Nigeria plans to join Africa’s Cocoa market’s OPEC

Women from a local cocoa farmers association called BLAYEYA spread cocoa beans to dry in Djangobo, Niable in eastern Ivory Coast, November 17, 2014. REUTERS/Thierry Gouegnon/File Photo

The cocoa market’s OPEC may be about to get bigger, with Nigeria being lined up to join the Living Income Differential system set up by top producers Ivory Coast and Ghana.

Ivory Coast and neighboring Ghana, which produce about 60% of the world’s cocoa, set up the LID system in 2019 to charge the $100 billion chocolate industry a premium to boost the income of some of the poorest growers. Bringing Nigeria on board could strengthen the hand of producers, whose efforts have been undercut by a pandemic surplus that lowered prices.

“Very soon we’re going to have Nigeria on board with the LID system and increasingly other countries are going to join,” Fuad Mohammed Abubakar, head of Ghana Cocoa Marketing Company UK Ltd., said in an interview.

The Nigerian Ministry of Agriculture will discuss the matter with Ghana’s Cocoa Board next month, a representative said on Thursday. Ajayi Olutobaba said the issue will be discussed with a view to ensuring Nigeria adopts the LID system.

Read: Cocoa’s OPEC Vows to Defend Premium to Improve Farmer Pay

The European Union plans to introduce legislation to force chocolate brands to guarantee their supply chains are free of deforestation risks. However, guaranteeing a fair wage for farmers hasn’t been part of the discussion and should be included in company audit trails, Abubakar said.

“The legislation is good because we do think companies should be responsible for these things, but how can you source ethical cocoa without paying ethical prices?” Abubakar said.

On average, cocoa farmers earn 6% of the price consumers pay for chocolate, according to U.K. campaign group Fairtrade Foundation.

Ghana is also exploring setting up alternative physical market platforms or exchanges in Dubai, Southeast Asia and domestically as a means to get a better price for beans.

This year’s crop in Ghana will be curbed by the dry weather earlier in the season and the country will struggle to achieve 75% to 80% of last year’s record 1.047 million-tons output, Abubakar said.

“This year, as a result of climate impact, we are seeing quite a difficult crop,” he said.