs of farm labour;
  • the non-availability and low utilisation of fertilisers;
  • climate change;
  • poor road access in major cocoa-producing areas;
  • Insufficient levels of input subsidies in support of farm-level investments, due to weaknesses in delivery mechanisms.

In this context, the USDA believes the 2015 production target is unlikely to be attained.

Nigerian cocoa: Production, domestic consumption and exports (tonnes)

  2012 2013 2014*
Main production 230,000 230,000 250,000
Mid production 46,000 44,000 46,000
Total production 270,000 280,000 300,000
Bean exports 222,360 240,605 250,432
Total exports 261,600 271,300 291,097
Domestic consumption 8,400 8,700 8,903

* Forecast for 2013/14

Source: USDA, ‘Nigeria hikes target on cocoa production’, 8 May 2014, p. 7 (see below)

Local processing of cocoa increased between 2010 and 2012, fuelled by an export incentive rebate programme, but the suspension of this programme in 2012 “following ‘sharp practices’ in cocoa export reporting by certain exporters” has subsequently discouraged local processing. It is suggested that the suspension was in contradiction with the policy objective of achieving “a 25% processing rate of the national output within 4 years” (up from the current level of 10%). However, the export incentive rebate programme is now being revised prior to reinstatement.

USDA maintains in its report that despite such schemes, “exporters still find it more profitable and convenient to sell cocoa beans than export cocoa in processed forms”. This is linked to the high costs of local processing, which mean that “Nigerian processed cocoa products are not competitive in the international market”. Currently, only 30% of installed cocoa processing capacity is being utilised.

Overall, Nigeria’s cocoa production and trade are completely liberalised. Ninety per cent (90%) of exports take place in the form of cocoa beans, with Belgium, UK, Germany and the Netherlands being the largest destinations. 

Editorial comment

The greater use of private schemes to ensure quality control raises the issue of the public sector recognition and accommodation of internationally recognised private sector quality-control schemes in the application of SPS and food safety import controls in OECD countries. This is an increasingly important issue, in view the rising costs of these controls in countries where moves to recover the full costs of official inspection services are under way (e.g. in the UK and the Netherlands).

The Nigerian cocoa experience highlights how in developing trade policy measures to support key policy objectives (such as expanding local value-added processing prior to export), establishing an effective, transparent and accountable implementation capacity for policy measures is essential if programmes are to be sustained and underlying objectives attained.

In the absence of such capacity, trade policy tools can prove ineffective and even counterproductive. The issue of establishing effective institutional capacities for policy delivery also affects efforts to support production expansion.

These problems are common across many ACP countries and sectors, with the application of information and communications technologies potentially offering important solutions to some of the transparency and accountability challenges faced.

The high costs of processing and low levels of capacity utilisation in the Nigerian cocoa sector highlight the importance of addressing input supply issues affecting agro-food sector value-added processing activities. Many of these issues go substantially beyond agricultural and trade policy formulation processes. 


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