One year on from the election of President Muhammadu Buhari, Nigeria is still awaiting the promised policies to boost the cocoa sector, whose growth is seen as vital to offset a slump in oil revenue that has plunged the economy into crisis.
Buhari routinely states the need to expand the agricultural sector to end the reliance of Africa’s biggest oil producer on crude exports and cut its $20 billion annual food import bill.
A priority is to develop cocoa farming, the only sizeable agriculture sector in the continent’s biggest economy to have survived government neglect since the 1950s oil discovery. But Buhari’s policies have not yet made it beyond the talking stage.
“The government has not come out clearly to say what they are pursuing for cocoa, so we are still in the dark,” said an official at the Cocoa Research Institute of Nigeria (CRIN), a body which advises the government.
Reuters was unable to get a comment from the government on its agricultural policies.
Cocoa farmers in Nigeria, the world’s fourth-largest grower, have recently enjoyed bumper profits, but this is due to high global prices for raw beans rather than government intervention.
At the same time, for cocoa processors, Buhari’s foreign exchange policies have added to a crisis, as grinders struggle to get dollars to import spare parts, since the central bank has imposed hefty curbs to support the naira.
This, combined with high bean prices, Nigeria’s high transport costs and sporadic power supply, have driven up production costs, causing several plants to shut in recent months.
“There are about eight processing factories in Nigeria and I think only three or four of us are in operation,” said Cocoa Products (Ile-Oluji) managing director Akin Olusuyi based in southwestern Ondo, the country’s largest cocoa producing state.
Olusuyi struggles to afford raw beans as traders, lured by a surge in global prices, offer farmers dollars and snap up part of the harvest usually going to grinders. As a result, his plant’s output fell to 4,000 tonnes last year, a fraction of its 30,000 tonnes capacity.
So far the clearest message from Buhari’s administration is that it will retain many of its predecessor’s policies.
The roadmap inherited by this government seeks to increase output to 1 million tonnes by 2018 in a bid to catch up with the 1.8 million tonnes of top producer Ivory Coast.
The agriculture ministry also wants to plant 2 million cocoa trees within three years, but no details have been given to show how this would be achieved.
“We’re looking forward to quick intervention, quick action on the part of government … But we haven’t seen that yet,” said cocoa consultant Robo Adhuse, who works with farmers and non-governmental organisations.
HARD TO IMPLEMENT
Buhari has unveiled a record $30 billion budget for 2016 to invest in infrastructure to diversify the economy, but the bill setting this out has been delayed by parliamentary wrangling.
Adding further woes, a policy retained from the previous administration in which farmers could receive central bank loans at a rate of 9 percent, instead of borrowing from commercial banks at about 18 percent, has proved difficult to implement.
Buhari has urged banks to increase lending to the agriculture sector and in March said the central bank should bear part of the risk of such loans. But the central bank governor has complained that banks have largely failed to follow this guidance.
Buhari’s refusal to devalue the naira currency has exacerbated processors’ problems, said Edward George, head of group research at Ecobank.
“This is squeezing grinders, who must source dollars on the black market (for imports), but who are paid the official interbank market rate for their cocoa exports, which is overvalued,” said George.
Nonetheless, Nigeria’s cocoa output is set to rise to 350,000 tonnes in the 2015/16 season, as farmers are reinvesting last season’s larger profits in fertilizer and pesticides, said the CRIN official who wanted to remain anonymous.
Aside from a brief drop in January, global cocoa prices have risen for two years, buoyed by growing demand for cocoa products and chocolate, particularly in China and India, plus fears that the El Nino weather pattern could affect beans.
Ebeneezer Akimade, 56, whose five farms located just a 20 minute drive from the Cocoa Products plant span 12 hectares, typifies gains made by farmers in the last few months.
“Last year the price of cocoa was 270,000 to 300,00 naira, but this year it’s 800,000 per tonne, which is of great benefit to me,” he said.
High poverty levels among the 180 million Nigerians have prompted authorities to see the labour-intensive cocoa industry as a way to create jobs, but Olysuyi at Cocoa Products has been firing workers to stay afloat.
Via Reuters
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