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Akufo-Addo says Nigeria, Cameroon membership of cocoa pricing floor needed
Ghana and Côte d’Ivoire need to get Nigeria and Cameroon on board their minimum cocoa price agreement, Ghanaian President Nana Akufo-Addo said at the Africa Investment Forum in Johannesburg.
“Structural issues have to be addressed first,” Akufo-Addo said, giving Nigeria’s lack of a cocoa marketing board as an example. “But such an association has to be the way forward.”
Akufo-Addo spoke at the signing of a $600m syndicated loan to the Ghana cocoa board COCOBOD, arranged by the African Development Bank and underwritten by Credit Suisse and the Industrial and Commercial Bank of China.
- The loan is intended to finance warehouses and support processing.
Nigeria and Cameroon each account for about 10% of the world’s cocoa production. Ghana and Côte d’Ivoire together produce about 65% of the world’s cocoa but get only about $6bn each year from the $100bn global chocolate industry.
- “That’s an arithmetic that can not continue,” Akufo-Addo said. The exporting of raw cocoa has been the main cause of the low returns received by Ghana’s farmers, he said.
In June, Ghana and Côte d’Ivoire, which together produce about 65% of the world’s cocoa, agreed a price floor of $2,600 per tonne of cocoa produced.
- Then in August, Ghana said that it will increase cocoa prices paid to farmers by 5.2%, the first increase in four years.
- In September, COCOBOD concluded a $1.3 billion syndicated loan with a consortium of 24 banks.
Lack of cooperation
According to analysts at The Economist Intelligence Unit (EIU) in London, previous efforts to introduce minimum sale prices have failed on the back of weak collaboration between countries.
It would currently be difficult for Côte d’Ivoire and Ghana to withhold cocoa from the market for any length of time to enforce minimum prices since cold storage and warehouse facilities are insufficient, the EIU says.
- The EIU believes that an agreement between the Côte d’Ivoire and Ghana to fix a minimum price of US$2,600/tonne for 2020/21 crop sales will be difficult to implement.
- Benedict Craven, the EIU’s principal economist for the Middle East and Africa, says that the re-establishment of marketing boards in Nigeria would make the idea of a west African cocoa cartel more feasible. But there’s no way it can be done for the 2020-21 marketing season, he says.
Bottom Line: A clear signal from Nigeria on marketing boards would give new momentum to west African efforts to enforce minimum cocoa prices.