This guide would give you a broad overview on the cocoa exporting business in Nigeria, and get international buyers online.
Cocoa is an important cash crop in Nigeria. It is the highest non-oil export in the country.
The cocoa market is estimated to hit 24.25 billion USD in 2024.
Cocoa business is still considered under explored, and there’s enough room for more business people to make good money. While Africa dominates the world in cocoa production with over 70%, Africa is missing in the wealth in cocoa value addition, with just less than 5 percent market share.
As a country in desperate need to diversify its economy, this is one business you can venture into knowing the country need you eventually.
So are you ready to get started?
Let’s delve right in…
Introduction on cocoa
Cocoa, also called cacao tree, is an evergreen plant popularly cultivated to harvest its edible and rich cocoa seeds.
The cocoa seed is the major ingredient used in the production of chocolate liquor, chocolate solids, chocolate butter, and chocolate.
Cacao is a member of the family of malvaceae with its origin from the tropical rainforest area of central and southern America.
Cacao tree usually takes 3-5 years to grow it’s seeds. At maturation, cocoa pods are plucked off the tree and broken to extract the cocoa seeds. Each cocoa seed(also called cocoa beans) comprise of a seed coat, a kernel, and a germ.
Favourable Conditions for Cultivating Cocoa
In cultivating cocoa tree, you need the following conditions in your favour:
Temperature and weather conditions
Cacao trees are favorably grown in regions having about 27°C in average annual temperature, and an Annual rainfall of 150 to 350 cm.
Protection from Strong Winds
Strong winds often blow off unripe pods, and this can lead to waste and low yields for the farmers. Hence it is important to put measures in place to curtail such occurrence. As a typical example, Hurricanes can also cause huge damage to cocoa trees as seen in the West Indies and Central America.
Good covering from direct sunlight
It is encouraged as good practice to protect the cocoa tree from direct sunlight as it can cause pores on the cocoa pots. Planting of other crops to provide good covering from sunlight is a good practice.
Varieties of cocoa tree
They are mainly known as the common cocoa as they are 95% of world production. The pods are short, yellow, smooth without warts, with shallow furrows. Their quality is not as good as Criollo. They are grown mainly in west Africa and Brazil. It is grown a lot in Africa.
Criollos are typically protruded, yellow or red in color, with deep furrows and big warts when they are ripe. They are mainly known as the fine or aromatic cocoa because of their very good cocoa quality, and are less than 1% of world production. They are grown mainly in Latin America.
They are a hybrid of the Forastero and the Criollo and considered a fairly good, fine flavour cocoa. They are approximately 5% of world production, and grown mainly in Trinidad, Venezuela, Papua New Guinea, Sri Lanka, East Timor, Java and Madagascar.
Some interesting things to know about cocoa
- Cocoa beans are rich in potassium, magnesium and iron.
- Very rich in food value, cocoa beans contains up to 20% protein, 40% carbohydrate, and 40% fat.
- Cocoa can prevent cancer and other heart , and blood related diseases as it contains theobromine, an alkaloid closely related to caffeine and phenols and flavenoids, antioxidants.
Cocoa in Nigeria
Agriculture was Nigeria’s main source of foreign exchange prior to independence. According to reports, 58.4% of the foreign exchange earnings from 1960 to 1970 was the export crop subsector of the agricultural sector.
Then came the discovery of oil in the 1970s which led to some drastic shift in the political and economic landscape of the country.
Oil became the main focus for foreign exchange, displacing agriculture, as evident in the sharp decline in output from 305,000, to 100,000MT, and Cocoa export contribution dropping to 5.3% from 1970-1985.
Although the 1986/87 cropping season saw output improved from previous lows to around 200,000MT due to Government intervention initiatives to revive the sector, the journey back to the top has been slow, maintaining an average of just 4% between 1980 and 2000. The country’s undying love story with oil has seen other sectors struggle over the years.
Nigeria is the third largest exporter of cocoa in Africa behind only Ghana and Cote’d’ivoire and the fifth in the world behind Cote’d’ivoire, Ghana, Indonesia, and Brazil, according to recent figures.
To run your farm here are some tips to help you:
- Make good arrangements with farmers who’d be on ground to monitor your farm on a regular basis. You can look for good incentives for them. The best is if your farm is closer to a village settlement.
- When getting your farm land, you want to look for areas you know wouldn’t be commercialized in the next 20-30 years.
- Weed 3-4 times a year.
- Always ensure carrying out best farming practices to achieve healthy yields.
- Take some time in educating yourself on the best practices, and always look to transfer those knowledge to the farmers working with you.
Cocoa harvest seasons in Nigeria
Harvest season for cocoa span from October to September.
October to February as the prevalent period for harvest, while from April/May to September, harvesting of smaller and mild crops are common.
Where to find cocoa in Nigeria
Ondo State produces 70% of cocoa in Nigeria, making it the highest producer in the country. Here is a list of cocoa producers in the country, in no particular order:
- Akwa Ibom
- Cross river
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 would typically start 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.
Challenges facing Cocoa smallholder farmers in Nigeria.
These are the major challenges facing Nigerian cocoa farmers:
- Lack of sufficient access to incentives and government support
- Difficult access to market; poor road channels leading to high cost of transporting farm produce from farm to market
- Increasing running cost of production
- Less favourable climatic conditions; Climatic conditions now are far less favourable to that in the 70s and 80s.
- Seasonality of cocoa farming means farmers do not make money during off seasons, and these periods can be challenging times for the farmers.
Challenges facing Cocoa exportation business in Nigeria.
- Volatility and unpredictability of foreign exchange.
- Dwindling number of smallholder farmers due to uninterested budding youth, and interest in other endeavours they feel is much more profitable.
- High interest rates, to get financial credits and loans
- Unstable political will.
- Difficult port and customs regulations
- Governing bodies who are key players in the value chain have over the years failed in providing adaptation and workable systems and policies to ensure ease of doing export business.
Top cocoa exporting countries in Africa
Top importers of cocoa in the world
- United Kingdom
Top cocoa importers in Europe
- 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
Opportunities in Cocoa Export Business
- Surging global demand cocoa and cocoa futures, In 2011, the trading volume of cocoa futures on the Intercontinental Exchange (ICE) was 4.95 million tons, exceeding production by 750,000 tons.
- In November 2011, global sales of chocolate confectionery crossed US$100 billion for the first time, with consumer demand for chocolate anticipated to continue increasing and possibly outstripping supply.
- Cocoa processing market is estimated at $200 billion.
Getting started with cocoa export business
Next we’ll look at the three steps to take to get started as a cocoa exporter
- Set up your business plan
- Promote your business
- Fulfilling your orders.
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?
- 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.
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.
The good part of this is most of these bodies are online, so you can start from there.
Start your business registration online by clicking on the following links:
CAC (Corporate Affairs Commission) – Start the registration of your business online. 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. Start here: https://pre.cac.gov.ng/register/new
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.
You can visit their official website here: https://nepc.gov.ng/ereg/exporter.
Or go straight to register your business with them here: https://nepc.gov.ng/get-started/e-registration/
Organization of Women in International Trade (OWIT) Nigeria
Awesome for woman 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. You can read more on them and become a member here: https://owitnigeria.org/join-us/
Before we move ahead, let’s try to do a rough sketch of what it’d cost you to setup your cocoa export business.
Land(1 hectare) – N4M
Warehouse & drying facility- N2M
Laptop/desktop computer- N200,000
Cocoa seedlings – N210,000
Farm clearing and preparation- N30,000
Planting and workmanship- N100,000
Website building – N100,000
Promotion cost – N200,000
Registrations – N50,000
Packaging – N500,000
Transportation – N3M
Total = N9.34M
Monthly running cost estimation
Internet subscription – N10,000
Webpage maintenance – N30,000
Promotion costs – N200,000
Calls and communications-N5000
Office space- N10,000
Miscellaneous – N10,000
Other costs to consider is for custom brokerage and freight forwarding. Their costs arent fixed as it depends on several factors. But ensure to include them as variable costs.
If you’ve already set the ground running; you have your farm, business plan, registrations, and everything we’ve talked about so far up until now, I’m sure all you want is to be bombarded with calls from buyers, placing orders, and business booming.
Promote your cocoa business Online
How do you get international buyers for your cocoa beans?
There are several ways. But we just cut to the chase and focus on our preferred way- the internet.
The internet is your fastest and most cost effective way to reach foreign buyers. It presents a mouth-watering prospect such that if gotten right, you can build an awesome, and well fulfilling business for yourself.
Some Facts about the internet
- More than 60% of the world’s population use the internet, that amounts to about 4.72billion people around the world [datareportal].
- According to Netcraft, there are over 1 billion active sites on the web today and it’s number keeps changing every second.[Netcraft]
- According to MOZ, Everyday, 77 percent of people use google at least three times to search for things online.
- 54 percent of social users research products using social media [globalwebindex].
You can get your buyers online because people are using the internet to search for things to buy. The internet is one huge community, get plugged in.
What’s so beautiful is you don’t need to be a software guru to own and manage a website. You can outsource it.
Outsourcing is a fantastic way to leverage other people’s skills especially on something you’re not so good at, while you focus on other things.
To get buyers on the internet, you’d need an online presence. Your online presence just asks the question how easy and often are you found online? So to get started, here’s what you must do:
- Build a website/online store
- Manage the website
- Promote your website
What you need to build and run a website
- Domain name
Website vs online store
Think of your website like a well prepared business card, only that it has much more details in it, and your online store is a brochure that contains your products and price listing.
If for you, the internet is a vital avenue to getting buyers then you might be doing yourself a disservice by choosing to use one over the other.
It’s all about online presence. Let your business be out there as possible, given it’s within your budget.
|You own the website||You’re renting a website within another person’s/company’s website|
|It can take lots of time and effort for buyers to see your products on google search.||It takes little time to get customers to see your products on google search as your store is within a bigger website that’s well ranked on google search engine.|
|It would cost you lots of time and effort to build your brand||It can help you build your brand faster online|
|If done expertly, you might spend little and get free buyers and customers||It can be capital intensive, however if done properly, is worth every penny spent.|
In promoting your website and business online, there are two methods:
You can get buyers without having to spend any money, this method can take time but is really worth the while if done properly. The best approach to this is giving something of value, and getting traffic as reward. You’d be focusing on ranking for relevant keywords that lead people to clicking your link to your website or web store. You then sell your products to the visitors of your website.
But it’s not so easy, because there are billions of websites out there competing for your prospects’ attention, hence the need to tilt the odds in your favour by ranking at least on the first page of searches relevant to your business.
Remember, the aim is to make the first page of google search.
According to this survey conducted by MOZ, 75 percent respondents preferred to click one of the top two results. They’d prefer to scan through the first search page to find relevant answers to their queries, or link to other results from page one.
Another interesting findings from the survey was respondents largely preferred to click on organic search results than click on advertisement.
This is another route to making first page on relevant keywords on search engines. Advertisers bid on keywords and they pay per click once browsers get to your website through your link from the search page.
This requires you to have a good budget, and expertise to get good results. Results can be instant if done expertly.
you can advertise on:
Search engines like Google, and Yahoo have Google ads, and Yahoo ads. Advertisers bid for keywords, they pay per click once there’s a click on your link to your website or online store.
Other people’s website
You, or advertisers like Google and Yahoo can pay owners of particular websites to advertise on their platform. Owners of websites are then paid each time there’s a view on your ads displayed on that website. This is called pay per impression or pay per view.
Social media helps you connect with people on a personal level. You can really make a good impression of your business by having a good social media presence that connects with the people.
Take clean pictures, engage in quality conversations on relevant topics, showcase your expertise as a thought leader in your business.
Facts about social media
There’s been a staggering number of social media users in the world. Reports show there are over 3.5 billion active users.[emarsys, 2019]
Statistics show that one person spends 3 hours on average on social media everyday.
Your task is to maintain steady flow of buyers while also building a brand people can trust through good farming practices and quality online presence.
- Make sure you understand the nitty-gritty of running an online ads campaign, if you don’t, hire someone or outsource professionals to run for you.
- In the case of advertising with a particular website, make sure you do your findings on the website to ensure their kind of visitors are the kind who can buy your product.
- Your website should contain the following:
- Company name
- Vision and mission statements and a little bit about you. Eg when it was founded, your partners, your present customers, etc.
- Description of your business values
- Your products and production capacity
- Production description
- Email and contact information
Order fulfillment and getting paid
To export your goods, most exporters make use of freight forwarders, and custom brokers as they make lives easy for them. These are specialists in moving goods to different places in the world, and also handling of custom related issues.
- Ensure your cocoa is exported in well ventilated cool, and dry conditions to ensure the beans can arrive at buyer’s destination without blemish.
- Never agree on any agreements until you’ve agreed on payment method
- Depending on your negotiation skills, your buyer can bear part of the shipping cost. Of course this would only work if there’s the element of trust in the equation.
- If the relationship is not strong enough, buyers would most likely prefer a POD (payment on delivery) arrangement. If that be the case, it’s not a bad idea to request the buyer make down payment to show they’re serious about doing business with you.
- In finding a freight forwarder, you should look out for those with good experience in shipping cocoa to your buyer’s location.
- In your agreement with your buyer, ensure pricing is factored in. In Nigeria, the futures commodity exchange is still a concept the government is looking to support exportation in the country. Futures contracts can help buyers and sellers mitigate risk that occurs due to currency fluctuation. So you can agree with your buyer to peg your commodity price based on current global price such that if it changes in the future, you don’t incur loss.
- Know your rights as an exporter to any country. It’s possible some of these foreign buyers can take you for a ride if you don’t know what’s within your rights as an exporter to their country, issues like what happens if your buyer decides to cancel their order last minute? Surely you shouldn’t bear the loss for that.
You can visit the NEPC guide to get more information on logistics and freight https://nepc.gov.ng/get-started/logistics-freights/
Now that we’ve come to the end of this guide, we know not everything on this post can be assimilate once, so you can bookmark this and come back to it in the future. Feel free to drop your questions and comments on this topic.