Nigeria’s push to move beyond exporting raw agricultural commodities is facing a tariff barrier in the European Union (EU), where cocoa processors pay duties of 6.1 percent on cocoa paste and 4.2 percent on cocoa butter, while unprocessed cocoa beans enter duty-free.
The tariffs are adding to cost pressures facing Nigerian processors, who are already contending with high electricity costs, logistics bottlenecks and limited access to affordable financing.
Their competitors in Ghana and Côte d’Ivoire, however, enjoy duty-free access to the European market for the same semi-processed cocoa products under separate interim Economic Partnership Agreements (EPAs) with the EU, giving them a tariff advantage over Nigerian exporters.
Industry estimates suggest the difference could put Nigerian processors at a competitive disadvantage of as much as $200 per tonne ( N269,000 ).
Nigeria has not signed the regional EU-West Africa Economic Partnership Agreement, which seeks to establish a free trade arrangement between the two regions.
African peers like Ghana and Côte d’Ivoire have instead implemented separate interim agreements that grant their exporters duty-free and quota-free access to the European market.
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Data from the National Bureau of Statistics’ foreign trade report shows that Nigeria exported N69.2 billion worth of cocoa butter to Germany, the Netherlands, Estonia, France and Belgium in the first half of the year. However, the export earnings remain below the industry’s potential, given its installed processing capacity and the cost pressures facing local operators.
Gabriel Igechi, a political science lecturer at Edo State University, Iyamho, described Nigeria’s position on the trade agreement as an “economic nationalist position” in a paper published in the Review of African Political Economy.
That trade status now places the very processors the government wants to champion at a disadvantage, undermining its value-addition drive.
Felix Oladunjoye, chairman of the Cocoa Processors Association of Nigeria (COPAN), said the numbers no longer add up for Nigerian cocoa processors.
He said the import duties, combined with high electricity and logistics costs, made it difficult for local processors to compete with exporters from countries enjoying preferential access to the European market.
“The tariffs have left Nigerian value addition at a disadvantage to our competitors,” Oladunjoye said, noting that Nigeria still exports more than 80 percent of its cocoa in raw form.
This means processing margins, jobs and foreign exchange earnings are captured elsewhere, even as Abuja pushes for industrialisation.
Akin Laoye, executive director at FTN Cocoa Processors Plc, said the tariffs were eroding the competitiveness of Nigeria’s processing industry.
Laoye said operators were often left in the dark about government decisions. “We really don’t know who the government is consulting with,” he said.
Nigeria is the world’s fourth-largest cocoa producer, after Côte d’Ivoire, Ghana and Ecuador, with production of 315,000 tonnes in the 2022/23 cocoa season, according to the International Cocoa Organisation (ICCO).
The European Union is a major market for West African cocoa. Côte d’Ivoire, Nigeria, Ghana and Cameroon together account for more than 70 percent of EU imports of cocoa and cocoa products, according to the European Commission.
Nigeria’s policy mismatch
Nigeria is pushing for local processing while maintaining a trade arrangement that leaves its processed cocoa exports facing higher EU tariffs than those of competitors in Ghana and Côte d’Ivoire.
A proposed amendment to the Raw Materials Research and Development Council Act seeks to introduce a mandatory minimum of 30 percent local value addition to raw materials before export.
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The bill had passed the National Assembly and was transmitted to President Bola Tinubu for assent. However, following a presidential review, the House of Representatives on November 3 recalled and re-examined five clauses of the bill, sending them back to the Committee of the Whole for further legislative adjustments.
The proposed legislation is therefore not yet law.
Experts say introducing mandatory local processing requirements without addressing the trade barriers facing Nigerian manufacturers could expose the industry to further competitive pressures.
“The policy is working against itself,” Oladunjoye said. “We say we want to add value, but the trade status with the EU makes it cheaper to ship raw beans.”
The Federal Government has, however, said its objective is to encourage local processing rather than ban raw cocoa exports. In July, the Minister of Agriculture and Food Security, Abubakar Kyari, said raw cocoa exports would continue as the government worked to expand domestic processing capacity.
Nigeria exports more than 70 percent of its cocoa to the EU and the United States, according to the National Bureau of Statistics.
Several calls to the Federal Ministry of Industry, Trade and Investment for comments on why Nigeria has yet to sign the regional agreement went unanswered.
Capacity underused
Nigeria’s cocoa processing industry has a combined installed capacity of 250,000 tonnes, but only five factories remain functional, processing about 20,000 tonnes annually, according to industry data.
High energy costs, multiple taxation, indebtedness and a difficult operating environment have made it unattractive to run plants at scale. Farmers also prefer to sell their beans to merchants who offer higher prices than processors, further squeezing raw material supplies.
The result is that local factories, already constrained by high operating costs and limited access to raw materials, struggle to absorb the additional EU tariffs while remaining profitable enough to tap export demand for cocoa butter, paste and powder.
Josephine Okojie-Okeiyi is a journalist with over five years’ reporting experience. She writes on industry, agriculture, commodities, climate change, and environmental issues. She is fellow of Thomson Reuters Foundation and Bloomberg Media Initiative for Africa.
