Naira devaluation causes 17% rise in cocoa price in one month

Expectations of further devaluation of the nation’s currency has brought about N90,000 or 17 percent increase in the prices of a metric ton of cocoa in one month, BusinessDay investigations have shown.

The development is as a result of delay of sales by farmers to exporters on speculation that they would be able to get more money for their cocoa in the coming weeks, as the recent naira devaluation takes more effect.

Prices in the Southern cocoa belt currently range from N500,000 to N520,000 per metric ton, compared with N430,000 to N450,000 in October, as the main-crop harvest started, according to stakeholders in cocoa export business in Nigeria.

According to reports, most exporters are holding forward contracts entered into when a dollar exchanged for N160 so they can get more naira now that the dollar sells for more naira.

In a bid to salvage the disturbing macroeconomic indicators; dwindling reserves, FX volatility and impairing government revenue -as a consequence of falling oil prices, the Monetary Policy Committee MPC decided in its last meeting for the year to devalue the Naira by 8 percent to N168 from N155 per dollar. This has hit the country’s mainstay crude oil export.

“Price normally goes up at this period, It has to go up at this period because farmers are harvesting,” according to Odunayo Adeyemi, an expert in cocoa farming who spoke with BusinessDay in a phone interview. “If farmers buy and hoard, the price would definitely go up but in spite of devaluation, price of cocoa is determined by the international London Cocoa market,” Adeyemi said.

According to Adeyemi, all these speculations normally happen around this period but demand and supply will determine price.

Nigeria is the world’s fourth-largest cocoa producer, behind Ivory Coast, Ghana and Indonesia. March cocoa futures fell 0.4 percent to close at $2,861 per ton, according to data compiled by Bloomberg.

Nigeria is Africa’s biggest producer of oil, which accounts for 70 percent of government revenue and 95 percent of foreign-currency income.

Some exporters in Nigeria however say current local prices are not in line with international prices. The recent devaluation of the Naira by the monetary policy committee meeting last week have caused cocoa farmers to slow down harvest to sought more money for their crop as the country’s currency plunged. Only exporters with prior commitments to overseas buyers are continuing to purchase cocoa to sell.

Nigeria produced 350,000 tons of cocoa in the 2013-14 seasons, according to the Federal Ministry of Agricultural. Most of the country’s output is by farmers working on small plots.

JOSEPHINE OKOJIE