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Nigeria's strategic push to transition from a raw commodity exporter to a processed goods hub is hitting a significant roadblock in the form of European Union (EU) tariff barriers. Cocoa processors in the country are currently subjected to import duties of 6.1 percent on cocoa paste and 4.2 percent on cocoa butter, whereas raw, unprocessed cocoa beans enjoy duty-free entry into the EU. These tariffs are intensifying the operational pressures on Nigerian processors, who are already grappling with exorbitant electricity costs, logistical inefficiencies, and a lack of affordable credit.
While Nigeria faces these hurdles, its primary regional competitors, Ghana and Côte d'Ivoire, benefit from duty-free access to the European market for the same semi-processed products under separate interim Economic Partnership Agreements (EPAs). Industry analysts estimate that this tariff disparity places Nigerian exporters at a competitive disadvantage of approximately $200 per tonne (N269,000). Nigeria has refrained from signing the regional EU-West Africa EPA, a move intended to foster a free trade zone, opting instead for what some experts term an 'economic nationalist position'.
According to data from the National Bureau of Statistics, Nigeria exported N69.2 billion worth of cocoa butter to key European destinations including Germany, the Netherlands, and Belgium in the first half of the year. However, these figures remain well below the industry's true potential. Felix Oladunjoye, Chairman of the Cocoa Processors Association of Nigeria (COPAN), emphasized that the current economic landscape makes local processing increasingly unviable. He noted that the combination of import duties and domestic overheads has forced the country to continue exporting over 80 percent of its cocoa in raw form, effectively exporting jobs and processing margins to foreign nations.
Akin Laoye, Executive Director at FTN Cocoa Processors Plc, echoed these concerns, stating that the tariffs are systematically eroding the industry's competitiveness. Despite being the world's fourth-largest producer with an output of 315,000 tonnes in the 2022/23 season, Nigeria's processing sector is underutilized. Of a total installed capacity of 250,000 tonnes, only five factories remain functional, processing a mere 20,000 tonnes annually. High energy costs, multiple taxation, and the preference of farmers to sell to raw bean merchants over local processors further complicate the situation.
The Nigerian government is attempting to address this through legislative means, with a proposed bill requiring a mandatory 30 percent local value addition before raw materials can be exported. However, the bill is still undergoing legislative adjustments following a presidential review. Experts warn that mandating local processing without resolving external trade barriers could further strain the industry. For now, the Federal Government, through Minister of Agriculture Abubakar Kyari, maintains that raw exports will continue as they work toward expanding domestic capacity, even as the EU continues to absorb over 70 percent of Nigeria's cocoa output.
Source: Business News Nigeria