Post by Trade facilitator on Sept 4, 2013 20:39:38 GMT 1
As the nation’s crude oil wealth begins to dwindle, Crusoe Osagie states that value addition to cocoa may be one among many great options for Nigeria’s migration towards a diversified economy
The older Nigerians endlessly look back at the great days of the cocoa boom. People go on and on about the funds from cocoa helping to build the famous Cocoa House in Ibadan.
As a robust source of foreign exchange, cocoa provided infrastructural development that still exists in the South West. In those days, Nigeria ranked high in the global cocoa sector and her cocoa beans were sought-after by foreign countries to satisfy their taste for cocoa-based products.
Tapping the Potential
However, in these times of seeking to diversify the nation’s economy, analysts ask if it is not time for Nigeria to promote the huge potentials that lie in the cocoa industry. One of the on-going debates in the sector is the attitude towards processing of cocoa into products for export as opposed to the mere export of raw beans.
Industry watchers believe that Nigeria’s bid to forge ahead is intrinsically linked to income and jobs from the non-oil sector i.e. agriculture, and manufacturing. In other words, the country needs to focus on value addition to her cash crops such as cocoa and agro-industrialisation. There is an economic imperative for adopting a change in policy; yet efforts by cocoa processors, for example, to build a strong agro-industrial base and export value added products and produce are being seriously jeopardised.
Resistance from Europe
Analysts also argue that Europe currently is doing its best to discourage value-added products from landing on its shores. It does this by placing huge taxes on cocoa products while allowing raw beans in with zero import duty.
In other words, it is protecting its labour market and economy. The European Union’s Economic Partnership Agreement (EPA) has been pointed to as the reason for Europe’s approach to value addition products from Nigeria. According to the EU website, EPA’s benefits include “Quota-free exports making West Africa a hub for global trade and investments; job creation, especially in value added products and services benefitting to free access to Europe and regional market; and less imports dependence through the strengthening of value chains and manufacturing opportunities.”
It noted that: “the conclusion of an EPA will be crucial in order to attain Nigeria’s ambition to become one of the 20 most developed countries by 2020.” Unfortunately, Nigeria’s cocoa processors do not enjoy the encouragement and protection against the massive export of raw cocoa beans as products exported to Europe are heavily taxed. The high tariffs levied for processed cocoa and low tariffs for raw beans are a clear indication of the stiff trade policies emanating from Europe, which are detrimental to Nigeria.
Wasted Opportunities
While Europe protects its own interests, Nigeria’s continuous poor support towards cocoa processing for export and local consumption means it is throwing away much-needed jobs and wealth creation to foreign lands. The trade barriers in consuming countries are clearly harming the efforts by local processors to be drivers of agro-industrial production, sustained employment and growth.
Apart from the disincentives from Europe, the cocoa sector faces several other challenges. For instance, the Export Expansion Grant (EEG) designed to help local manufacturers deal with high production cost ironically prevents them from accessing and competing effectively in the export market. Over time, the scheme has come in for some sharp criticism from manufacturers, over the delays in accessing funds for their operations.
In a statement issued earlier in the year to highlight the challenges faced by the cocoa processors, the umbrella organisation, Cocoa Processors Association of Nigeria (COPAN), noted that “Government should further give advantage to value addition sub-sector for increased foreign exchange earnings and employment creation by removing incentives in form of Export Grant to all exporters of raw agricultural commodities like cocoa beans without processing to semi and finished products.
“In addition, government should impose substantial export tax on all raw commodities exported as is done in other cocoa-producing counties such as Indonesia, Malaysia, Ghana, Cote d’Ivoire Coast and Cameroun; instead of rewarding the raw commodities exporters, at the expense of additional employment that could have been created in Nigeria, through value addition.”
Seeking Solutions
Speaking at a forum on the way forward, its Chairman, Mr. Dimeji Owofemi, noted that “raw cocoa beans export is increasing, as it is being highly rewarded by government who must also note that zero tax is imposed on it by European countries keeps their factories working at optimum capacity to sustain employment in their own countries.”
“The negative impact of this is that value addition to raw cocoa is decreasing because it is vulnerable to the massive export of raw cocoa beans, while the processed cocoa products are heavily taxed by the same European countries that are charging no tax, on raw cocoa beans. In other words, “European countries obviously want to discourage Nigeria from developing her value addition sector.”
Value-addition Benefits
Economists insist that none of the rich countries attained that position by exporting raw commodities. They posit that value-addition generates employment, creates jobs and on the whole keeps the economy rolling as small businesses generally regarded as the engines of an economy boost growth and economic development.
Nigeria stands to gain from activating a deliberate policy to make value-addition of its raw materials a key part of its economic policy. COPAN described it as a “double jeopardy” for Nigeria because Europe is subsidising its own factories and making Nigeria’s factories uncompetitive.
The association called on the federal government to cease what it calls “rewarding exporters of raw beans to the countries that are imposing taxes on value-added products from Nigeria”, adding that “Nigeria is the only cocoa-producing country rewarding the export of raw beans.”
If Europe and America have achieved great economic feats, what about Africa? All talk and visions about Nigeria becoming one of the top 20 economies will remain fanciful unless the government takes a second look at the issues and adopts a fresh approach.
Value of Cocoa
Cocoa remains Nigeria’s highest non-oil export with media reports revealing that the country realised $900 million from the export of cocoa. Nigeria’s Minister for Industry, Trade and Investment, Dr. Olusegun Aganga, acknowledges that: “Nigeria is the world’s 4th largest producer and exporter of cocoa. Paradoxically, over 90 per cent of the cocoa produced is exported.”
But Aganga agreed that value addition is the backbone of industrialisation. He is currently driving what he calls “an industrial revolution” and regards cocoa processing as a veritable channel to boost Nigeria’s industrialisation.
The federal government’s “industrial revolution” is receiving strong backing from one of the cocoa- producing states, Ogun. The State government during the just-concluded 3rd Roundtable Conference on Nigeria Cocoa Value Chain held in Abeokuta, called for Nigeria to “set forth an industrial skills training programme that is relevant to linkages between the cocoa processing industry and other sectors of the Nigerian economy”.
Speaking at the conference, the State’s Deputy Governor, Chief Segun Olusegun, added that: “Cocoa processing should be part of priority in Nigeria’s industrial development agenda; Nigeria must have a published industrial policy of strategy for local value addition in terms of local content or local processing of cocoa. Cocoa export and processing companies must continue to embark on forward integration and invest heavily in plant and machinery to add value to indigenous commodities.”
Policy Decisions
Certainly, if the Nigerian government is serious about becoming a world economic power by Year 2020, she must be prepared to take a few tough policies to put her on that path. For instance why can’t the same tax policies that apply to rice and cement, apply to cocoa? It is time for government to impose substantial export tax on all raw commodities export.
Nigeria must stop demoting her economy and in turn protect her national interests. She must stop exporting jobs overseas and safeguard employment and jobs for her youths.
Source: www.thisdaylive.com/articles/the-case-for-cocoa-value-addition-in-nigeria/157985/
The older Nigerians endlessly look back at the great days of the cocoa boom. People go on and on about the funds from cocoa helping to build the famous Cocoa House in Ibadan.
As a robust source of foreign exchange, cocoa provided infrastructural development that still exists in the South West. In those days, Nigeria ranked high in the global cocoa sector and her cocoa beans were sought-after by foreign countries to satisfy their taste for cocoa-based products.
Tapping the Potential
However, in these times of seeking to diversify the nation’s economy, analysts ask if it is not time for Nigeria to promote the huge potentials that lie in the cocoa industry. One of the on-going debates in the sector is the attitude towards processing of cocoa into products for export as opposed to the mere export of raw beans.
Industry watchers believe that Nigeria’s bid to forge ahead is intrinsically linked to income and jobs from the non-oil sector i.e. agriculture, and manufacturing. In other words, the country needs to focus on value addition to her cash crops such as cocoa and agro-industrialisation. There is an economic imperative for adopting a change in policy; yet efforts by cocoa processors, for example, to build a strong agro-industrial base and export value added products and produce are being seriously jeopardised.
Resistance from Europe
Analysts also argue that Europe currently is doing its best to discourage value-added products from landing on its shores. It does this by placing huge taxes on cocoa products while allowing raw beans in with zero import duty.
In other words, it is protecting its labour market and economy. The European Union’s Economic Partnership Agreement (EPA) has been pointed to as the reason for Europe’s approach to value addition products from Nigeria. According to the EU website, EPA’s benefits include “Quota-free exports making West Africa a hub for global trade and investments; job creation, especially in value added products and services benefitting to free access to Europe and regional market; and less imports dependence through the strengthening of value chains and manufacturing opportunities.”
It noted that: “the conclusion of an EPA will be crucial in order to attain Nigeria’s ambition to become one of the 20 most developed countries by 2020.” Unfortunately, Nigeria’s cocoa processors do not enjoy the encouragement and protection against the massive export of raw cocoa beans as products exported to Europe are heavily taxed. The high tariffs levied for processed cocoa and low tariffs for raw beans are a clear indication of the stiff trade policies emanating from Europe, which are detrimental to Nigeria.
Wasted Opportunities
While Europe protects its own interests, Nigeria’s continuous poor support towards cocoa processing for export and local consumption means it is throwing away much-needed jobs and wealth creation to foreign lands. The trade barriers in consuming countries are clearly harming the efforts by local processors to be drivers of agro-industrial production, sustained employment and growth.
Apart from the disincentives from Europe, the cocoa sector faces several other challenges. For instance, the Export Expansion Grant (EEG) designed to help local manufacturers deal with high production cost ironically prevents them from accessing and competing effectively in the export market. Over time, the scheme has come in for some sharp criticism from manufacturers, over the delays in accessing funds for their operations.
In a statement issued earlier in the year to highlight the challenges faced by the cocoa processors, the umbrella organisation, Cocoa Processors Association of Nigeria (COPAN), noted that “Government should further give advantage to value addition sub-sector for increased foreign exchange earnings and employment creation by removing incentives in form of Export Grant to all exporters of raw agricultural commodities like cocoa beans without processing to semi and finished products.
“In addition, government should impose substantial export tax on all raw commodities exported as is done in other cocoa-producing counties such as Indonesia, Malaysia, Ghana, Cote d’Ivoire Coast and Cameroun; instead of rewarding the raw commodities exporters, at the expense of additional employment that could have been created in Nigeria, through value addition.”
Seeking Solutions
Speaking at a forum on the way forward, its Chairman, Mr. Dimeji Owofemi, noted that “raw cocoa beans export is increasing, as it is being highly rewarded by government who must also note that zero tax is imposed on it by European countries keeps their factories working at optimum capacity to sustain employment in their own countries.”
“The negative impact of this is that value addition to raw cocoa is decreasing because it is vulnerable to the massive export of raw cocoa beans, while the processed cocoa products are heavily taxed by the same European countries that are charging no tax, on raw cocoa beans. In other words, “European countries obviously want to discourage Nigeria from developing her value addition sector.”
Value-addition Benefits
Economists insist that none of the rich countries attained that position by exporting raw commodities. They posit that value-addition generates employment, creates jobs and on the whole keeps the economy rolling as small businesses generally regarded as the engines of an economy boost growth and economic development.
Nigeria stands to gain from activating a deliberate policy to make value-addition of its raw materials a key part of its economic policy. COPAN described it as a “double jeopardy” for Nigeria because Europe is subsidising its own factories and making Nigeria’s factories uncompetitive.
The association called on the federal government to cease what it calls “rewarding exporters of raw beans to the countries that are imposing taxes on value-added products from Nigeria”, adding that “Nigeria is the only cocoa-producing country rewarding the export of raw beans.”
If Europe and America have achieved great economic feats, what about Africa? All talk and visions about Nigeria becoming one of the top 20 economies will remain fanciful unless the government takes a second look at the issues and adopts a fresh approach.
Value of Cocoa
Cocoa remains Nigeria’s highest non-oil export with media reports revealing that the country realised $900 million from the export of cocoa. Nigeria’s Minister for Industry, Trade and Investment, Dr. Olusegun Aganga, acknowledges that: “Nigeria is the world’s 4th largest producer and exporter of cocoa. Paradoxically, over 90 per cent of the cocoa produced is exported.”
But Aganga agreed that value addition is the backbone of industrialisation. He is currently driving what he calls “an industrial revolution” and regards cocoa processing as a veritable channel to boost Nigeria’s industrialisation.
The federal government’s “industrial revolution” is receiving strong backing from one of the cocoa- producing states, Ogun. The State government during the just-concluded 3rd Roundtable Conference on Nigeria Cocoa Value Chain held in Abeokuta, called for Nigeria to “set forth an industrial skills training programme that is relevant to linkages between the cocoa processing industry and other sectors of the Nigerian economy”.
Speaking at the conference, the State’s Deputy Governor, Chief Segun Olusegun, added that: “Cocoa processing should be part of priority in Nigeria’s industrial development agenda; Nigeria must have a published industrial policy of strategy for local value addition in terms of local content or local processing of cocoa. Cocoa export and processing companies must continue to embark on forward integration and invest heavily in plant and machinery to add value to indigenous commodities.”
Policy Decisions
Certainly, if the Nigerian government is serious about becoming a world economic power by Year 2020, she must be prepared to take a few tough policies to put her on that path. For instance why can’t the same tax policies that apply to rice and cement, apply to cocoa? It is time for government to impose substantial export tax on all raw commodities export.
Nigeria must stop demoting her economy and in turn protect her national interests. She must stop exporting jobs overseas and safeguard employment and jobs for her youths.
Source: www.thisdaylive.com/articles/the-case-for-cocoa-value-addition-in-nigeria/157985/
