Cocoa Nigeria

DOES GHANA COCOA BOARD THINK NIGERIA IS IN FOR COOPERATION OR COMPETITION WITH THEIR COCOA SECTOR RENAISSANCE?

Further in the conversation, I asked about their overarching goals with this revival. I wanted to understand where their focus was. Whether they were going to repeat Ghana’s mistakes of prioritising the political benefits and any benefit to the farmer to be an unintended consequence, he highlighted Increasing youth employment, the attraction of Foreign Direct Investment, Foreign Exchange earnings, and increasing the living standards of smallholder farmers’ areas as the main goals they want to achieve.

Increase youth employment:

To Mr Adeola, by increasing cocoa production, they can domesticate cocoa processing to the point where 80% of their cocoa will be processed locally. Value addition, in this case, will lead to the creation of jobs which will divert the youth from engaging in social vices. He believes the youth becoming a farmer is another source of employment and a strategy to sustain cocoa production.

The attraction of Foreign Direct investment:

He said that, with Ghana and Ivory Coast’s long-standing focus on developing their cocoa sector, they had become the destination for foreign cocoa-related investment. The proliferation of foreign-led sustainability programmes and infrastructural development in the cocoa sector of these two countries was seen by Mr Adeola as the consequence of their years of hard work and focus on the industry.

Foreign Exchange earnings

He also intends to increase Nigeria’s foreign exchange earnings with cocoa-related exports. He said that currently, Cocoa stands as the second largest foreign exchange earning commodity in Nigeria, with Oil being the first. To him, Nigeria has a lot of foreign exchange deficits hence the reason for the devaluation of the Nigerian currency to the US dollar. So, with Nigeria being an import-dependent economy, he believes that boosting its foreign exchange earnings with an increased cocoa export portfolio can stabilise the Nigerian economy and lead to reduced inflation.

Increase the living standards of smallholder farmers

In the 1950s, he recalled that most of the infrastructure built in the 1940s and 60s was created using their forefather’s cocoa proceeds. To him, it showed that they made much more money from Cocoa then. However, today, the most “Ungood” building that cannot attain any commercial rate today is what smallholder farmers are capable of building in Nigeria. So, for you to see the kind of asset the farmer owns today as opposed to the 1940s showed how clearly, they are not remunerated as they should. Cocoa prices are being determined in the international market with no recourse to the farmers’ investment. So, to him, the institutions of the LID, hopefully, Nigeria joining the LID bloc will be essential for improving the living standards of Nigerian cocoa farmers.

With his Songs of praise about the Ghanaian cocoa sector, I reminded him that Ghanaian Farmers are awarded a producer price for their cocoa beans, which is a percentage of the world market price. This means the farmer does not receive the entire world market price for their cocoa beans, which we touted as inadequate even if the farmer received the total price. So, I sort to find out how he and his leadership intend to handle cocoa revenue management and how different they would be from Ghana.

He recounted that in 1986, the then Cocoa Marketing Company of Nigeria was dissolved, liberalising the sector for private sector participation. To him, this liberalisation retarded the industry as government influence was non-existent, allowing stakeholders like the buyers to act as it best suited them. He argued that when the Nigeria marketing board existed, cocoa productions were high, and he claimed it made them known to be the best producer of grade one cocoa in west Africa. The quality of their cocoa beans today has reduced due to the non-existence of regulatory agencies supervising cocoa development and management of cocoa marketing to protect smallholder farmers. He hopes they could set up a body like Ghana’s cocoa board to work with all the stakeholders to manage all the areas required to ensure that Nigeria reverts to the top.

To him, whatever they do will be foregrounded by consultation with their internal stakeholders, including external actors like Ghana and Ivory Coast, and use their feedback to curate a marketing board management model that would not repeat the shortcomings Ghana and ivory Coast have experienced or being criticised over the years for. He added that development is in stages and that Nigeria already had a marketing board until it dissolved; hence, they have many more experiences and insights to learn and create a robust one. He recounted in my article where I highlighted how Ghana farmers are paid a producer price in Ghana Cedi, yet, their beans are sold in US Dollars, hence farmers losing out on the exchange rate benefits they could have gained to reduce the effects of the high inflation they experience, as some of the issues they would ensure never happens to Nigeria farmers. He added that developments like a pension scheme for Cocoa farmers in Ghana (launched recently in 2022) are vital lessons they can learn from and develop to help Nigerian Cocoa farmers.

During the interview, I sensed how his focus was on increased cocoa production being a plausible achievement they intend to gain during his term. So, I asked him if he had thought of the implications of increased cocoa production and its effects on pricing and creating a buyers’ market, which will further deepen the power of the western buyers to dictate that the value chain is run continuously. I further added that, while Nigerian may be an enormous country, its people are not economically strong to consider chocolate a necessary product to buy. Whereas creating a domestic market is good, chocolate is not part of our cuisine. The economical stands make it impractical to view domestic market creation as a strategy to consume the increased production they ought to achieve.

MR Adebola reminded me of an alleged world deficit in Cocoa production (which I couldn’t find in any of my sources), the new emerging markets for chocolate, the increased population globally, the increased taste for chocolate, etc. He highlighted Asia as a prime example of a continent that fits all the abovementioned opportunities. He also said that he had been informed (but can’t confirm) that Ghana processed 50% of its cocoa beans. So, to him, while increased cocoa production may be an objective, they will also tap into the opportunities in international markets like Asia, increase cocoa processing locally to create jobs, increase cocoa by-product processing, and use cocoa and as by-products as the dominant ingredient in the daily products used by the ordinary Nigerian, like bread, soap, wine, etc. So, to Mr Adeola, Increased production doesn’t matter as through the national policies they will be creating, they will ensure that different windows of opportunities are designed to support local processing, manufacturing and local consumption of different cocoa and cocoa by-product derivatives.

In a nutshell, Nigeria wants to compete rather than collaborate with Ghana and Ivory Coast, with no recourse for its repercussion on its other objective objectives.

The world market price fluctuation is caused mainly by demand and supply. Ghana and Ivory Coast’s increased production has already led to price drops.  Especially within the 2020/21 crop year, where Ghana achieved over a million tonnes of production, they simultaneously experienced a reduction in the price from as high as US$3000 in December 2020 to around US$2300 in August 2021. So, I encouraged Mr Adeola to think of these figures and what their increased production is likely to cause in the long run on global prices, as well as the vicious competition the oversupply can stoke on who gets to benefit from the LID.

Mr Adeola quickly used the effects of the Ukraine and Russia to explain the risk of reliance on a limited supply source. So, to him, Ghana and the ivory Coast are enjoying a monopoly around cocoa beans supply; hence their entry will ease the collection risks those two countries pose to the cocoa-consuming world. To him, excess production doesn’t matter because the world needs more cocoa due to the emerging markets in Asia and the new market creation opportunities they will be exploring in Nigeria.

I asked what they see wrong regarding how the global cocoa chocolate is run and how they intend to change it with their renaissance.

He said that the sector is bedevilled with unsustainable means of cocoa production. That is why they are currently working to bring all stakeholders together and create a process of due diligence that allowance for sustainable production, good agronomic practice, good labour practices, etc., that meets the standards the world market expects from buyers. He also hopes this can extend to discussions on changing the colonial way of cocoa trading, where the price is determined internationally with little to no input from the farmers. Aside from their current activities building the capacity of farmers in all the cocoa growing areas to understand the new direction and convenience policymakers on new policy directions to support this new Nigerian cocoa renaissance, they are also in touch with investors to discuss how they can support farmers with a financing arrangement that can help farmers to irrigate their lands. Their case analysis of irrigated model farms in Ghana shows how correctly irrigated cocoa farmers can generate four to five times the yields per acre the Nigerian cocoa farmers produce. This makes irrigation an essential farming activity linked to their production increase objective.

As a country trying to revive, you would have learned some lessons from your country and other producing countries. I asked him what wrongs he thinks Ghana and Ivory Coast have made and how they intend to fix them by developing a future model worthy of emulating.

He said that he was concerned that for over years that Ghana and Ivory Coast were leading the sector in cocoa production, farmers were still unsustainably paid, leading to the persistence of the same old issues of child labour, deforestation etc. However, with their current joint effort to institute the LID, he hopes that his hearing of the farmers being paid 100% of the LID will lead to farmers experiencing a better livelihood that can lead to addressing some of the endemic challenges that lead to the unsustainable way of cultivating their cocoa. Referencing my article,  “Are Cocoa Farmers Paid The Whole Us$ 400/Mt Lid Levy As Promised?” I quickly reminded him that Cocoa and Ghanaian farmers are not necessarily paid the whole LID as he perceived.

I also drew his attention to how African governments weaponise the need for foreign exchange to directly take over the sale of cocoa beans to now control the use of the foreign exchange at the expense of the cocoa farmer who produced it. This happened in the 1950s when Ghana used their control of the cocoa sector through the Ghana cocoa board being the sole seller of cocoa beans, out of which less than 1% of the world market price was given to the farmers that produced it as their producer price. So, he added that if what I said was right regarding how farmers are cheated through forex rate, then Ghana should fix this as one of the issues. He mentioned, “The one who seeks justice must come with clean hands”, so if Ghana has promised to award cocoa farmers the entire US$400, they must do so.

I couldn’t complete the interview without asking if they had any international partners supporting them financially on this renaissance.

He said that since their launch of this vision, they had received considerable intent to partner with various local and international partners. However, he believes it’s good for them to start the struggle before bringing external partners in. However, he added that USAID selected Nigeria as part of the countries going to benefit from their US$20m development fund, with Nigeria’s benefit focusing on cocoa development projects.

The next article will conclude the interview with my analysis and discussion of the interview and my recommendations.

Author

  • Kwame

    organisation:

    Agricultural Trade Policy Analyst | Cocoa-Chocolate Industry Expert | Digital & Industrial Project Manager | A persuasive Negotiator | Columnist. Email: Kwame.a.Kwarteng@gmail.com / Kwame.Kwarteng@PolicyCON.com Twitter: @asamoahpeters

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