BY ONOME AMUGE
Cocoa is a perennial tree crop that primarily grows in tropical regions, particularly Southeast Asia, Latin America, and West Africa. The fruit contains brownish red seeds when dried and fully fermented known as cocoa beans, the major ingredient of chocolate – one of the world’s sweetest and most popular confectioneries.
As of 2021, the International Cocoa Organisation (ICCO) ranked Côte d’Ivoire as the world’s largest producer with a capacity of 2.248 million tonnes, Ghana maintained its second spot with 1.047 million tonnes tonnes, Ecuador was third with 365 thousand thousands, while Cameroon and Nigeria both produced an estimated 290 thousand metric tonnes of cocoa to stay among the five largest producers and net exporters of the crop.
Cocoa is considered by nutritionists to be of a high food value as it contains as much as 20 percent protein, 40 percent carbohydrate, and 40 percent fat, and also contains antioxidants that can inhibit cancer and cardiovascular diseases.
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Cocoa beans are also renowned as a good source of potassium, magnesium and iron. The commodity is one of the most traded in the world, with the worldwide consumption of chocolate every year estimated at 7.2 million metric tonnes.
The global cocoa processing market was valued at about $12.4 billion in 2020 and is forecast to reach $14.6 billion by 2027, according to market data research by Statista.
Production statistics by the ICCO, showed that the West African region produces over 70 percent of the world’s cocoa market and over 80 percent of these crops is produced by smallholder farmers who have less than five hectares of land.
Despite the significant value of cocoa in the world market, many local producers were continually offered low share of cocoa revenues often attributed to the low prices of cocoa and the unequal distribution of profit margins across the chocolate value chain.
As a result, many of the local farmers became exposed to extreme poverty, limiting their capabilities to generate enough capital to invest in quality productivity and sustainable forms of production. The low farmer income was also attributed as one of the major reasons for the prevalence of child labour and deforestation in the industry.
To raise the value share and price accruing to the farmers and enable them negotiate effectively for equitable market relationship with international players in the manufacturing sector, Côte d’Ivoire and Ghana the two biggest cocoa producing countries jointly leveraged their collective market power towards the establishment of the cocoa Living Income Differential (LID) policy.
The introduction and eventual implementation of the LID system at the start of the 2020-21 cocoa growing season activated a differential of $400 per tonne above the floor price, resulting in cocoa buyers paying an extra $400 on every tonne of cocoa directly to the local farmers.
The new pricing mechanism to increase income for cocoa producers resulted in higher valuations for cocoa produced in both countries and has been lauded by analysts as a bold move by both governments towards making a fundamental change to the structure of global markets and ensuring rural producers receive a living income.
Prior to the establishment of the LID, the export prices were effectively what the global market was prepared to pay, but the additional fee of $400 per tonne of cocoa on top of the market price for forward sales for the 2020/21 main crop, secured higher prices for both countries, as valuation of the commodity jumped to $1,837 per tonne in Ghana and $1,840 in Côte d’Ivoire, according to farmgate prices announced in October 2020.
Due to Nigeria’s exclusion in the LID policy, cocoa farmers in the world’s fourth largest producer and third largest exporter, were offered lesser values for cocoa compared to their West African counterparts as Nigerian cocoa was sold below $1,800 per tonne in the period under review
According to the Cocoa Farmers Association of Nigeria (CFAN), the country loses N60 billion annually to the non-existence of the LID initiative for producers of the highest foreign exchange earning cash crop in the country.
Adeola Adegoke, national president of the association, who made the disclosure during a workshop jointly organised by the University of Ibadan and the Agricultural Policy Research in Africa (APRA), which was held in Abuja with the theme: “Cocoa Commercialization in Nigeria: Issues, Prospects and Policy Requirements’’, bemoaned that cocoa producers in the country receive a woefully low share of cocoa revenues in the world market, leaving them exposed to extreme poverty.
“In Ghana today, each farmer collects $400 on each tonne of cocoa after the fall price. Same in Ivory Coast, and that’s why we believe that Nigeria must begin to collect Living Income Differential. The refusal to collect it makes us lose N60 billion annually,” he said.
Stressing the need for the government and stakeholders to strengthen mechanisms that would increase Nigeria’s guaranteed cocoa farm gate price to encourage production, Adegoke noted that Nigeria has the potential to reclaim its position as the second largest producer of cocoa in the world, address its foreign exchange woes and ensure producers earn a living wage by adopting the LID policy.
The CFAN president said the association is working towards raising the country’s cocoa production from the current 340,000 metric tonnes to 500,000 tonnes by 2024, while also aiming to become the largest cocoa producer in West Africa by 2027.
The ambitious plan, according to him, is anchored on improved cocoa variety, national cocoa farm irrigation, the improvements of the livelihood of our smallholder cocoa farmers via the collection of $400 LID and the overall improvements of the cocoa sector from research, inputs, production, value addition, processing to export.
Corroborating Adegoke’s statement, Adeola Olajide, the country lead and principal investigator of APRA Nigeria, observed that the LID policy beyond supporting smallholder farmers in Cote D’ivoire and Ghana, has also strengthened the market dominance of both countries who have a combined market share of over 60 percent as they are able to influence international prices of the commodity, leaving importers with no choice but to comply.
Olajide opined that Nigeria’s inclusion in the LID policy will not only strengthen Nigeria’s position in the global market, but also boost production as local farmers will be encouraged to produce more which will ultimately boost the country’s foreign exchange.