Unhealthy competition is a prevalent problem within the Nigerian cocoa industry. Foreign traders, with better funding and technology, compete against local players for market share. Expectedly, local players struggle to maintain profitability when competing against foreign players that benefit from loans with annual interest rates ranging between 2.5 per cent and 4 per cent. Conversely, the indigenous players have to bear a hefty 25 per cent interest rate per annum on loans accessible to them.
On a superficial level, a student who finished fourth place in a class of over 50 students has not performed poorly. However, when considering that the student who finished first place amassed over 2,000,000 points, while the student who finished fourth had only 300,000 points, does that change your assessment of the student’s performance? It should.
Nigeria may be the fourth largest producer of cocoa globally, only trailing behind Ivory Coast, Ghana, and Indonesia, but its output is still comparatively low. Ivory Coast produces 2,200,000 tonnes of cocoa beans annually, while Nigeria’s total annual output is about 340,163 tonnes.
Before the discovery of crude oil, agriculture was the mainstay of Nigeria’s economy, contributing substantially to the country’s GDP and export earnings. However, Nigeria shifted its focus to crude oil, which led to a decline in its agricultural output. Despite this decline, cocoa remains the country’s principal non-oil foreign exchange earner. The declining price of crude oil continues to provide momentum for conversations about economic diversification into sectors such as agriculture. If any segment of the agricultural industry has shown a potential to improve the country’s economy and contribute to employment generation, it is the cocoa industry. In the right position, the industry will generate more jobs for farmers and other players involved in the production value chain.
The industry, however, continues to grapple with limiting challenges, such as poor infrastructure, inadequate research and development, the lack of funding for farming startups, dearth of mechanised farming techniques, poor education of farmers, aging farmers and the lack of protection of local industries, all of which hamper its potential. To address the challenges, some of the strategies to prioritise include:
Investing in Infrastructure
The absence of quality infrastructure in Nigeria has significant detrimental effects on the country’s cocoa value chain. Poor road networks and inadequate transportation facilities greatly contribute to difficulties in transporting cocoa beans. These challenges lead to increased transportation costs that invariably affect the profit margins of farmers.
The infrastructure issue is not limited to transportation facilities alone, it also extends to poor telecommunication networks, the lack of clean drinking water, inadequate health care facilities and deficient power supply. Beyond the direct effects of this impoverished state of infrastructure on the cocoa value chain, the cumulative effects also constitute “push factors” that discourage the Nigerian youth from considering the cocoa industry as their source of livelihoods. Rather, youths are eager to migrate to urban areas, even if it would imply taking up menial and unproductive jobs that contribute little to the country’s GDP.
To address these challenges, there is need for collaboration between the government and the private sector for investments in infrastructure development. Plus, rural cocoa-producing areas should receive higher priority during the execution of infrastructural development projects.
Improving Research and Development
Inadequate research and development (R&D) is one other challenge limiting cocoa production in Nigeria. The research institutions in Nigeria are either underfunded or outdated, and this has led to a significant gap in localised knowledge and technology to improve outputs, both in quantity and quality.
To address this challenge, the government should partner with international organisations to set up new research institutes that are adequately funded and equipped with modern technologies. This collaboration would also contribute to increasing expertise in cocoa research. Additionally, the government can provide funding and other incentives for private researchers and farmers to encourage more R&D in the sector.
Improving the Quality of Farmers’ Education
An industry can only be as prosperous as its people. Therefore, improving the quality of farmers’ education is crucial to improving the results from the Nigerian cocoa industry. Farmers need continuous access to best practices, innovative farming methods, and solutions to emerging problems like climate change, pests, and diseases.
Sadly, several farmers lack formal education which limits their capability to adopt new farming practices such as regenerative farming, and mitigate emerging problems. Similarly, due to their lack of proper literacy, the farmers are susceptible to engaging in inefficient resource management practices, such as wrong fertiliser application and suboptimal farming practices. All these shortcomings ultimately have negative impacts on the quality of their cocoa outputs.
To address these issues, there is the need for the establishment of training centres for farmers to learn sustainable resource management practices, such as soil and water conservation, among others. Also, well-equipped agricultural extension workers should be mobilised to work closely with the farmers.
Furthermore, existing organisations that are working with farmers with limited literacy skills should ensure that information is presented to them in ways they can easily understand. Using visual aids, such as illustrations or videos, can help to simplify complex concepts and make them more assimilable by these farmers. The government can liaise with the cooperatives and associations of these farmers to disseminate knowledge and promote good agricultural practices.
Making Funding Accessible
The success of cocoa farming depends on access to funding, which enables farmers to purchase necessary inputs such as fertilisers, pesticides, and mechanised farming equipment needed to maintain their farms and improve yields. Despite the availability of various funding projects in Nigeria such as NIRSAL’s Schemes and Anchor Borrowers Programme, farmers still face challenges in accessing funding. Many farmers are unaware of the funding opportunities, and even those who are aware may not have the necessary documentation or collateral to access the loans. In addition, the application process can be time-consuming and complicated, further deterring farmers from applying for funding.
The implication of these funding challenges is that many farmers take recourse to informal financing options which have worse terms and may not be sufficient for large scale production. To address the issue of lack of funding, there needs to be greater awareness and education among farmers about the available funding schemes. The government should collaborate with agricultural extension workers to ensure that farmers are informed about the funding opportunities and the application process. The application process should also be simplified for these farmers.
Another funding issue is the high-interest rates charged by banks and other financial institutions. This makes it challenging for farmers, especially small-scale farmers, to access funding as they may not be able to afford the high-interest rates. In addressing this challenge, the government should liaise with financial institutions to provide concessional loans to farmers. These loans could have lower interest rates and more favourable repayment terms, making them more accessible to small-scale cocoa farmers.
Protecting the Local Industry
Unhealthy competition is a prevalent problem within the Nigerian cocoa industry. Foreign traders, with better funding and technology, compete against local players for market share. Expectedly, local players struggle to maintain profitability when competing against foreign players that benefit from loans with annual interest rates ranging between 2.5 per cent and 4 per cent. Conversely, the indigenous players have to bear a hefty 25 per cent interest rate per annum on loans accessible to them. This stark disparity in interest rate adversely affects the income and livelihoods of thousands of small-scale farmers and traders who rely on these local players to fund their farming operations.
In addition, the foreign players are primarily concerned with buying cocoa beans from farmers. They show negligible interest in helping the small-scale farmers improve their operations. On the other hand, the indigenous players are willing to take up these responsibilities, but constraints such as the interest rates on loans limit their capacity to engage in such sustainability endeavours. Unfortunately, the effects of the unhealthy competition eventually force several local players out of the industry.
To address the challenge of unhealthy competition, the Nigerian government must enact policies that protect local players in the cocoa value chain. These policies may include regulations on foreign players operations and tariff measures to protect local players. By introducing these policies, the existing indigenous players can expand their operations while also reducing the entry barriers for new entrants.
Increasing Youth Participation in Cocoa Production
Poverty prevalence among ageing smallholder cocoa farmers in Nigeria is a discouraging factor for upcoming generations. As a result, many youths do not have an interest in farming or consider it as a viable income source.
Yet, the younger generation’s participation is crucial for the industry’s sustainability. That’s because the current population of cocoa farmers is ageing, and the youth are more inclined to innovation which would definitely improve the entire cocoa value chain in Nigeria. However, as earlier mentioned, the poor state of infrastructure in the rural cocoa-producing communities coupled with widespread poverty among the farmers, continue to discourage the younger generation.
In addition, smallholder farmers often encounter numerous setbacks when scaling up their businesses and increasing their profit margins. Faced with these challenges, many youths are compelled to consider other career paths that do not involve direct engagement in cocoa production or distribution.
Addressing these problems would require implementing a comprehensive strategy which would include improving the state of infrastructure in the rural cocoa-producing areas and the economic conditions of smallholder farmers. The government should create avenues for increasing the farmers’ productivity and income by providing them with relevant financial and technical support and resources. This strategy would go a long way in improving the appeal of cocoa farming to the younger generations, while also alleviating the burden of unemployment in the country.
In conclusion, the challenges of cocoa production in Nigeria may be numerous, but there are also numerous available strategies to address them. The success of these strategies require inputs from all stakeholders, especially the government, because its policies, actions and inactions have the largest impacts on the entire cocoa value chain in the country. Mitigating these challenges will go a long way to improve Nigeria’s performance on the global cocoa production scale, not just in position but also in the size of its annual outputs.
Olasunkanmi Owoyemi is the Managing Director of Sunbeth Global Concepts (SGC).
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