Nigeria's Chocolate Industry Valued Above $31 Million Amid Forex Crisis

Nigeria's chocolate industry is estimated to be valued at $31.1 million by the end of this year on the back of the rising cost of foreign exchange (FX), according to an analytical report by Euromonitor International.

The report showed that the high import cost for both raw materials and finished products is encouraging local production of chocolates, which would encourage more local players in the industry that used to be dominated by international players.

Since the rise of the COVID-19 pandemic, Africa’s largest economy, which depends heavily on oil proceeds, has been riddled with weak foreign inflows, resulting in a liquidity challenge in the country’s FX market.

Last year, the Central Bank of Nigeria (CBN) devalued the naira twice from N306/$ to N361/$, and then to N379/$, weakening the value of the naira against the dollar. More recently, the apex bank officially adopted the NAFEX rate, which is a market-determined rate. This has a serious effect on imported commodities.

According to data from the International Trade Centre, cocoa and cocoa preparations imports rose by 38.8 percent to $22.9 million in 2020 from $16.5 million in 2019.

Cocoa is an essential ingredient for the production of chocolates and Nigeria is among the top producers of the commodity. However, major challenges such as high cost of production, dearth of skilled labour, government regulations, high cost of raw materials, among others, have limited the growth of the industry.

Also, Nigeria’s large young population makes it an appealing market for chocolates, which are seen as an alternative to sugary confectioneries and sweet biscuits. However, chocolates are perceived to be expensive.

“Chocolate confectionery remains a niche in Nigeria, but a growing presence on the shelves of modern grocery retailers will help to boost its visibility, as local consumers seek out new sweet snacks,” Euromonitor International highlighted in the report.

Earlier this month, the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending Plc (NIRSAL), owned by the CBN, granted a N1.15billion credit guarantee in order to help Nigeria benefit from the over $67-billion-dollar global cocoa market.