Plantation Industries Limited Office in Akure, Ondo State

Nigeria, already hit by low oil prices, faces a threat to its cocoa sector with industry officials saying its few remaining grinders could close.

The rise in the cost of raw beans coupled with a sharp depreciation in the naira currency made it unattractive for them to tap export demand for butter, grinders say.

The plants face the risk of permanent closures, which would lay off workers and affect creditors unless the central bank makes it easier for them to source dollars, analysts say.

Cocoa cake, one of the products of the Plantation Industries

Taiwo Ayoade, general manager at Plantation Industries Ltd in Ondo state, Nigeria’s largest cocoa-producing state, said his 25,000 tonnes processor had scaled down operations by half and was considering shutting down in another two to three weeks.

“There are three factories in Akure town but the only one operating now is ours which is doing 50 percent. If it continues this way in the next two to three weeks we may have to close down,” Ayoade told Reuters.

He added that two others in Akure including Olam closed down two months ago as the cost of hold stocks surged with rising bean prices and the weaker currency. Olam International was not available to comment.

The Akure grinder is one of around only three now partially operating in Nigeria processing less than 20,000 tonnes a year, down from 18 crushing over 200,000 tonnes when the sector was deregulated nearly three decades ago. Nigeria is still the world’s fourth largest cocoa producer.

Africa’s biggest economy is working on agricultural commodities, including cocoa, to help plug shortfalls from oil revenues.

DEVALUED CURRENCY

London cocoa futures hit their highest level since March 2011 on Monday, with London March at 2,327 pounds per tonne. New York March cocoa hit their highest since March 2011 at $3,429 per tonne.

In Nigeria, farmgate price has risen to an all-time high of between 750,000 to 780,000 naira per tonne, compared with 520,000 naira a year ago, thanks to a weaker naira, said Akin Olusuyi, managing director of Cocoa Products (Ile-Oluji) Limited.

Processors are also facing dollar shortages as grinders have to source hard currency from the black market to pay for beans while proceeds from exports are received through the official market, which does not compensate for the weaker naira, Olusuyi said.

The Central Bank of Nigeria  has focused on curbing access to dollars for importers of some goods, to conserve foreign reserves, after a plunge in oil prices forced it to devalue the naira.

The bulk of processed cocoa is exported to Asia and Europe with only a small portion consumed at home.

Scores of firms have closed down citing currency control, poor infrastructure, erratic power supply, excessive bureaucracy and multiple taxation among factors making business uncompetitive.

Cocoa analyst Robo Adhuse said the high bean price has pushed working capital needs higher, meaning that grinders can no longer store beans, hurting growers.

*Reuters