Efforts by the Central Bank of Nigeria (CBN) to claw back some of the foreign-exchange earnings lost to falling oil prices are causing delays in exports ranging from cocoa beans to cashew nuts, and adding to a problem that the apex bank sought to address in the first place.
Nigeria is the world’s fifth-biggest producer of cocoa beans, a key ingredient in chocolate. As Africa’s largest economy, it also fell into a recession last quarter.
About 100,000 tons of cocoa beans are trapped at the ports and another 100,000 tons of a variety of agricultural commodities are in warehouses around the country,
Pius Ayodele, president of Cocoa Exporters Association of Nigeria, said. It now takes an average of 40 days, instead of seven, to get approvals to clear a container for shipping.
That’s after the Central Bank started insisting on additional documentation to ensure export proceeds are returned to the country. The oil-price plunge has worsened dollar shortages in Africa’s largest producer of fossil fuel. While crude contributes less than 10 per cent to Nigeria’s gross domestic product, it accounts for about 90 per cent of foreign-exchange earnings and half of government revenue.
The shortage of hard currency is also adding to the gap between the official exchange rate and that on the parallel market. That spread, now more than 20 per cent, has created an incentive for exporters to divert dollar proceeds to unofficial channels.
The slowdown in trade flows since October has caused a loss exceeding N500 billion ($1.3 billion) in non-oil revenue for exporters, according to Tola Faseru, president of the National Cashew Association of Nigeria. Some traders have cash-flow problems and default on loans due to the gridlock at ports, the exporters association’s Ayodele said.
And while it’s a struggle to get shipments out of the country, the 2020-21 cocoa crop in world’s fifth-largest producer of the chocolate ingredient could exceed initial estimates by as much as 27 per cent to reach 270,000 tons. Reduced production by global chocolate manufacturers adds to their problems.
Nigerian cocoa sellers are struggling to find buyers willing to enter into new forward contracts because many factories have shut operations because of the pandemic, said Mufutau Abolarinwa, president of the Cocoa Association of Nigeria. International buyers are complaining of heavy stockpiles of unsold beans, he said.