Economic Impacts of Cocoa Production in Nigeria

For the Nigerian Cocoa Industry to thrive here are some of the key investment needs.

Improved Primary Production of Cocoa: Nigeria produces over 340, 000 MT of cocoa annually. However, a majority of this yield comes from cocoa plantations that have been existent between the 1960s and 1980s. There exists an opportunity to increase production to 500,000 tonnes by investing in new cocoa plantations in Cross River, Osun, Ondo and Oyo states of Nigeria. This increment could yield over 100,000 tons per hectare earning over US$208 million in foreign exchange.

Improved processing: the already existing bulk of cocoa in Nigeria is being exported to a tune of about US$700 million and imports of processed products rival to a tune of about US$500 million. Nestle and Cadbury, key players in the processing industry are making approximately N122.7billion and N8.4billion respectively. A 30% return on investment and a 6.27% growth rate in view for potential investors in the Nigeria cocoa processing space, creating products such as chocolate bars, cocoa liquor, butter and powder.

Investing in Infrastructure: there is a huge infrastructural deficit in cocoa processing and storage leading to loss of revenue. About 90,000 tonnes of cocoa is lost annually worth approximately US$180 Million due to lack of processing and adequate storage facilities. Inputs such as dryer machines, bean to bar, roast lines, peeling machines, cocoa grinders and entry level roasters could curb this loss. Providing these facilities could meet the needs of local processors like Cocoa (Ile-Oluji) Limited, FTN Cocoa Processors Plc, Mondelez International, Olam International and Saroafrica International Limited.

Cocoa Funding: A major difficulty within the Nigerian cocoa industry has been funding. The high risk within this industry has seen financial players shun from this venture. However, the rewards for investing in this sector are high with a projected (CAGR 2024-2028) of 13.86% and an ROI of 30%. Major financing has been from Norfund (US$12 million) and donors such as United States Department of Agriculture’s ‘Food for Progress Programme (US$22 Million). There exists an opportunity to unlock capital in this sector by providing the much-needed capital for their expansion and growth.

Improved Research and Development: Currently 4 varieties of cocoa exist. However, according to research by CRIN, 8 new varieties were developed increasing yield per hectare form 0.35 tonnes per hectare to 2 tonnes per hectare. With over 1.4 million hectares being cultivated, there exists a need for the varieties to be mainstream. Furthermore, input suppliers like Mars edge cocoa solutions, ICCO Germplasm Bank, John Deere, BASF Agricultural Solutions and Yara International provide improved seeds, mechanized inputs and fertilizers in Nigeria to improve the production by over 2 million tonnes.

Tapping into these needs will ensures not only profitability but development of the overall agri-sector and increased revenue generation