As the majority in Nigeria continues to lament the hardship induced by the cash redesign directive implemented by the Central Bank of Nigeria (CBN), the policy has had a ripple effect on most sectors and areas of business in the country. Export of cocoa in Nigeria has also been hit by the hardship resulting from the new note scarcity within the country. Due to this, merchants are finding it relatively hard to pay laborers and delivery drivers with cash, which has further inflamed the global supply.
While the majority detest the policy due to the hardship experienced, it is important to note that some individuals, business operations and sectors are already adapting to the new changes. But in an area like the cocoa industry where the daily activities are carried out by paying laborers with cash at every process, the policy has landed a big blow. Cocoa farmers have bewailed the new note scarcity hardship as they are unable to hire and pay workers and exporters to get their produce moved to the ships.
The predicament might exacerbate the supply worries.
Cocoa, as you know, is Nigeria’s most lucrative agricultural export. In 2022 Q1, N122.89 billion was earned from the export of raw cocoa beans and cocoa products according to the National Bureau of Statistics and Analytics (NBS). Mufutau Abolarinwa, president of the Cocoa Association of Nigeria has expressed concern that the nation, which is the world’s fifth-largest producer of the chocolate component, may be unable to export as much as 30,000 tons in February.
Furthermore, Abolarinwa explained that they do not have enough new notes to pay for all of the essential services, such as grading fees, handling costs, freight, and other incidentals, all of which are generally paid in cash. The predicament might exacerbate the supply worries that have driven London cocoa prices to a six-year high. Last week, futures rose more than 6% on reports of bean shortages in top supplier Ivory Coast, fanning concerns that some exporters may default on contracts.
Shortage of cash have forced some exporters to halt operations.
Atangba Bonjor, a cocoa farmer in Ikom, Nigeria’s southeastern region, believes the cash constraint would affect next cocoa plantings because landowners won’t be able to pay their employees’ daily salaries, resulting in a labor scarcity to clear and weed plantations. Isaac Arayela, manager of the Ile-Ife Cooperative Product Marketing Union, a cocoa farmer group, concerns the paucity of new notes as a barrier to fresh delivery. Arayela further said that around 500 tons of the union’s produce is being stored in warehouses owing to a lack of funds to pay members for their cocoa supply since they refused bank transfers.
This followed a drop in Nigerian cocoa exports caused by unfavorable weather and fungal challenges that delayed the major crop harvest. The nation exported 36,571 tons in December, while January export data is still pending. According to Kunle Ayoade, managing director of Agro Traders Ltd., a cocoa exporting firm, cash shortages have forced some exporters to halt operations. Exporters often pay laborers and truck drivers in cash at the point of loading and unloading to the ships.
CFAN aim of 500,000-tons cocoa bean produce by 2024 is jeopardized.
In addition, as the cash crunch continues to impede overall cocoa sector activity, the Cocoa Farmers Association of Nigeria (CFAN) commitment to attain 500,000-tons of cocoa bean produce by 2024 is jeopardized. Nigeria currently produces over 300,000 tons per year, with an average yield of 350 kg/400 kg per hectare. However, if the CFAN target is met, Nigeria would overtake other West African Nations producing cocoa over the next four years.