Tons of Cocoa Stranded at Ports Due to Complicated CBN Paperwork

An attempt by the Central Bank of Nigeria (CBN) to monitor agriculture export so as to better ensure that exporters repatriate proceeds through it rather than seek better terms of exchange in the parallel market is having precisely the opposite effect to the intention to boost foreign exchange reserves. Delays in obtaining the paperwork are seeing tons of cocoa and cashew bits pile up at the ports. 

Currently, the fifth-largest cocoa producer in the world, Nigeria slipped into a recession in the third quarter, the second time since 2016.

Nearly 100,000 cocoa tons are stranded at Nigeria’s chaotic ports. An equal volume of different agricultural commodities is seated in warehouses nationwide waiting for the queue of export-bound produce to shorten. 

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Obtaining authorisation to clear a container for shipping now takes an average of 40 days rather than 7, following CBN’s demand for further documentation to facilitate export earnings return to the country.

The oil crash has led to a severe forex scarcity in Nigeria where oil accounts for one-tenth of the gross domestic product and nine-tenths of foreign exchange earnings as well as around 65 percent of the government’s revenue.

The dearth of hard currency is similarly widening the gulf between the official rate of exchange and that of the black market. At over 20%, the difference provides a strong incentive for exporters to divert dollar proceeds to informal channels rather than repatriate to Nigeria through the CBN.

Also Read: Dollar Shortage Poses Major Risks to Nigerian Banks – Fitch

The disruption in trade flows since October has triggered a loss of over half a trillion naira in non-oil revenue for exporters. A number of exporters face cash-flow troubles and loan defaults because of port congestion.

Yet, the 2020-2021 cocoa crop output in Nigeria is on track to climb past original projections by 27 percent to hit 270,000 tons.

Fallen output by chocolate producers around the world has worsened the plight of cocoa traders. Nigerian dealers are labouring to attract patronage from buyers desiring to enter into fresh forward contracts given that several factories have closed because of the pandemic.

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