Bilateral cooperation between West African neighbours, Cote d’Ivoire and Ghana, introduced a new cocoa pricing mechanism in 2019 targeting a floor price of $2600 per tonne.
Chocolate companies and cocoa traders accepted the proposal aimed at helping improve incomes for smallholder cocoa farmers.
The mechanism hinges fundamentally on the introduction of a Living Income Differential (LID) to tackle extreme poverty among farmers by adding $400 per tonne to the market price of cocoa from the two countries.
With the LID, cocoa farmers would earn a minimum of 70% of the $2600-floor price marking a significant step in the journey to achieving decent living incomes for cocoa growers, who receive only 3% of the retail price of a bar of chocolate and live on a wage of less than $1 a day.
The top two cocoa producer nations have since moved to legally institutionalise their cocoa sector cooperation, establishing Cote d’Ivoire – Ghana Cocoa Initiative (CIGHCI) to advance their interests.
Last August, at the official launch of the organisation in the Ghanaian capital, Accra, Ghana Cocoa Board’s chief executive Joseph Boahen Aidoo hinted at a scramble by other African countries to join their ranks but fell short of naming any.
Nigeria’s bid for LID
On Thursday, May 19 2022, a 5-member Nigeria government delegation visiting Ghana Cocoa Board announced the country’s desire to join the “LID bloc.”
With this formal declaration, Nigeria becomes the first country to launch a formal campaign to sign onto the charter establishing the pan-African cocoa organisation.
Dr Ernest Umakhihe, Nigeria’s Permanent Secretary for the Federal Ministry of Agriculture and Rural Development disclosed that the Cocoa Farmers Association of Nigeria (CFAN)… “seeks to improve the livelihood of their farmers through Living Income Differential of $400/ton of cocoa beans sold.”
Ghana and Cote d’Ivoire are benefiting from the LID “while Nigerian cocoa farmers are at a disadvantage of this benefit”, Dr Umakhike emphasised in a speech read on his behalf by Engr. Abdullahi G. Abubakar.
“Nigeria being lined up to join the LID system will also guarantee that the premium charged in the $100 billion chocolate industry will help in boosting the income of the smallholder cocoa farmers,” he added.
Engr. Abubakar, a Director of the Federal Ministry of Agriculture and leader of the Nigerian government delegation explained the visit was to “gain insight into the operations of the LID.”
African Cocoa Organisation in the offing
Cocoa is said to be the highest non-oil contributor to Nigeria’s gross domestic product (GDP) with the country currently ranking number four among the top producers with 340,000-tonne annual output.
Nigeria’s liberalised and unregulated cocoa sector, the delegation noted, was depriving smallholder cocoa farmers of the appropriate income, aside from losing out on the Living Income Differential (LID).
But Africa’s biggest economy reckons that the status quo can only be remedied by joining hands with Ghana and Cote d’Ivoire in pushing the agenda for a favourable pricing mechanism for African cocoa producers.
Engr. Abubakar opined that the 2-nation cocoa organisation “if fully implemented in the region can be compared to the Organisation of Petroleum Exporting Countries (OPEC) where prices of cocoa will be regulated.”
“More or less it’s like an ICCO, but this one is a regional African Cocoa organisation that has been formed. This one, no importing country, this is purely exporting countries and Ghana and Cote d’Ivoire we form the nucleus of this new organisation,” Boahen Aidoo, the Cocobod Chief, seconded the Nigerian position.
He practically opened an invitation to all cocoa-growing African countries to join the organisation, assuring that all structures have been put in place for a formidable institution.
“The size of the bird is actually determined by the number of feathers. So the more the feathers the bigger the size of the bird, therefore, if we can get more members to shore this organisation then we become bigger and stronger,” Joseph Boahen Aidoo appealed.
He believed it is high time African cocoa producers had a common front just as Big Chocolate has a united front in the World Cocoa Foundation.
“And the top 100 manufacturing companies are all there. Literally, they dictate price and everything. And so it cannot be the case that we the producers are not together especially here in Africa,” the Ghana cocoa boss said.
Ghana and Cote d’Ivoire together account for over 60% of the global cocoa beans supply but receive a paltry 6% of the $130 billion industry revenue.
With Nigeria and Cameroon joining the LID bloc, the organisation is expected to control over 75% of the cocoa beans market, creating an African economic force that demands a seat at the price determination table.
Admission criteria
With the warm embrace accorded Nigeria, the founding parties of the pan-African cocoa organisation – Cote d’Ivoire – Ghana Cocoa Initiative – have signalled clearly their readiness to admit new members into their ranks.
Would-be members of the bloc must, however, meet a number of conditions, namely to demonstrate state oversight of the cocoa production value chain as well as to have their national legislative assembly ratify the organisation’s Charter.
This is to ensure the country’s commitment to comply with the organisation’s founding principles of keeping the interest of the smallholder cocoa farmers at the heart of its activities.
It is upon successful admission into the organisation that the country can apply the $400-per-tonne LID to its pricing mechanism solely for the benefit of the cocoa farmer.