Nigeria Cocoa Exporters Gaining More Profits Due to Weak Naira

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Nigeria’s cocoa exporters are smiling to the bank as the steep devaluation of the naira has resulted in a sharp increase in the naira income from cocoa exports. “Despite a drop in the country’s cocoa output, farmers and exporters are making a lot of income presently, due to the foreign exchange situation” Zacheaus Egbewusi, chief executive officer, Agri Commodity Inspection Limited, told BusinessDay.”

BusinessDay findings show that the local price of cocoa per ton at Matori cocoa warehouse in Lagos was N1.25 million on Tuesday, 1 November, almost twice higher when compared to N650, 000 per ton in December of 2015. Hakeem Adebisi, a cocoa farmer in Ajebandele in Ondo State, said cocoa is now a more profitable business. “Farm-gate price of a kilo of cocoa beans have increased from N650 in December 2015 to N1, 250. We are currently harvesting and we are still expecting the price of cocoa to increase because of the value of the naira,” Adebisi said.

Some cocoa farmers confirmed to BusinessDay that they repatriate their foreign exchange proceeds through the country’s land borders to circumvent the Central Bank of Nigeria’s (CBN) rule that exporters can only withdraw their foreign exchange at the official rate of about N305 to the US$. This way, they exchange their proceeds at the black market rate which is currently hovering around N470 to the US$.

Some exporters said they sometimes buy products abroad with their foreign exchange earnings or come in with their earnings through the borders of other African countries, pretending to be nationals of these countries.

“Definitely the foreign exchange policy is driving people to do all sorts of things. The export figures are dropping, not because exporters are not exporting but most are going through the land borders due to policy issues,” said Obiora Madu, chairman, export group of the Lagos Chamber of Commerce and Industry (LCCI). “Exporters are not getting any incentives from the government, so why would they sell their dollars at the official market and lose money?” Madu asked.

Tunde Oyelola, chairman, Manufacturers Association Export Group, said the trend started as soon as there was a big differential between the parallel and the official markets. “It is a regulatory problem by the financial authorities. Why should you mandate exporters to take their dollar at N305?” asked Jon Kachikwu, CEO of Jon Tudy Interbiz, an exporter to the United States. The price of cocoa in US dollars on Thursday, 3 November was $2,678 according to data found on the website of the International Cocoa Organisation.

This means that cocoa exporters could earn N1.25 million per ton by selling export proceeds in the unofficial market at N470 to the US$ than the N816, 790 earnings if the cocoa sells it through the CBN’s official window at N305 to the US$, a N433, 000, a significant amount for any farmer. Nigeria is the world’s fourth largest cocoa producer, with total cocoa exports of $666.4 million in 2014, which dropped by more than half to $270.7 million in 2015; according to Nigeria’s non-oil export data, compiled by Cobalt Services. People familiar with the cocoa industry say a significant amount of the drop could be due to smuggling through the borders. Cocoa is currently Nigeria’s flagship crop export, dwarfing rubber, oil seeds, grains and nuts.

Export destinations include the Netherlands, Spain, India, Ghana, Gambia and Senegal, among others. Companies that participate in cocoa export include Olam International, Bolawole Enterprise, AIS Trades, among others. Out of N1.3 trillion total exports in the first quarter of 2016, cocoa accounted for N46.7billion ($153million), which went mainly to Europe and the United States. This constituted 3.7 percent of Nigeria’s total exports within the period, according to the National Bureau of Statistics (NBS)’s calculations. Though Nigeria produces an estimated 3.6 million metric tons of cocoa per annum, it consumes about 250,000 metric tons annually, according to data obtained from the Ministry of Agriculture and Rural Development.

Nigeria’s two cocoa harvests include the smaller midcrop from April to June, and the main crop from October to December. The midcrop normally accounts for about 30 percent of Nigeria’s cocoa output, while the main-crop constitutes the rest. High input costs, poor weather, aging trees and farmers are the main challenges faced by cocoa farmers

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