Introduction
IBADAN, Nigeria - Exporters and other buyers in Nigeria are facing obstacles in their efforts to purchase the main cocoa for the 2023-24 season, as prices soar to a high of 3.2 million naira ($4,178) per ton. Traders have attributed this surge in cocoa prices to a weak naira currency and a shortage of beans.
Impact of Currency and Bean Shortage
The Central Bank of Nigeria's decision to allow a free float of the national currency against global currencies, including the US dollar, created a depreciation of the naira. Combined with low sales from oil, which is Nigeria's primary export, this shortage of dollars has contributed to the current state of affairs. In January, cocoa traded at between NGN1.8 million to NGN2 million per ton in most cocoa-producing states in Nigeria.
Funding Challenges
Tunji Akinbami, a trader, revealed that the increase in cocoa prices has made it difficult for local traders and exporters to secure the necessary funds. For instance, a trader or exporter seeking to purchase 10 tons of cocoa would now require at least NGN30 million or more. The challenging factor lies in obtaining funding from financial institutions, which often demand high-interest rates of over 20% for borrowing purposes.
As the new cocoa season unfolds, it remains to be seen how exporters and buyers will navigate these financial constraints amidst rising cocoa prices. This situation calls for innovative solutions to enable continued trade in one of Nigeria's key commodities.
Nigerian Cocoa Industry Faces Challenges in Processing
The cocoa industry in Nigeria is currently facing significant challenges due to a shortage of funds for cocoa processors. This shortage could impact their ability to purchase the necessary amount of cocoa for regular processing. However, traders and exporters who have secured overseas cocoa contracts may be in a better position, as their funds are sourced from abroad.
Nigeria's total cocoa production volume for the upcoming season is expected to be supported by funds from abroad and the presence of international cocoa firms operating within the country. Despite the high cost of cocoa, Nigeria's reputation for producing high-quality cocoa ensures that there will be buyers for all its crops in the new season.
According to Adeola Adegoke, president of the Cocoa Farmers Association of Nigeria, Nigerian cocoa is highly sought after in the global market due to its remarkable qualities. It boasts good bean count, low mold, and a strong aromatic and smooth flavor.
The marketing of the 2023-24 main cocoa harvest is set to kick off next month as the dry season commences. This timing allows farmers to properly dry their beans under ample sunshine.
While the challenges faced by the cocoa industry in Nigeria are significant, there is optimism that the country's commitment to producing top-quality cocoa will continue to attract buyers and sustain its position in the global market.
