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$2bn lost to under-explored cocoa industry

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By Abdulwasiu Usman

Prevalence of oligopolistic market dynamics complicates trade transactions.

Many stakeholders within the Nigerian Ministry of Agriculture alongside Olawale Edun, the Minister of Finance as well as the Coordinating Minister of the Economy, and Senator Abubakar Bagudu, the Minister of Budget and Economic Planning, have shed light on a concerning issue of the cocoa industry under-exploitation causing an annual loss of $2 billion to the country. This information was shared in a communiqué issued with the joint signature of Oba Dokun Thompson, the creator of International Cocoa Diplomacy (ICD), Dr. Patrick Adebola, the Executive Director of Cocoa Research Institute of Nigeria, and Mr. Abba Bello, the Managing Director of Nexim Bank.

It was revealed that important figures including the ministers and other stakeholders made the announcement during the 2024 International Cocoa and Chocolate Forum, which took place at both the Transcorp Hilton Hotel in Abuja and the Sheraton Hotel in Victoria Island, Lagos. The Nigerian cocoa industry has caught the attention of stakeholders due to its inherent domination by a select few multinational corporations. This prevalence of oligopolistic market dynamics complicates trade transactions as these entities hold the power to determine the prices, sustainability practices, certifications, and even the necessary training curricula for farmers involved in cocoa production within the country.

New EUDR policy may cause disruption to the supply chain.

Despite being the world’s fourth-biggest producer and exporter of cocoa, and having the potential for growth in over 24 states, the cocoa industry in the country has faced a consistent decline. Even with its significant share of global cocoa production output (6.5%) and exporting revenue (close to $700 million), the industry has failed to flourish. Nigeria’s cocoa industry fails to capitalize on countless possibilities for value chain development on a global scale. This oversight arises from a deficient cocoa culture and a failure to grasp the country’s value propositions, resulting in annual losses exceeding $2 billion.

Moreover, the Nigerian cocoa industry lacks any sort of policy, mapping, identification, or data to effectively address the European Union Deforestation Regulation (EUDR) or COP28 resolutions, as well as to strategize for social and economic progress. The European market continues to dominate as the primary destination for cocoa and its derivatives originating from West Africa. However, with the implementation of the new EUDR policy on January 1, 2025, there is a potential for significant disruptions in the industry’s supply chain and a potential decline in the country’s foreign exchange earnings from cocoa and other related products.

NEXIM Bank is not adequately organized or funded.

Small-scale cocoa farmers and the Nigerian cocoa supply chain seem to lack awareness of the recently implemented EUDR policy and its associated compliance obligations. Addressing the issue of underfunding in this sector, the stakeholders expressed concerns about the inadequate and much needed financing options available that hinder the full exploration of the industry’s potential. The Cocoa Research Institute of Nigeria (CRIN) is facing financial challenges due to insufficient funding. The Nigerian Export-Import Bank (NEXIM), in contrast to its counterparts like AFREXIM or EXIM Bank of India, is not adequately organized or funded to support substantial investments and finance crucial infrastructure projects essential for promoting and expanding the country’s export trade.

In order to tackle the prevailing issue, a designated amount of ₦100 billion has been allocated for the Agric Development Fund from the total agricultural budget of ₦900 billion for 2024. This fund will serve as a support system for initiatives like the ICD forum, which holds global perspectives due to the country’s competition with other nations. In order to gain market share, these countries may adopt multiple policies and subsidy frameworks. Thus, it becomes crucial to periodically reassess government policies, bridging gaps and establishing necessary infrastructure to ensure optimal functioning of all sectors in the economy.

Related Link: Nigeria 4th in cocoa production worldwide

Also, the stakeholders emphasized the urgent need to remove cocoa from the realm of commodities in order to unlock its true potential for adding value and driving inclusive development, wealth creation, and prosperity. They said it is important to raise awareness about the economic value of cocoa and the opportunities within its value chain. In order to foster a cocoa-centric culture promoted by ICD and attract both domestic and international investments, it is imperative for the nation to shift its focus from solely producing cocoa to becoming a cocoa-consuming country. This transition can be facilitated by introducing cocoa derivatives or cocoa beverages into the current school feeding program.


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AN-Toni
Editor
26 days ago

$2bn lost to under-explored cocoa industry.Prevalence of oligopolistic market dynamics complicates trade transactions. – Express your point of view.

SarahDiv
Member
26 days ago

Nigeria’s cocoa industry faces obstacles, including oligopoly control and policy gaps. The EUDR policy’s impact is uncertain. Allocating ₦100 billion to the Agric Development Fund is positive, but sustained efforts are needed for industry growth and compliance.

Adeoye Adegoke
Member
25 days ago

It’s really disheartening to hear that the cocoa industry has lost $2 billion due to being under-explored. The prevalence of oligopolistic market dynamics definitely complicates trade transactions and hinders the industry’s growth potential.
When a market is dominated by a few large players, it can create barriers for smaller farmers and businesses to enter and thrive. This can lead to limited competition, lower prices for cocoa producers, and a lack of incentives for innovation and investment in the industry.
To unlock the full potential of the cocoa industry, it’s important to promote fair competition and create a more inclusive market environment. This can be done through policies that support small-scale farmers, encourage value addition within the country, and promote sustainable practices.
Investing in research and development, improving infrastructure, and providing access to finance and technical assistance can also help stimulate growth and innovation within the cocoa industry. By addressing these challenges, we can create a more vibrant and resilient cocoa sector that benefits both the farmers and the economy as a whole.
It’s essential for stakeholders, including the government, industry players, and international organizations, to collaborate and work towards unlocking the untapped potential of the cocoa industry. Together, we can create a more sustainable and prosperous future for cocoa producers and ensure that the industry thrives in the long run.

Taiwo
Member
25 days ago

The untapped cocoa market cost $2 billion. Trade deals are made more difficult by the prevalence of oligopolistic market dynamics.Our cocoa industry is not being explored at all. Our loss of such a substantial sum of money is due to this. With any luck, we can put in as much as possible.

Kazeem1
Member
25 days ago

Regrettably, trade operations are becoming increasingly complex due to the dynamics of the market. Investigating the sector and taking action to counteract the oligopolistic market are essential.To fully realize the potential of the cocoa sector, it is imperative to foster equitable competition and provide a more comprehensive market atmosphere.