Despite the federal government’s export drive initiative, Nigeria’s cocoa processing industry has dramatically declined, operating at just eight percent of its installed capacity due to worsening macroeconomic conditions.
The sector, which once boasted 15 factories with a combined installed capacity of 250,000 metric tons (MT), now has only five operational plants with a total utilisation capacity of 20,000 MT annually.
High energy costs, multiple taxes, farmers’ preference to sell cocoa beans to merchants offering higher prices, and a challenging business environment have made it difficult for the remaining cocoa processing factories to meet export demands for butter, cake, and powder.
Felix Oladunjoye, chairman of the Cocoa Processors Association of Nigeria (COPAN), called for urgent intervention. “It is very challenging and tough for Nigerian cocoa processors, and there is a need to declare a state of emergency in the sector,” he said during a briefing with journalists.
He highlighted that the required working capital has increased fivefold compared to the previous year, exacerbating the industry’s struggles.
Oladunjoye pointed out that harsh operating conditions have forced many processors to shut down, leaving significant investments in machinery—over N500 billion—idle.
He warned that the situation could deteriorate further with the proposed 2024 export regulations by the National Agency for Food and Drug Administration and Control (NAFDAC).
These regulations, he argued, duplicate existing efforts of other government agencies, leading to multiple taxation, shipment delays, international defaults, penalties on exporters, and job losses.
The industry, heavily indebted with over N50 billion in debt as of 2017, faces additional challenges such as high import duties in European markets and difficulty securing loans at single-digit interest rates.
The high production costs, particularly for power, have made Nigerian processors less competitive than their counterparts in Ghana and Ivory Coast.
Sunday Bamikole, managing director of Premium Cocoa Products Limited, noted that production costs account for over 30 percent of expenses, further reducing competitiveness.
He criticised the proposed NAFDAC export regulations, stating that the agency lacks the infrastructure and capacity to manage numerous export transactions efficiently, which could worsen exchange rate issues.
Despite its potential to diversify Nigeria’s economy and boost earnings, employment, and other benefits, the cocoa industry remains underdeveloped. Although cocoa is one of the fastest-selling agricultural commodities globally, the Nigerian government has not fully capitalised on its production. Nigeria, once a leading producer, has slipped to the world’s fourth-largest cocoa producer, with 340,163 tons in the 2021/2022 season, according to the International Cocoa Organisation (ICCO).
In the first three months of the year, Nigeria traded cocoa beans worth a record N408.66 billion, driven by a global price rally, representing a 279 percent increase from N107.59 billion in the same period last year, according to the National Bureau of Statistics (NBS).
However, the industry’s financial needs have skyrocketed, with average working capital per cycle rising from N20 million in 2022 to N140 million currently, a sum no bank is willing to finance, as highlighted by Bamikole.
Furthermore, exporters face substantial costs, paying N1.54 million per shipment of cocoa beans and N3.5 million for butter and liquor, excluding shipping charges.
Despite the government’s stated priority to develop cocoa farming and processing, the sector’s decline continues, threatening Nigeria’s position in the global market and the livelihoods dependent on it.
