Nigeria is a leading cocoa bean producer in the world. The country has been a leading producer of cocoa beans since the 1980s. Cocoa beans are the raw material for cocoa and cocoa products such as chocolate. The plant, which is native to tropical regions of the Americas, Africa, and Asia, was grown for domestication in West Africa.
Cocoa is the largest non-oil foreign exchange earner for the country, as well as providing sources of employment to millions of Nigerians as farmers, processors, licensed buying agents, marketers, and exporters. Cocoa also contributes about 41.6% to Nigeria’s export earnings and currently Nigeria is ranked 4th in cocoa production behind Cote d’Ivoire, Ghana, and Indonesia in the world, with a production capacity of 340,163 tonnes. They export most of their crop to Europe and America. Nigeria’s foreign earnings from cocoa was N122.9 billion in the first quarter of 2022, according to the Minister of Agriculture and Rural Development, Muhammad Abubakar.
Cocoa beans are the raw material for cocoa and cocoa products such as chocolate. The plant, which is native to tropical regions of the Americas, Africa, and Asia, was grown for domestication in West Africa. Nigeria has been a leading producer of cocoa beans since the 1980s. Exporting them outside of Nigeria is complex because Nigeria wants to protect its industry and preserve its investment in cocoa production. That means that to export cocoa beans from Nigeria, you’ll need a permit from the Nigerian Cocoa Board.
Cocoa export supply chain in Nigeria
Every party involved in the supply chain play a key role in the overall business outlook of cocoa export in Nigeria.
These parties are:
• Smallholder farmers
The cocoa supply chain typically starts from local farmers. Small scale farmers are spread across the several cocoa producing states in Nigeria. Each farm is about 2-5 hectares, and would produce on the average 0.6MT per hectare.
The farmers need steady and ready buyers to guarantee in-flow of cash to reinvest in their business, pay up immediate outstandings, loans and expenses.
Meanwhile the middlemen stand in the gap between the farmers and the exporters. They’re the aggregators. They source directly from the farmers and supply to the exporters in bulk.
Top importers of cocoa in the world
• United Kingdom
Governing organizations to follow as a cocoa exporter in Nigeria
• The Nigerian Cocoa Association
• World Cocoa Producers’ Organization
• Cocoa Research Institute of Nigeria (CRIN)
• Cocoa Framers Association of Nigeria
• OWIT Nigeria
Steps to take to get started as an exporter of Cocoa
1. Setup your business plan
A key component in planning your business is knowing your strengths and weaknesses.
You should look at what you’re capable of as against what you’re incapable in terms of capital, resources, reach etc. This would give you an idea on how to go about structuring your plan to meet your business goals.
In your business plan questions you want clear answers to are:
• How do I get customers?
• How am I going to maintain supply to my customers?
• Am I owning my own farm or leasing or partnering smallholder farmers?https://blog.evolveafrica.org/starting-a-cocoa-farm-in-nigeria/
• Who are my key partners to help me achieve my supplies and fulfill my orders?
• Which technology can I leverage to achieve my goals?
• How am I advertising my product? What methods would I be employing? If we’re talking about online advertising, should it be Paid ads vs free ads, or combination of both?
Bottom line? To stay profitable, what strategy would best work for you based on what you have vs what you don’t have?
Remember, you’re dealing with international buyers, they’d be most likely be sophisticated and your business has to be well planned and presented, backed with the right principles of course. If everything is well planned, you can achieve success even without spending too much capital. Also remember, cocoa business is evergreen, one cocoa tree can last for 30 years, producing constantly once it’s matured. So the initial cost might feel or look too much, it gets better over time with good rewards to follow.
Now that your well-thought-through business plan is ready, the next step is to register your business with appropriate governing bodies.
2. Register your business
Exportation business is a serious endeavor. A lot of risks are involved, so anything to help reduce the risk from the side of your buyers should be encouraged to win them over.
That’s why it is necessary to register your business with all necessary bodies. Registering with these organizations is necessary. Some of them would give you necessary support like low interest loans, trade information and support to help your business grow.
CAC (Corporate Affairs Commission) – Give your business credibility and visibility by registering your business as a legitimate business in Nigeria because international buyers would mostly do business with verified businesses.
Nigerian Export Promotion Council (NEPC)- The NEPC rules over all other apex institutions involved in the promotion, development, and diversification of exports in Nigeria.
Their activities involve:
• Co-ordinating and facilitating export development in the country
• Facilitating export promotion activities
• Working with international trade agencies on cooperation and capacity building.
Organization of Women in International Trade (OWIT) Nigeria- Awesome for women into international trade, you can join them and benefit a lot from partnering with international and local businesses, to getting low cost loans, and other wonderful benefits.
THE PROCESS OF EXPORTING COCOA BEANS FROM NIGERIA
Exporting cocoa beans from Nigeria is complex. To export, you need to get approval from the Nigerian Customs Service. After approval, you will be given a Certificate of Origin, which must be included with your shipment documents.
In addition to the Certificate of Origin, you will also need a Commercial Invoice, a Packing List, and a Bill of Lading. The Bill of Lading must indicate the weight, grade, and type of cocoa beans as well as their destination country. Finally, you will need a certificate of quality before you can export.
The problem is that exporting them outside of Nigeria is difficult because there are so many restrictions on what can be exported and how it must be transported. You will need an export license from the Nigerian government if you want to export any goods. You will also need to produce a Nigerian Goods Clearance Certificate (NGCC) for goods with a value of more than $5,000. Obtaining this certificate is not easy. There are also requirements for labeling and packaging, which you can read about here.
HOW TO EXPORT COCOA BEANS FROM NIGERIA
Step 1: Find someone who knows the law.
Understanding the law is crucial if you want to export cocoa beans from Nigeria. In Nigeria, there are many rules that need to be followed when exporting goods. You need to find someone who can help you with that.
Step 2: Find a shipping company
You also need a shipping company to transport your cocoa beans from Nigeria to a destination in another country.
Step 3: Get the certification
You need certification from Nigeria’s Cocoa Marketing Company before you can export cocoa beans from Nigeria.
Step 4: Prepare the cocoa beans
You must prepare the cocoa beans for export. This includes sorting them according to quality, removing any debris, and drying them.
Step 5: Pack the cocoa beans
You need to pack the cocoa beans into 50-kilogram bags.
Step 6: Agree on the terms of payment with your buyer
In the bulk market, exporters and buyers usually operate on the futures market, where a specific volume of cocoa (200 tonnes, for example) is sold at a pre-determined international price on a future delivery date. Check the international daily prices for cocoa beans on the website of the International Cocoa Organization (ICCO). Making agreements on payment terms before signing any contracts is key. The most common form of payment in the cocoa trade is Cash Against Documents (CAD). This payment is made via a bank transfer, and the party that owns the documents also owns the goods.
Another method of payment is the letter of credit (L/C). If this method is agreed on, payment will be made from the buyer’s bank to the exporter’s bank against certain documents, such as the invoice, the certificate of origin and the bill of lading. Be aware that L/Cs are the most expensive option and require a lot of paperwork. However, they are also the most secure method of payment for an exporter.
Sometimes, payment is made after arrival of goods, following quality approval, although this is less common. This is usually agreed when the buyer perceives higher risks. Nevertheless, a producer will always want to get paid a certain percentage in advance, as a sign of commitment. Cocoa is traded in US dollars (USD) both in Europe and in the USA. Exchange rates fluctuate, which may influence the price you get. Cover this risk by including a clause on currency risk in your contracts.
Step 7: Agree on delivery terms with your buyer
Always agree on terms of delivery for your export with your buyer before transporting cocoa beans. The delivery term chosen usually depends on your buyer’s preference. In most cases, the use of Free on Board (FOB) terms, which are most commonly used, is recommended. FOB means the buyer takes ownership of the cargo at the point of departure from the supplier’s shipping dock. If goods are damaged in transit, the buyer (or their insurance company) is responsible for the associated costs.
Cost, Insurance and Freight (CIF) is not recommended for cocoa exporters. Under a CIF delivery term, the seller bears the responsibility and costs of any loss of or damage to the cocoa beans during transport. This means the seller must purchase specific documents, such as export licenses and insurances, and pay for inspection costs. Only once the freight unloads at the buyer’s port of destination, the buyer becomes responsible for the product.
Step 8: Apply for export
Shipping your cocoa beans from Nigeria is just the first part of the process. You also need to apply for an export license through Nigeria’s Securities and Exchange Commission within 10 days of exporting the goods. You’ll need to show that you’ve followed all the necessary regulations if you want to be able to export
In conclusion, the cocoa bean industry is a valuable resource for Nigeria.
According to TrendEconomy; Top export destinations of “Cocoa beans, whole or broken, raw or roasted” from Nigeria in 2021:
• Netherlands with a share of 31% (176 million US$)
• Malaysia with a share of 22% (124 million US$)
• Germany with a share of 11.1% (62 million US$)
• Indonesia with a share of 10.7% (60 million US$)
• Belgium with a share of 6.09% (34 million US$)
• USA with a share of 5.98% (33 million US$)
• Canada with a share of 5.12% (28 million US$)
• Bulgaria with a share of 1.53% (8.58 million US$)
• Vietnam with a share of 1.41% (7.94 million US$)
• Spain with a share of 1.32% (7.43 million US$)