Cocoa Production in Nigeria

Given renewed interest in the development of cocoa and government decision to recognize it as one of the key sources of foreign earnings, the Center for Public Policy Alternatives carried out a review of existing literature including reports of research carried out by experts in the sector. The intention was to explore the state of cocoa, focusing on South West Nigeria. Attempts were made to aggregate production information and examine farmers access to planting input and finance.

NIGERIA’S COCOA
Cocoa crop thrives in tropical climate and production is therefore dominated by countries in those regions, while consumption is mostly by countries in temperate regions of the world. West Africa is a major producer accounting for approximately 70% of global production which fluctuates annually with climatic variations. This is often cyclical with periods of rapid expansion followed by periods of stasis. However, overall production continues to expand with cultivation becoming more widespread.

In West Africa, Nigeria is the third largest producer of Cocoa. While the crop is sometimes farmed on a large scale in Nigeria, the sector is dominated by small scale farmers and remains a critical source of livelihood for rural populations in states where the crop is produced. In the South-west, cocoa-producing states include Ondo, Oyo, Osun Ogun and Ekiti where farmers either operate on inherited field or operate a share cropping system in which two-thirds of the produce accrues to the land owner who also contributes to purchase of farming input.

The country is currently reported to be experiencing low and declining yields due to inconsistent production patterns, disease and pest attack. Low levels of mechanization with dependence on cutlass and hoe agriculture and ageing of cocoa fields play a role in decreased productivity, especially in southwest states that contribute nearly 80% of national cocoa yields. Although reports are conflicting, annual cocoa yields for Nigeria are generally estimated at an average of between 300 to 350,000[2]. Reports also set production per hectare at 0.38 tonnes but these are reported to have declined to less than 0.3 hectares mostly due to reduced rainfall[3]

Problems with production according to available literature, include high cost attendant to the establishment of nurseries and plantations, a dearth of market information, high levels of spoilag, low quality of beans and extremely weak linkage between producers and processor/exporters. Even with this, reports indicate that there is positive relationship between area harvested or farm size and cocoa production in Nigeria (Fadipe et al 2012).

It is widely acknowledged that there is under-investment in agriculture while studies have highlighted a strong relationship between cocoa out and farm size and access to finance (Fadipe et al, 2012)

Nigeria’s cocoa is cultivated on (estimated) 800,000 hectares of land and makes up 5% of global cocoa production which is contributed by an estimated 300,000 cocoa farmers, two-thirds of which live in south west Nigeria. Majority of them inherited farms with trees that are more than 25 years old with declined production.

Prone to disease, maintenance of cocoa farms is labour intensive and requires the use of expensive chemicals to keep black pod disease at bay. Cultivation is a delicate process and trees are sensitive to changing weather conditions such as excessive rain or drought which negatively affects yield per hectare.

Osun, Ondo and Cross River states are reported to contribute approximately 68% of Nigeria’s yearly cocoa output which reached a high of 350,000 MT in 2014[4] when the Ministry of Trade and Industry also reported that Nigeria made $1.3 billion from cocoa export. There is however poor price transmission between export markets and producers[5]

YIELD
The Cocoa Transformation Plan of the Federal Ministry of Agriculture and Rural Development set a national target for production at 500,000 MT by 2015 and 1 million MT by 2018. This is to build on the target of 600,000 MT by 2015 set by the National Cocoa Development Committee. Between 2002 and 2007 NCDC distributed inputs for cocoa farming to farmers at 50% subsidy. The Committee also raised 62 million high yielding early maturing hybrid seedlings – enough to plant 56,000 hectares of new cocoa fields.

Farmers are responding to rising international market prices for cocoa and reports indicate a potential increase in production resulting from adoption of improved production practices to meet the UTZ certification requirements. There are indications that farmers are willing to rehabilitate abandoned farms and to increase area under production[6]. Production has however been hampered by the inability of the Cocoa Research Institute of Nigeria to meet demand for seedlings, and utilize adequate mechanisms for distributing improved varieties of cocoa to farmers. Production has therefore fallen short of 2015 targets of 500,000 MT.

A study of technical efficiency of cocoa production in southwest Nigeria[9] showed that more than 80% of cocoa farmers in the region had more than 10 years of coca farming experience and were relatively technically efficient in their use of resources although they were largely resource constrained. The study report also explained that labour constituted the highest cost of cocoa production and that it would likely determine the viability and profitability of cocoa production. The report concluded that there is potential to minimize inputs to maintain current production levels and/or maximize output at current input levels in southwest cocoa production although technical efficiency was found to be high at 0.8126. A critical factor that affects technical efficiency was reported as the age of cocoa trees (the older the trees the less efficient), education of farmers (the better educated and inform the more efficient due to likelihood of adopting progressive farming practices) and land area cultivated (better to increase yield and efficiency). The report recommended sustained improvements by planting younger trees to replace aging ones to raise technical efficiency.

It has been estimated that there can be a 15 – 30% rise in cocoa production if more fertilizer is used in cocoa production[10]. Nigerian cocoa farmers use a lot less fertilizer than farmers in Ghana where production was increased from 650,000 to 1 million tonnes in one season (2011/2012). Farmers in Nigeria were introduced to fertilizer usage in 2012/2013 season.

Many NGOs and donor organisations including USAID are supporting on-farm capacity development for farmers to improve productivity and quality. Researchers have also been supported through the Cochran Fellowship and Borlaug training programmes to build knowledge and skills. However, yield improvement continues to be constrained by poor farm management, inadequate extension services, low farm input utilization, farmers’ reluctance to replant old trees and slow uptake of new technology.

QUALITY
Crop quality has improved since the Sixties but quality of cocoa from Nigeria is currently considered lower than the quality on offer by other West African countries. Quality control mechanisms are severely compromised given a liberalized market and limited value chain governance.

Nigeria’s cocoa is reputed in the world market for its aroma which makes it a great choice for blending with cocoa from other sources. Quality provides opportunity for price differential and, where there is a premium, provides an incentive for the farmer and others in the value chain. Nigeria suffered a setback in cocoa quality following the market liberalization in 1986 and reduced confidence the trade.

There are continual efforts by the Cocoa Association of Nigeria (CAN) and Cocoa Processors association of Nigeria (CPAN) to raise farmer awareness on appropriate use of chemicals as well as quality parameters for fermentation and drying of beans. Government produce inspectors however pay more attention to revenue capture than to quality grading. There are wide disparities in grading fees set by state governments and this range from N3000 to N5000 per tonne.

Quality issues range from simple cleanliness of the bean bag, preparation by farmer to genetic origins of the beans. Many processors rate flavour (which is a combination of genetic factors influencing the varieties) as highly important.

A study on the effect of farm management practices on cocoa quality carried out in Ondo State concluded that Nigerian cocoa farmers receive low prices for their crops because of poor quality arising from inappropriate farm management practices[11]

COCOA SEEDLINGS AND SEED GARDENS
Federal Ministry of Agriculture and Rural Development’s Cocoa transformation agenda reported estimated that if Nigeria is to meet national targets for cocoa beans productions, it will be necessary to raise 111 million improved hybrid seedlings in 2012, 116 million in 2013 with a decrease to 80 million by 2015. Seedlings produced fell far short of these estimates.

CREDIT FOR COCOA PRODUCTION
Along with other crops in Nigeria, cocoa farming is hindered by availability of credit to sustain or expand production. Shortage of credit for agriculture production is attributed to reluctance by banks given high risks associated with the sector. To address the challenge, the Central Bank of Nigeria set up some development finance to target agriculture; one of this is the Commercial Agriculture Credit Scheme designed to boost production of selected cash crops including cocoa. Despite this and other schemes, studies show that few cocoa farmers in Cross River State (6% of owner managers and 12% of lease managers) were able to obtain bank loans although the likelihood of obtaining bank loans was also correlated to level of education. Other cocoa farmers, especially small scale farmers and share croppers were deemed unable to meet requirements for bank loans and relied on credit from relatives or on savings[26]. The same study demonstrated that to make appreciable income from cocoa production, farmers need to make large cost outlays; the larger the investment, the more likely the returns[27].

A study carried out in Ondo State reported that despite the mean size of cocoa farms being 1.28 hectares and 66.7% of farmers surveyed having no more that primary school education (32.8% had no formal education) 58.5% procured credit in the 1009/2010 production season although 83.2% of these, obtained credit from produce merchants. Mean age of farmers in this study was 49.8 years and 95.1% of them were male. The study concluded that inadequate credit affected production efficiency. In addition to access to finance, poor infrastructure was indicated by respondents as being a major challenge[28].

Credit available in the cocoa economy is short term and provided within season production in cash or kind to farmers by merchants and buying agents. Size and structure of loans makes it difficult to apply them to significant improvement or expansion or cocoa farms. Here are however options for special on-lending facilities backed by government guaranties.

Conclusion

Evidence from documents reviewed demonstrate that in spite of Nigeria being considered a major contributor to cocoa production, the industry is precarious and requires strategic interventions if it is to become the productive resource that government wants to make it. Farmers, especially in the south west, farm very small holdings and are experiencing declining yields. Although it has been reported that they are willing to rehabilitate cocoa fields, they are poor resourced and have scant technical know-how or technology support.

Recommendation is for strengthened governance of the cocoa value chain. Large off-takers should be helped – utilising industry studies and preparation of a sector strategy – to see the potential for generous returns on investment and policy documents should highlight this as well as make provisions for appropriate mechanisms for regulating the sector including prioritising certification of farms, seedlings and products.