Efforts by the Governent to diversify the economy seems to be hitting a hard rock as stakeholders in one of the major export crops in Nigeria continue to experience huge losses and rising debts.
Cocoa processors in Nigeria have invested billions of naira in the cocoa value chain in response to the Federal Government’s call for value addition to the agricultural produce meant for export.
Instead of the desired returns on investment, they have however suffered huge losses and indebtedness as a result of the harsh operating environment in Nigeria.
A prominent cocoa processor and Managing Director, Ile Oluji Nigeria Limited, Mr Akin Olusuyi, was quoted as saying in a new report that “the total debt in the industry today is not less than N50bn.”
According to him, the current capacity utilisation in the industry is less than 20 per cent and the sector as a whole is losing about N720bn annually.
Another leading cocoa processor and the Managing Director, Multi-trex Integrated Foods Plc, Mr Dimeji Owofemi, said for them to underwrite debts owed to banks, the government must intervene in terms of facilitating long-term fixed asset refinancing loans at a single-digit interest rate.
A wholly Nigerian owned company consisting of two factories with installed capacity of 65,000 metric tonnes of cocoa per annum, processing equipment and machinery for manufacturing chocolate bars, drinks and others, Owofemi’s company reportedly owed Skye Bank N8.5bn. In 2011, the Asset Management Corporation of Nigeria bought over the loan facility.
Multi-trex’s case became complicated when the Central Bank of Nigeria barred banks from lending to companies indebted to AMCON above N5m. Following this, the firm became handicapped and unable to access working capital to produce and pay back the debt owed to AMCON.
In June 2015, the factory was shut. Over 300 workers were retrenched and its modern processing plant and equipment are currently rotting away and exposed to vandals.
“If they can write off the loans of people who borrowed to buy shares, why can’t write off our own? Underwrite the debts for existing factories by half because most of them are made up of interests,” he told our correspondent in a recent interview.
Although the facility has been under lock and key for four years, interest on the loan has been mounting, according to him.
“The loan was N9.1bn in December1, 2017; today, it has grown to N10bn. AMCON has to be realistic and know that an asset that is shut down cannot be earning interest for them. How can a shut factory accumulate N1bn debt in eight months?”
Owofemi disclosed that his firm was being owed N4bn from the Export Expansion Grant scheme of the Federal Government and suggested therefore that the firm’s debt be written off with the N4bn.
An Ogun State-based cocoa processor and Executive Director of FTN Cocoa Processors Plc, Mr Akin Laoye, said he owed banks N4bn after investing N5bn in the plant.
Production at his factory had been on and off due to paucity of funds and the local banks attempted to throw the firm into liquidation, so Laoye had to appeal to a foreign investor to buy into the business.
The latest financial statement of FTN Cocoa, a firm listed on the Nigerian Stock Exchange on February 29, 2008, showed that its loss after tax rose from N263.4bn in 2016 to N419.7bn in 2017.
The company was also reported to have recorded a drop in revenue from N842bn in 2016 to N23bn in 2017; and the export of cocoa from the firm dropped by 99 per cent from N508.2bn in 2016 to N1.9bn in 2017. It had a 94 per cent drop in local cocoa sales from N334bn in 2016 to N21bn in 2017. The company last paid dividend in 2017, according to reports.
The Nigerian Export Import Bank had established a N500bn export stimulation fund for exporters and Laoye is hoping to access it to continue production.
The cocoa processors regretted that Nigerian banks were unwilling to finance long-term projects.
They complained that the cocoa sector in Nigeria was too deregulated; while major cocoa producing countries such as Cote d’Ivoire and Ghana gave priority to their processors, Nigeria threw the sector open for all comers.
“That is why multinational companies come into the sector as they like and even sometimes put a price on our cocoa. Also, there are infrastructural challenges such as power and the recent bad roads leading to the ports. Things get bad before they are shipped and the banks don’t care about the situation, their interest continues to count on a monthly basis.
“If you are supposed to ship a consignment in one month and it is taking you three months, the banks will not care; they will keep charging interest every month and bleeding the investors,” one of the processors said.
The Chief Executive Officer, Plantation Industries Limited, a cocoa processing factory in Akure, Ondo State, Mr Kunle Ayoade, told our correspondent that despite the fact that operators were not making profits, they had to contend with paying fees to a countless number of regulatory agencies.
He said, “There are too many regulatory agencies charging several fees for the same service. Apart from National Agency for Food and Drug Administration and Control, Standards Organisation of Nigeria, Ministry of Labour and Productivity, state and federal produce inspection services, there is the Weights and Measures Board whose service costs us N500,000 annually. Last week, we paid N413,000 for two weight bridges. If we don’t pay, they will lock our doors because they always come with police.
“In addition to the government agencies, the government also has private consultants from the Ministry of Finance that collect 0.5 per cent of whatever sale we make for a service they call Nigerian Export Supervision Scheme.”
Ayoade who gave his debt profile as N3bn told our correspondent that he was contemplating shutting down due to the challenge of getting his products out of the country.
Among cocoa producing nations, Nigeria, which historically made its earnings from cocoa in the 1970s, ranks fourth with a production of 220,000 tonnes as of 2016/2017.
Cote d’ivoire is number one with 1,980 million tonnes per annum; followed by Ghana with about 950,000 tonnes; Cameroon comes third with 240,000 tonnes.
Also in recent years, Nigeria’s production has been fluctuating between 195,000 and 220,000 tonnes.
There had been a lot of promotion of the importance of the agriculture sector by the government and cocoa was chosen as one of the strategic crops to focus on as part of its economic diversification project.
The Director-General, Lagos Chamber of Commerce, Mr Muda Yusuf, noted that since the government had been championing the campaign for local content and emphasising value addition for the country’s exports, there was a need to rescue the critical sectors like cocoa and others.
He said, “The government has been talking about indigenous participation in manufacturing.
“The government has also been talking about backward integration and this is a very good example of an industry that is fully into backward integration.