Nigeria is grappling with foreign exchange issues. The country’s forex reserves dropped below $30 billion in December, 2015 and the currency has continued to lose its value, closing at N295 to a dollar at the parallel market on Tuesday while official rate remained at N197. Things may worsen despite efforts by Africa’s largest economy to stabilize its economy, as oil slid below $30 per barrel. The black gold accounts for over 90 percent of Nigeria’s forex earnings. But this was not always this case; agriculture used to be the principal foreign exchange earner.
About 80 percent of Nigeria’s land is arable and was put to good use before the country found oil, with major crops including beans, sesame, cashew nuts, cassava, cocoa beans, groundnuts, kolanut, maize (corn), melon, millet, palm kernels, palm oil, plantains, rubber, among others. But the agricultural sector was neglected and today the country finds it hard to produce enough crops to satisfy local demand. Despite the neglect, however, agriculture remains one of the biggest employers of labour.
With the current economic challenges facing the country, the Nigerian government is shifting focus away from oil. Increasing foreign exchange earnings from other sources will help address Nigeria’s forex issues. The country, which gets more than 80 percent of its revenue from oil will also need to boost revenue from other sources, hence the need for improved focus on agriculture.
Cocoa, the leading non-oil foreign exchange earner in the country should be one of the first crops that would be focused on. Global demand for chocolate is outpacing the rate of cocoa production, especially with extreme weather condition El-Nino, affecting cocoa production. Nigeria is one of the luckier countries in Africa where the effects of the phenomenon has not been greatly felt; this opportunity should be used well.
However, all is not well in the Nigerian cocoa industry. In recent times, government policies have stifled the growth of the industry. While the lower value of naira should mean more money for exporters of the produce, the efforts of Nigeria’s central bank to hold the naira’s value is affecting cocoa. In the past, cocoa farmers live in penury while processors enjoy the foreign currency earnings from exporting the produce but with increased awareness among the farmers, they now price cocoa based on the value of naira to the dollar at the parallel market. With the central bank insisting on holding the naira’s value at N197, processors incur huge losses on exports. As at Tuesday, the naira was 295 to a dollar at the parallel market despite official rate remaining at N197. The price of a tonne (1,000kg) of cocoa beans, therefore, increased by 20.6 percent to N700,000 ($3,515) in Dec. 2015 from N580,000 ($2,912) in 2014. Also, the falling naira is making it difficult for grinders of cocoa beans to keep machines running. Several processing plants are shutting down as a result of these.
In Ondo, a state in Nigeria’s south west and one of the country’s largest cocoa producers, a processing plant managed by Olam Nigeria has not worked since mid-2015. When The Nerve Africa visited the company, some workers were seen bagging cocoa beans. An older man who sat at the entrance of a building beside the shed where the beans were being bagged received The Nerve Africa team but would not say why the company was shut. He also warned against taking photographs of the premises. The plant processes 40 tonnes of cocoa beans daily.
Another man at the waiting room who did not say his name lamented the negligence of the government. He said the Export Expansion Grant (EEG) which is a very vital incentive required for the stimulation of export oriented activities has not been as effective as it used to be, in recent times. He also decried the number of jobs being lost by the country due to lack of adequate processing of raw materials in the country before export. About 85 percent of the total Cocoa production in Nigeria is exported as beans. He called for a policy on agriculture.
Going forward, the best bet for Nigeria’s economic future is agriculture. Solid minerals, sure, could suffice, but not at a time when prices of commodities are at their lowest levels in decades. Cocoa has proven an important crop for Nigeria in the past and can once again be a major revenue and foreign exchange source for the country.