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The Cocoa Alternative

“In the next 10 years, Nigeria will be the largest producer of cocoa in the world”.

This was the prediction of African agriculture experts from Conservation Alliance in April 2012.

Cocoa has witnessed tremendous growth in production and demand over aeons. According to the World Cocoa Foundation, there has been a 3% annual increase in demand for the past 100 years. Being the key ingredient in the production of chocolate, this continuous growth in cocoa demand is in tandem with the budding demand for chocolate.

Annual global consumption is estimated at 2.8 million tons with the key consumers comprising Europe, Brazil and the US, while annual cocoa production is estimated to be in the range of 3 million tons, with 70% of this sourced from West African countries. The World Cocoa Foundation further predicts a 3% yearly growth in global demand for cocoa.

The UN Food and Agriculture Organization (FAO) in 2010, ranked Nigeria as the 4^th largest producer of cocoa in the world, with a 2010 output of 0.4 million tonnes. Apart from crude oil, cocoa is the highest foreign exchange earner in Nigeria. There are 14 states endowed with the appropriate climate to grow the crop, namely Abia, Adamawa, Akwa Ibom, Cross River, Delta, Edo, Ekiti, Kogi, Kwara, Ogun, Ondo, Osun, Oyo and Taraba, employing over 5 million people nationwide. Southwest Nigeria accounts for 70% of the country’s cocoa production. Majority of the product (>90%) is exported annually.

National cocoa production and export value has grown over the years by an average of 40% year on year, and a cumulative of 280% from $215m in 2006 to $822m in 2010 according to the National Export Promotion Council (NEPC). The agricultural industry, specific to crop production, contributed 27% to 2010 GDP and grew to 34.5% as at 1Q 2012. Crude oil, the major driver of GDP, constituted 43% of GDP (2010). Judging from these statistics, it is clear that the Nigerian government, both at Federal and State levels, has no need of a crystal ball to foretell where national wealth should be created and harnessed. The agricultural sector holds such strong potential for job creation and mass employment.

With an available market and fair economic potential, cocoa expansion should be central to the economic master plan of these Nigerian states. Majority of the producing farmers in Nigeria are said to run small-scale operations, via family farms. Cocoa is a delicate crop especially in its tender years, requiring much care and shelter from the sun and wind. How do these farmers expand their production without well structured, low-cost financial support? Favourable environments must be created for lenders to invest, thus providing customer-friendly, long term financial products to support expansive cocoa production. These products should target all sectors of the production chain – upstream farmers, mid, downstream transporters, marketers, shippers and processers.

Downstream, opportunities remain to be exploited. Chocolate, a cocoa-centric product, is heavily imported into Nigeria from Europe and the US. This is ironic for the obvious reason – cocoa is grown in Nigeria, packaged and exported for processing into chocolate and other by-products, which in turn are imported to Nigeria. Yet, according to Fairtrade Foundation, the downstream sector currently earns 17% share of a chocolate bar value, while processing factories earn the majority 70% share. The residual share is accruable to the upstream producing farms. As such, cocoa producing states must begin to lure the private sector to invest in cocoa processing firms within their regions. The challenges of power supply and security notwithstanding, innovative means must be explored to incentivise such in-country investments. Manufacturing firms will always require skilled and unskilled labour, ultimately driving employment rates up. Corporate taxes on the other hand will boost the states’ fiscal position.

The old Western Region holds a historical example in this regard. Under the leadership of Chief Obafemi Awolowo, cocoa was the mainstay of the regional economy with resultant visible infrastructural developments. The establishments of Cocoa House (the first skyscraper in tropical Africa), Western Nigeria Television (the first television station in Africa), Liberty Stadium, and the introduction of free primary education, were all based on cocoa proceeds.

Indeed, there is a cocoa alternative which Nigerian states, through their public and private sectors need to aggressively embrace and exploit. The next three years will tell.