How N50bn Debt Chased Six Cocoa Processors Out Of Business

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Nigeria’s cocoa processing industry is facing some daunting challenges due to lip service being paid to the sector by successive governments. Part of these challenges is funding as N50 billion debt is now frustrating six local cocoa processors out of business.

Cocoa remains one of the highest foreign earners outside oil, but several indigenous processors in the country are groaning under the weight of debt arising from high interest rates, which hinder them from operating at full capacity. This has resulted in the country losing billions of dollars in foreign exchange.
Daily Sun learnt that as at today, only two firms owned by expatriates out of eight cocoa processing companies in Nigeria, are in business, which means that no indigenous processor is functioning in the country at the moment.

Stakeholders in the industry say that the debt incurred by the six local cocoa processors was from loans they took at 25 per cent, considered too high for operators in the industry, coupled with that fact that the incentives given to them to finance part of the deficit not forthcoming having stopped for three years now.

Key industry players said there is need for government to do something urgently by creating special intervention fund before the total collapse of the industry, as it is already resulting to loss of jobs across the country.
The Chairman of Cocoa Processors Association of Nigeria (COPAN), Akin Olusuyi, who spoke to Daily Sun, said the the processing sector of the cocoa economy has all through the years been facing neglect, adding that due attention has never been paid to this vital link in the cocoa value chain in the history of the commodity in Nigeria.

Speaking on the pains the industry has had to bear, he said there have not been any clear cut policy direction on what the government intends to do towards industrializing agriculture, especially the cocoa value chain.

According to him, the debt the industry incurred was as a result of harsh operating environment in the country and inability to secure loans at single digit interest rate. He added that the interest on the money local processors borrowed is now being compounded by the banks at 25 per cent, which is a default rate that applies to each of the facilities.

He lamented: “We have a total of eight cocoa processing companies in the country but only two are operating right now. Unfortunately, these two are owned by foreigners. So as we speak, there are no local cocoa processing facilities that are functioning. More so, the total installed capacity of cocoa processing plants in the country is around 270,000 metric tonnes but cumulatively, the industry is presently operating below 15 per cent capacity.”

Meanwhile, Executive Director, FTN Cocoa Processors Plc, Akin Laoye, said the average borrowing cost to any cocoa processor by any bank in Nigeria is 25 per cent interest rate, when their counterparts in Ivory Coast and Ghana could get loan at single digit, asking how the local processors could compete.
He hinted that local cocoa processors have not been able to access the Export Expansion Grant (EEG) that was designed to cushion structural misalignment in the economy since 2013 even when approval was given by NEXIM last year.

Laoye lamented that, “there is a lot of lip service paid to policy, there is a lot of somersault from the side of the Central Bank of Nigeria (CBN) because it has been very inconsistent in the last one year. Government should also be serious because we have lots of examples of countries that are serious with their cocoa economy. Examples are Ivory Cost, Ghana and Indonesia; these are countries whose trees are yielding to processing because they know that processing creates jobs.

“A typical trader who exports 30,000 tonnes of cocoa will need about 10 people in his trade but anybody that will process 30,000 tonnes, there is no way he will employ less than a thousand people directly and indirectly because those graduates in Engineering, Microbiology and so on, will have immediate places to work.”
On his part, the COPAN Chairman, who is also the Managing Director/CEO of Cocoa Products (Ile-Oluji) Limited, Olusuyi, said that agriculture has remained at rudimentary stage, which makes active players that take cocoa from farmers not to add any value by processing the commodity because government has failed to give a clear policy direction.

Said he: “We are looking for a government that will listen, that will come out with a policy targeted at developing our economy. The economy of this nation can only be developed through agriculture and the factor of development in agriculture is through industrialising agriculture by encouraging value addition and local consumption. For every tonne of cocoa exported in this country, at least you are exporting two jobs.”


 

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