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How to start a cocoa export business in Nigeria?

cocoa powder in a wooden bowl with wooden spoon on a table doing an exportation business in Nigeria
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The cocoa export business in Nigeria is one of the highest-paying business sectors in the country. Before Nigeria first discovered oil in 1956, cocoa production used to be the economic mainstay of the country.

Cocoa is among one of the 100 most lucrative agricultural items that can be exported from Nigeria. The global business of cocoa production is worth more than $900 million.

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Cocoa export in Nigeria is among the export products with the most important in the country. While cocoa production is still a primary export venture in Nigeria.

Cocoa production in Nigeria

The cocoa export business in Nigeria is a slightly different kind of business when compared to other countries. Cocoa is usually sold in Nigeria in an unprocessed form. While the country is such a huge producer of food products, cocoa exporters in the country usually export the product in different forms.

Cocoa can be export as cocoa butter, cocoa cake, raw cocoa beans, and powder. Hence, one thing to note about cocoa production is that the chocolate raw material has the most value in its processed or refined state.

At this stage, it can easily use to produce chocolate. Because of the absence of infrastructure and facilities for processing cocoa, Nigerian-based cocoa exporters and farmers never have the opportunity to leverage the value of the cocoa product.

Unfortunately, the most value of the product is in the Americas and Europe where they sell off as brand chocolate products. Nigeria currently has just one cocoa processing plant known as the Ede cocoa processing plant located in the southwestern part of the country (Osun state). This cocoa factory is responsible for the production of various cocoa products like cocoa cake, cocoa butter, chocolate, and cocoa powder.

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The irony of cocoa production in Nigeria is that the country can barely afford to process unprocessed cocoa to its more refined form – chocolate. The country exports the product but has exported the finished product – chocolate for consumption. In the future, the current cocoa-producing factory will be able to process cocoa to chocolate.

Leading countries for cocoa exportation

Before you commence your cocoa exporting business, you will want to know the leading countries that buy cocoa from Nigeria. This is one of the reasons most people go into the cocoa export business in Nigeria. They see the availability of these cocoa-buying countries as a business opportunity. It means that there is an international market demand for a local product that is widely around the country.

So, if you were one of the numerous cocoa exporters in the country, you will notice that about half of the total amount of cocoa exported out of the country goes to the Netherlands.

The Netherlands accounts for about 45% of the total cocoa products being export out of the country. After the Netherlands with 45%, the next two countries are Germany (22%) and Malaysia (6.2%) respectively.

Furthermore, other countries also buy cocoa from Nigeria. Some of these countries include but not limited to China, Luxembourg, Belgium, Italy, and Spain.

If you plan to export cocoa out of Nigeria to other countries, you should prepare to export your cocoa beans and cocoa in either the unprocessed or raw form.

They are then export to countries that have the facilities to process the raw products to chocolate. The cocoa from Nigeria is usually transport to food and confectionary companies that make chocolate snack bars and various chocolate-based products like cakes, chocolate beverages, and candy.

The price of cocoa in Nigeria

In recent times, the production and exportation of cocoa in Nigeria have been expanding. Most recently due to the devaluation of the Naira, Nigeria farmers now earn about $1800 (670,000 Nigerian Naira) for a single metric tonne of cocoa.

However, the International Cocoa Organization (an international body for cocoa exporters across the world) had reported a higher value. Based on a report from the ICCO, the cocoa price had decreased by more than 10% from more than $2,500 for one tonne of cocoa in March 2018 to below $2,200 for a tonne in September. Currently, according to a March 2021 report by ICCO, the current price of cocoa per metric tonne in Nigeria is $2,615.

Where to sell cocoa in Nigeria:

Cocoa production in Nigeria has various ways of being transport out of the country. In several cases, there are about one or two people involved in the supply of cocoa from farmers to cocoa exporters. The production of cocoa in Nigeria starts with farmers that harvest the cocoa beans from its local plant crop. Cocoa is exported in the following ways in Nigeria:

1). From farmers to small-scale cocoa buyers

Small-scale cocoa traders (buyers) usually visit individual sellers to buy a share of cocoa crops from them. With this method, small-scale buyers could directly sell the cocoa crop to exporters. However, more commonly, these small-scale buyers sell off the cocoa to wholesale cocoa buyers. These buyers then sell off the product to the exporters.

2). From farmers to cocoa co-operatives

Various cocoa farmer co-operatives work in partnership with various cocoa farms to sell off the product to various agencies. The cocoa co-operatives usually buy the cocoa directly from the farmers, and in several cases, sell them off directly to the exporters. While in several cases, these co-operatives will just directly export the product.

The local Nigeria cocoa export supply chain

Nigeria is a country where there are thousands of cocoa farmers. There are lots of people that participate actively in the growing of the perennial crop in the country. Everyone involved in the planting, production, and processing of the crop is a part of the local Nigeria supply chain.

They all influence the general cocoa business ecosystem of Nigeria. In Nigeria, there is a range of stakeholders that participate in the local cocoa business scene. They are the small-scale farmers, the middlemen, and the exporters. Technically, the cocoa supply chain begins with the local farmers.

These small-scale food crop farmers can found in the various cocoa-producing states in the country. Since Nigeria is a fertile ground for cocoa farming, there are still many farmers spread all over the country who grow cocoas as a part of their commercial farming.

The typical cocoa farm has a measurement of between 2 and 5 hectares. This size of farmland can produce an average output of about 0.6 metric tonnes per hectare.

For the farmers to stay in business, they usually need a continuous number of buyers to help in their cash in-flow to help them improve their business with more investments.

The farmers also need a healthy cash flow to pay back their loans, outstandings, and all other liabilities. The middlemen make up the connection between the cocoa exporters and farmers. These are the deal makers. They directly source the products from the farmers in bulk and sell them to the cocoa exporters.

The biggest cocoa producing states in Nigeria

The cocoa export business in Nigeria is not done in a single state. The business spans several states. The current biggest producer of cocoa in the country is Osun. This is closely followed by Ogun, Ekiti, Edo, Akwa Ibom, and Ogun.

About 60% of the total cocoa production in Nigeria, originates from these states. These states are all in the southern part of the country. It is important to state here that southern Nigeria has the perfect weather conditions for cocoa farming.

The perfect location for cocoa farming in the world is about 20 degrees either way of the equator. Nigeria spans from the equator (0°to 6°N) in the northern hemisphere and is ideally within the perfect regions to grow cocoa internationally.

Some problems affecting cocoa production and export in Nigeria:

The cocoa export business in Nigeria does not come without its problems. Before going into cocoa production in Nigeria, entrepreneurs must plan on how to solve these problems.

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It is better to be familiar with some of these challenges as they can help the cocoa exporter plan the best way to tackle the problems. The following challenges are encountered by Nigeria cocoa exporters, and they are:

1). Transportation and Road networks

The road networks in Nigeria are fine but can get congested. This happens the most in Lagos where the country’s major shipping port is located. Recently over 30,000 metric tonnes of cocoa were delayed while being transported in Lagos for export to other countries.

This delay was caused by flooded roads, craters on roads, and traffic congestion. More sadly is the fact that the local businesses get business loans to pay for incurring expenses as they wait to ship the products for exportation.

2). Cocoa production delay

Before now, Nigeria’s cocoa production capacity put it at fourth after Cote d’ Ivoire, Ghana, and Indonesia concerning cocoa production. However, in recent times, the country has dropped even further down as it is now tied in the fifth position with Cameroon.

A lack of financial support for local farmers plus being able to get cocoa seedlings, farming challenges/risks, and training for pest control are some of the factors that caused a reduction in cocoa production in the country.

However, most cocoa harvests are done by numerous small commercial farms throughout the southern part of the country.

3). Absence of farmers

With everybody aspiring to become an Engineer, a doctor, a banker, a lawyer, and so on, the farming sector is largely stigmatizing in the country. There are not enough farmers, still even among farmers, only a few interested in cocoa farming.

While calls for the stimulation of the Nigerian cocoa industry continues, the production of cocoa in the country would hit a brick wall if younger people are not part of this lucrative trade.

How cocoa beans are grown

Cocoa beans usually grow on tree pods from the species known as Theobroma Cacao. And is grown especially in hot and humid regions in Africa. Also grown in other locations like Northern Africa, southern Africa, and Asia. If planted a cocoa seed might need about 5 years for its maturation. And so one tree can become productive for over 25 years.

The major countries for cocoa production

Cocoa production is done mostly in Africa out of which the bulk of the continent’s cocoa production is located in West Africa. The primary cocoa-producing African countries include Nigeria, Cameroon, Ghana.

And Cote d’Ivoire. These four African countries account for about 70% production of the world’s total cocoa production output. Cocoa is produce in a lot of countries in Africa but the concentration of the product is in West Africa.

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Major cocoa-producing countries include Cote d’Ivoire, Ghana, Nigeria, Cameroon, and these four countries produce 70% of the total cocoa production in the world.

The leading cocoa-producing countries in the world

The world’s biggest exporter of cocoa products is the Ivory Coast with a revenue of about $3.75 Billion. Others are Indonesia, Ghana ($1.98 billion), Nigeria, Cameroon, Brazil, Ecuador, Mexico, Dominica’s Republic, and Peru.

The following are the leading countries that import the most amount of cocoa seeds. They are the USA- $1.38 billion, France, the United Kingdom, Belgium, Canada, Czech Republic, Italy, Malaysia, and Germany.

Starting your cocoa export business in Nigeria

If you were to begin your cocoa business in Nigeria, the first thing you need to know is how to source cocoa products. So, cocoa is mainly produced in the western parts of Africa. If you are located in Nigeria and you wish to buy the product, you can do this by checking some western states of the country like Ondo, Osun, Ogun, and Oyo.

Then again you will need to understand the cocoa importing countries you need to sell to. You need to understand where to sell cocoa in Nigeria. You will also need to find out the payment method, packaging, transportation, and the right exporting specification.

This means that you will need to conduct full-scale market research. Since this is a commodity market that you will be involving in, you will need to look for ways to get the product.

You will need to ensure that the product satisfies the needed specification for export overseas. You will also need to create business relationships with the farmers that produce the cocoa products.

Understanding the rules of import countries

You will need to become familiar with the international laws of the countries that you plan to export to. You will need to know what it takes to transfer the cocoa product from your country to other countries. It needs lots of planning and preparation.

Next up, is the creation of a practical business plan for the cocoa exporting business. A lot of people who begin their cocoa export business in Nigeria without drafting a good business plan will eventually be forced out of the market.

There are various things that your business plan has to contain like your product source, getting your cocoa products to buyers, and so on. Doing but simply because they do not have a good business plan. Your business plan will include a lot of things but the core concept will hover around how you want to source your product, get the product to the buyers amongst other things

Managing the risks involved in the production of cocoa

All businesses come with their natural risks and this is no different when exporting cocoa from Nigeria. If you are looking to start a cocoa export business in Nigeria. Always suggest beginning small for you to handle the risks that come with the nature of the job.

You can only begin to expand your business scope at the time that you gain sufficient experience and have educated yourself on how to better export cocoa from Nigeria.

Organizations that support the production and exportation of cocoa in Nigeria:

If you are planning to run a successful cocoa export business in Nigeria, then you need the supports of both CAN and ICCO.

1). Cocoa Association Of Nigeria (CAN)

CAN is an organization that helps cocoa exporters in Nigeria. The organization began in 1986. It caters to the needs of cocoa exporters, processors, farmers, and also other players in the Nigerian local cocoa industry.

The company aims to promote both the development and sustainability of the cocoa industry in Nigeria. CAN aim to represent the Nigerian private sector in every international cocoa activity.

They perform a wide range of roles and responsibilities such as but not limited to:

  • Establish stakeholder collaboration for the development of the local Nigeria cocoa sector.
  • To support cocoa farmers to enhance superior production, quality, and so on.
  • To enhance cocoa production and quality to meet the standards of other international countries.

2). International Cocoa Organization (ICCO)

ICCO also caters to any cocoa export business in Nigeria but in an international capacity. Also, ICCO is a worldwide organization that is made up of cocoa-producing and consuming countries.

ICCO supports:

  • Cocoa farmers to paid accordingly
  • Ensure the transparency of the market by implementing sustainable consumption and production.
  • The creation of an Information Centre for stakeholders to ensure excellent information flow to everyone involved.
  • To ensure the international participation of major local cocoa exporters.