MKM227 Postgraduate Dissertation

Student Number…U1325911…………………………

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 Supervisor Comments:

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interpretation procedures, identification of 2nd marker Comments:
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Organisation, presentation and
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2nd Marker General Comments:

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[A REVIEW ON THE IMPACT OF GLOBLISATION ON THE COCOA INDUSTRY
IN NIGERIA]

A dissertation submitted in partial fulfilment of the requirements of the Royal Docks Business
School, University of East London for the degree of [M.SC INTERNATIONAL BUSINESS
MANAGEMENT]

[September 2014]

[14,400]

I declare that no material contained in the thesis has been used in any other submission for
an academic award

Student Number: ___U1325911_________ Date: __04/09/2014_____

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Dissertation Details

Field Name Details to complete

Title of thesis A REVIEW ON THE IMPACT OF

GLOBLISATION ON THE COCOA
Full title, including any subtitle
INDUSTRY IN NIGERIA

Author

Separate the surname (family name) from ANYANSO HELEN OKORO

the forenames, given names or initials
with a comma, e.g. Smith, Andrew J.

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Format as for author. DR STEFAN LUTZ

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Name of school where you were based UNIVERSITY OF EAST LONDON

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E.g. MA, MSc, MRes, PGDip MSc

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The title of the course e.g. MKM 227 POSTGRADUATE DISSERTATION

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Name: ANYANSO HELEN OKORO

Signature: .........HOA................................. Date: ......04/09/2014......................

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ACKNOWLEDGMENTS

First of all I will like to thank God for his grace and seeing me through my
studies. Secondly I will thank my supervisor Dr Stefan Lutz for his guidance
and quick response to emails and directions to see to the end of this study. I
will also like to thank my family, my mum, my sisters and brothers for their
support and the Udechukwu’s family for being my family here in London. I
love you guys so much and you mean a lot to me. Finally, I will like to thank
my friends and loved ones. Thank you all for believing in me and I hope to
bring out the best in myself. I am so thankful.

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ABSTRACT

PURPOSE OF STUDY: Globalisation in its current form is seen in developed

countries as a certain positive effect for the development of developing
nations. However, these viewpoints on the positive impact of globalisation
on under developed countries have also been argued. The Nigerian economy
has so much dependency on imports and oil revenue, the country makes so
much profit from their Agricultural sector and oil, yet it’s still suffering from
setbacks. Therefore in order to find out the major reasons for its setbacks
despite the fact that globalisation it’s supposed to contribute immensely in
the nation as a whole, the cocoa sector has been chosen to review the
benefits on its industry. The cocoa sector was chosen because it involves
international trading and globalisation it’s supposed to have a direct impact
on the development of this sector.
METHODOLOGY AND APPROACH: Due to the dependency of this report on
secondary data, the data were obtained using reliable sources of information
such as: Government statistics reports, statistics reports from industry
associations and statistics reports from intergovernmental organizations,
Annual company reports and company filings, School Business databases,
Business journals, Business newsletters, articles and books. Therefore, my
methodology is essentially a review and synthesis of other literature and
secondary data.
RESULTS: Findings from this research study proved globalization to rub off
on the decision makings to improve the cocoa sector. These decisions are
however not seen as portrayed; therefore globalization cannot be given full
credit to have a major impact on the Nigeria cocoa sector because of the
setbacks affecting the development of the industry. There is a need for
adequate infrastructure, well-being of the farmers and price stability of the
produce for globalization to be fully accredited as a major impact in this
sector.
ORIGINALITY: A review of new evidence together with older studies was
analysed for the conclusion and recommendations. Even though
globalisation is regularly seen a positive impact on under developed

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countries. From my findings it will be seen that the case of Nigeria has been
exceptional to benefit from its influence and support viewpoints on this
theory. However, if there will be a stable government and less corruption,
Nigeria as a country will to a large extent benefit from globalisation due to
presence of numerous natural resources.

KEYWORDS: Globalisation, Cocoa, Nigeria.

GLOSSARY

CAN Cocoa Association of Nigeria

CBN Central Bank of Nigeria

CCN Cocoa Corporation of Nigeria

CET Common External Tariff Routine

CGES Cocoa Growth Enhancement Scheme

CIA Central Intelligence Agency

CRIN Cocoa Research Institute of Nigeria

CTA Coco Transformation Agenda

ECOWAS Economic Community of West African States

EEG Expert Expansion Grant

EPA Economic Partnership Agreement

FAO Food and Agricultural Organization

FGN Federal Government of Nigeria

FMSP Federal Market Stabilization Programme

FQC Fertilizer Quality Control

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GDP Gross Domestic Product

ICCO International Cocoa Organization

IITA International Institute of Tropical Agriculture

IMF International Monetary Fund

NACBRAG National Centre for Genetic Resources and Biotechnology

NAIP National Investment Plan

NCDC National Cocoa Development Committee

NCDP National Cocoa Development Programme

NCMB Nigeria Cocoa Marketing Board

NEPC Nigeria Export Promotion Council

NIRSAL Nigerian Incentive Based Risk for Sharing Agriculture for

Lending

NSPFS National Special Programme for Food Security

OFDP Organic Fertilizer Development Programme

PPP Public Private Partnership

PTA Presidential Transformation Agenda

SAP Structural Adjustment Programme

UNCTAD United Nations Conference on Trade and Development

USDA United States Department of Agriculture

WB World Bank

WTO World Trade Organisation

WITS World Integrated Trade Solutions

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 TABLE OF CONTENTS

ACKNOWLEDEMENTS ………………………………………………………….. 9

ABSRACT …………………………………………………………………….…….. 10

GLOSSARY ………………………………………………………….………….… 11

TABLE OF CONTENTS …………………………………………………………… 13

1.0 INTRODUCTION ………………………................................................ 15

1.1 Research Question……………………………………………………………… 16

1.2 Research Issue ………………………………………………………...………... 16

1.3 Research Purpose ………………………………………………..…………… 17

1.4 Limitations of study …………………………………………………………. 17

1.5 Target Group …………………………………………………….…… …….. 17

1.6 Disposition........................................................................................ 18

2.0 RESEARCH ……………………………………….…………. 18

2.1 Data Collection ……………………………………………………………........ 18

2.2 Developing the Conceptual Framework …………………………….…. 19

2.3 Criticism of sources ……………………………………………………….…. 19

3.0 LITERATURE REVIEW AND CONCEPTUAL FRAMEWORK ………….. 20

3.1 Globalisation ………………………………………………………………….... 20

3.1.1Globalisation: Definition ……………………………………………………… 20

3.1.2 Globalisation and Viewpoints …………………………………………… 21

3.2 Cocoa …………………………………………………………………………… 22

3.2.1 Cocoa production and utilization ……………………………………… 22

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3.2.2 The evolution of the Nigerian Cocoa Industry ………………………. 24

3.2.3 The cocoa trade in Nigeria …………………………………………… 26

3.2.4 The Nigerian Cocoa value chain and processing ……………… 26

3.3 Conceptual Framework ………………………………………………….. 28

4.0 EMPIRICAL 30

4.1 Background Information about Nigeria ……………………………. 30

4.2 The Economic History of Nigeria ……………………………………….. 30

4.3 The Nigerian Cocoa sector ……………………………………………… 31

4.4 Nigeria’s Cocoa Economy: Past and Present …………………………… 32

4.5Globalisation and the Nigerian Cocoa Sector (Policy decisions and actions)

5.0 41

5.1 Introduction ………………………………………………………………... 41

5.2 Cocoa (Nigeria) ………………………………………………………… 42

5.2.1 Structural Changes on the cocoa industry …………………… 42

5.2.2 External influence on the Government ……………………… 44

5.2.3 Environmental Conditions …………………………………………… 45

6.0 CONCLUSIONS AND RECOMMENDATIONS 46

6.1 Conclusions ………………………………………………………………… 46

6.2 Recommendations ……………………………………………………... 47

7. BIBLOGRAPHY 48

Figure 1: Conceptual Framework …………………………………………. 29

Table 1: ………………………………………………………………………... 40

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1.0 INTRODUCTION

With the arrival of globalisation particularly after the second World War came
to an end, the World extensively turned into a tiny place of habitation where
communication between diverse countries gradually steered a situation
whereby the growth and development of a country’s economy is not solely
dependent on the presiding Government, instead it is to an extent influenced
by the resources and large-scale organisations where global laws and
regulations rules. Globalisation is an extremely contentious development
which has been extensively criticised in its present Neo capitalist practice
and then emanates as a surprise to Policy makers and Economists who are to
a large extent certain of the advantages of the Neo capitalist form of
globalisation and its benefits to developing countries. The impact of
globalisation can be distinguished by the Economic development of a
country. Quite a number of incredibly globalised developing nations are not
evidently benefiting from globalisation and are still dealing with the same
problems for decades. However, investors in the western world has shown
interest throughout the years and invested in developing nations, this has in
turn brought more profits and exchange of foreign currencies to developing
countries, reasons being that lots of raw materials and natural resources are
found in these parts of the world. Nevertheless, examining the present
situation of the cocoa industry in Nigeria, it would be seen that globalisation
has not achieved the results which one would have expected with the
liberalisation of free trade and the world market demand of the produce. The
objective of this study is to analyse the impact of globalisation on the cocoa
sector in Nigeria, looking at the contributions of globalisation on the
development of the cocoa sector in Nigeria and other benefits in general.
Nigeria was chosen for this research because, Nigeria is a country of
enormous natural resources with a high and increasing rate of people living
in poverty and it has been recently declared the country with the largest
economy in Africa. I thought its ideal due to its current economic position in
Africa and its setbacks to analyse the effects of globalisation using one of
their major international trades cocoa, which is to a large extent influential

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and has a huge impact on the country’s economic development. Other
research in this area focused on the International price of the product
(cocoa) and innovation brought through globalisation. However, due to the
focus of this research on agriculture and globalisation, it will look at
globalisation from a different approach. The international modern day
global economy has naturally given a boost to the links between
International politics and International business, making the effects of
globalisation in developing nations of major concern to not just the parties
involved but also the international community. The percentage of Nigeria
living below poverty line is increasing by the day and international openings
like this should be held responsible to realise what role they have to play on
the development of the country at large. To create a better means of
approaching this research topic, I have gone through quite a number of
reports on this research issue and these reports consist of different methods
of documentation. Having that in mind, I was able to select between the two
methods of data collection namely quantitative and qualitative approach
suitable for a positive outcome of this study. The Qualitative approach views
the world as collectively built through individual opinions. The Qualitative
approach believes that they will understand better and are very cynical on
giving clarifications without carefully observing the process (Easterby-Smith,
Thorpe & Lowe, 2002). On the other hand, the quantitative approach views
the world as an independent existence separately from the opinions and
views of individuals. In other words, they believe results and explanations
can be discovered without individual beliefs (Easterby-Smith, Thorpe & Lowe,
2002). In respect to this study on the impact of globalisation, there two
major focus on the subject matter. One is Nigeria as an underdeveloped
country which has other aspects that could influence its development apart
from cocoa. And secondly, cocoa an international trade and yet hasn’t
flourished on its own to positively influence the development Nigeria.

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1.1 RESEARCH QUESTION

What impact has globalisation made in the cocoa industry in Nigeria been
one of the major exporters in Africa?

1.2 RESEARCH ISSUE

Globalisation in every form is often considered in developed countries as an

unquestionable or rather certain procedure for the economic improvement of
developing countries. However, these viewpoints on the impacts introduced
to under developed countries have been repeatedly argued. Thus, my
intention in this study is to focus on how the cocoa industry in Nigeria has
been affected by globalisation. I will not look at how Nigerian cocoa
processing industries have internationalised and expanded overseas but
instead focus on how globalisation has impacted on the cocoa industry
development at large.

1.3 RESEARCH PURPOSE

The purpose of this study is to review the impact globalisation has had on
the cocoa industry in Nigeria.

1.4 LIMITATIONS OF STUDY

It is reasonably evident that this study will have overall limitations regarding
the time period I had at my disposal. Due to the time limit I decided to focus
on a general overview on the cocoa producing states and not have to look at
them one after the other although I made reference to analysis carried out in
one or two states, to have a complete view on the impact of globalisation on
the cocoa industry in Nigeria it will be essential to take into deep
consideration of all the cocoa producing sectors and also include the role of
non- business establishments which includes NGOs (Non- Governmental
Organisations) and business organisations to have a comprehensive
analysis. There is a need for future studies to incorporate the role of NGOs in
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the development of the Nigerian cocoa sector. Finally, I will like to point out
that much information and articles dealt with this area of research and
therefore all opinions were not covered creating room for some criticism of
my sources.

1.5 TARGET GROUP

Referring to the above limitations, some areas however will not be covered in
this study. For that reason, I intend to direct the study at Doctorate students.
This work is believed to provide a suitable background for further research
for Doctorate students. Nevertheless, I intend to make it fascinating for all
accomplices concerned in the globalisation process of under developed
countries and also inform researchers, readers and the general public.

1.6 DISPOSITION

In regards to the structure of this study, I will explain in the following

section, the methodological approach which encompasses of the means of
data collection as well as justifications and limitations of approach. The next
section will introduce the Literature Review. The Literature review will have
definition of terms and also explain the usage. These terms will include a
rationalization of globalisation and its significance to the study. Afterwards, I
will have a broad look at cocoa, its production and utilization. The empirical
data will give background information the choice of country and its past
economic condition up until its independence. Thereafter I will review the
Nigeria cocoa sector and how it has developed through the impact of
globalisation. The last section which will be the fifth chapter of this study
will analyse all gathered information from two preceding chapters which are
the Literature Review and the Empirical data to review the significance of
these impacts in the development of the Nigeria cocoa industry. The impact
of globalisation in the study will be analysed on three variables (Structural
Changes, Environmental Conditions and External influence on Government).

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The final section will comprise of my conclusion and recommendations from
the study.

2.0 RESEARCH METHODS

This chapter will concentrate on the description of the methods of data

collection. There after i will explain how the conceptual framework was
developed and the critical analysis of the sources for this study.

2.1 DATA COLLECTION

The qualitative approach has been chosen to carry out this study due to its
capability to obtain extensive data. There is obviously no wrong or right
answer so it’s a situation of going through the data thoroughly and giving
sensible explanations and justifications. The major reason for choosing this
approach is due to its probability to understand the situation and doesn’t
concentrate on numbers like the quantitative approach, and also has the
capability to allow the researcher show hidden and more detailed
information untold by the numbers (Easterby-Smith, Thorpe & Lowe, 2002).
The source of data for this study is completely dependent on secondary data
such as articles, journals, Government reports, newspapers, school database
and books. The method of this study can be classified as documentary
research because I am carrying out an open method of data collection.
Fisher (2004) verifies that secondary data research can be carried out in an
open method. Although in this approach, the researcher may be trying to
distinguish how rhetorical methods are used to encourage the reader to a
perspective. The aim of this study is to review the impact of globalisation; I
decided that this approach is a proficient of gathering information for this
study.

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2.2 DEVELOPING THE CONCEPTUAL FRAMEWORK

The focus on this study is the impact of globalisation on an under developed

country and sector, In the Literature review I defined the meaning of
globalisation using several author’s viewpoints on the term. The word
‘globalisation’ is regularly used to describe the impacts on the development
of a developing country, (Wohlmuth 2001) and several other authors
reported backing up that argument. And so the term ‘globalisation’ is the
key hypothesis to this research. The three variables, External influence on
Government, Structural change and Environmental conditions selected for
the analysis of this study was assumed to be best fitted for the explanation
of the impact of globalisation in spite of others. The choice of Nigeria as the
country for this thesis was due to its recent declaration as the African
country with the largest economy and yet it’s still suffering from huge
setbacks. In that notion, the frame work of this analysis is grounded on
concepts of several subjects of research like Economics, Social science,
Social studies and every other required solution to the research question.

2.3 CRITICISM OF SOURCES

The information used for this study was solely dependent on secondary data
which can be considered as a limitation and will not provide a flawless push
on the topic that primary sources could have. The results were generated
more on reviewed sources from respected journals, the internet and annual
reports. In regards to the internet sources, the authenticity due to their
various aims and commitments might be difficult to appraise. However, due
to the variety on definitions and minute amount of supply of books reporting
on the research study, I decided to use the term reliable internet sources in
carrying this study. It must also be noted that reliability of these sources can
be questioned. The major part of this analysis results obtained from other
researchers without using primary information to support these results can
therefore be argued from an individual point of view. Due to time
constraints, the background of these researchers cannot be attested and

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therefore cannot confirm if there are external adherences with involved
persons.

3.0 LITERATURE REVIEW AND CONCEPTUAL FRAMEWORK

This chapter will start with a literature review of the basic terms of this
study, and how they are linked to each other. It will also look at the evolution
of the Nigerian cocoa sector, the production and utilization of cocoa in
Nigeria, how cocoa is traded in Nigeria and the development of the
conceptual framework.

3.1 GLOBALISATION

This section will give the reader a brief description of the foundations of
globalisation. Thereafter the term ‘globalisation’ will be defined using
various theories from several authors to have a different definition of the
term and then to connect it to the aim of research. The last segment will
discuss the views on globalisation, its benefits and drawbacks from
contradicting points of view.

3.1.1 GLOBALISATION: DEFINITION

It is not found new that Globalisation as historical trade paths such as ‘Silk
road’ crossing more than a few countries was in existence since the
beginning of mankind. The earliest wide-ranging trade network in Europe
was set up by the Romans through trading with other countries particularly
in the Mediterranean. Other examples of trade routes in history are
networks like the British Commonwealth and Hansa. Nevertheless
globalisation even in historical times was not just seen as a means of

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economic improvement but it also instigated actions like the creation of
America. This however proves that globalisation will not just be seen as a
novel even though the pace of globalisation has rapidly improved remarkably
in the past years. According to Schurman (2001), the term ‘globalisation’ is
regularly used in frameworks which at a glimpse not precisely associated
with this research topic and can barely be specifically associated to it. This
brings attention to the fact that the term ‘globalisation’ has advanced from
the word ‘modernity’ and thus conjoins several diverse phases (Schurman
2001). Several chances of been knowledgeable about the term globalisation
regularly leaves the reader deliberating on its genuine importance or its role
in the report and objective of reading. Pearson Education (2002), defined
globalisation as the network of numerous contacts of organisations and the
parties involved internationally, geographically and cultural boundaries. In
addition, a different definition of globalisation refers to the growing
significance of international trade, cooperation, international relations and
agreements across nations. The key element remains the nations even as
interactions between other nations become progressively more of the
essence (Daly, 1999). To be precise and reveal the first connection with this
study, it looks applicable to take account of the following argument
‘although the process of globalisation encompasses of economic
collaboration it also involves the political and political affairs (Howlett and
Ramesh 2006). “The word globalisation is regularly used to describe the
progression of the economic development of developing nations because it
is synonymous with its contribution to economic growth” (Wohlmuth2001).
Although this argument is not always as stated, Schurman (2001) in his book
also explained that weak countries are usually stalled in their development
because of the influence of globalisation. Using these definitions, however it
will be noted that globalisation is a collection of networking organisations
across countries thus emphasizing on the significance of international
collaborations. It is regularly seen with the sole purpose of economic
attribute, moreover it also encompasses of political, cultural and
international relations. Whilst globalisation is regularly used to describe the

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economic progression of developing nations, the impacts of the concept of
globalisation are not always as optimistic as it appears.

3.1.2 GLOBALISATION AND VIEWPOINTS

Quite a number of authors argued that globalisation is a means of regulating

and changing the economy of a nation by international organizations which
as a result entails a submission of authority by the provincial government.
Globalisation has also been seen as a channel of keeping under developed
countries precisely that very little income earners, GM seed implored on
improving international farmers, the trading of local industries in order to be
eligible for IMF and World Bank loans and the growing domination of the
Western cultural values across the world has come to signify globalisation for
its commentators (The Guardian 2002). Then again, some authors argued
that globalisation is not essentially vile or that international organizations
are in control of the wellbeing of individuals or more influential than nations.
Others argue that the expansion of globalisation, free market trade in under
developed nations is the way forward to the elimination of poverty (IMF
2002). The United Nations (2001) reported that globalisation offers gigantic
openings for developing economies by creating jobs and business platforms
to areas which otherwise would have battled with economic growth.

3.2 COCOA

Botanically, cocoa is known as Theobroma cacoa, which belongs to the

Stericulinacea family. The origin of cocoa came from the upper Amazon
region of the South America from where it was distributed to other parts of
the globe (Gockowski 2007). The cocoa tree produces an average of twenty
five to thirty cocoa fruits per annum. The fruits have an average of nineteen
to twenty five beans. The cocoa tree begins to flourish only in its fourth year.
Its harvest is highest in the tenth or eleventh year of its life cycle and
remains at that point for about nine years or more and it starts to deteriorate

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but the tree lives for a period of forty to fifty years (Idowu et al 2007).
According to Microsoft Encarta (2009) cocoa has a very high food value; it
contains more than 15 percent protein, 35 percent carbohydrate and 35
percent fat. It can also serve as a stimulant because of its mild presence of
theobromine, which is in the family of alkaloids that is strongly linked to
caffeine. The cocoa beans are sold in world markets but are mostly
harvested in African countries of about two-thirds of the overall international
productivity. The largest producers of cocoa in Africa are Ghana, Nigeria and
Cote d’Ivoire, the rest of productivity is from South American countries like
Ecuador and mainly Brazil. The cocoa crop is traded on world’s commodity
markets and attempts by cocoa producing counties to regularize the price
through international settlements have been vague.

3.2.1 COCOA PRODUCTION AND UTILIZATION

The cocoa tree is a vital means of expenditure for lots of farmers and their
families in cocoa producing countries. As stated earlier, Cocoa originated
from the river valleys of the Amazon and the Orinoco in South America. The
Maya people discovered it and named in ‘cocoa’ or ‘Gods food’ (Falusi 2006).
Cocoa is consumed internationally, and a primary cash crop for cocoa
producing West African countries, trade in cocoa and cocoa products is a
main source of foreign exchange revenue for developing countries. Cocoa
production, processing and consumption have gradually developed into a
growing international agro-industrial practice. The cultivation of cocoa is
mostly done in the tropical belt straddling between latitudes 150 south and
north of the equator (Ikpi 2002). Cocoa is mainly manufactured in
developing countries but customarily consumed in the western world. Africa
has been shown to sell a large portion of its cocoa to Europe while Latin
American countries sell mostly to the United States. Asian countries buy
mainly from Indonesia, Ecuador or other South American countries. Whilst
few developing countries like Brazil and Malaysia has developed substantially
for the mechanized processing of cocoa, the majority of mechanised cocoa

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beans processing and its derivatives is presently done in developed
countries. Presently, the world cocoa production is approximately 3.4 million
tonnes (UNCTAD 2007). Moreover, African countries has been reported to
account for more than 70% of the world’s exportation of cocoa and the
world’s over all cocoa consumption of approximately 2% (Falusi 2006). The
most valuable cocoa derivatives are made from cocoa beans which is the
kernels of the cocoa fruit. The cocoa mass or cocoa liquor produces the
most populous cocoa products known as Chocolate, and cocoa butter.
Chocolate is globally consumed and it’s preserved as a solid mostly at room
temperature and a melting point slightly less than the body temperature. It is
so rich in taste and very mild then filtered and safe to drink cocoa which are
products of cocoa cakes. Few International companies with subsidiaries in
Africa are the major manufacturers of chocolate and cocoa processing. On
the other hand, the production capability for mechanized processing of
cocoa into intermediary products are mostly done by subsidiaries of
international companies and a few domestic companies are of major concern
in developing cocoa producing countries (Haque 2004 and Obasanjo 2006).
Although cocoa mass is popularly known as is the chief constituent in
chocolate production, there are also four cocoa derivatives with a popular
and high amount of consumption globally. These cocoa products are namely:
cocoa powder, cocoa butter, cocoa liquor and cocoa cake. The preliminary
stage in the industrial processing of cocoa is the manufacturing of cocoa
mass from the cocoa beans. Precedent to the manufacturing process, the raw
cocoa beans is fermented and dried to a definite industrial standard.
Thereafter, the cocoa beans are thoroughly cleaned and inspected. The clean
cocoa beans are then mixed into the preferred blend, fragmented and their
husks are removed. The remains which is the inner part of the Kernel
generally known as the nib is heated to get rid of bacteria and afterwards
grounded into a liquid cocoa mass. The chocolate factories usually demand
supplies of cocoa mass which is the starting point of cocoa butter and cocoa
powder production.

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3.2.2 THE EVOLUTION OF THE NIGERIAN COCOA INDUSTRY

According to a research by (Idachaba 2000), Agricultural R&D is one of major

impacts of globalisation in Nigeria which started in 1893 when the colonial
government established a botanical garden in Lagos which was the capital of
Nigeria at the time. Ikpi (2002) pointed out that this garden was one of the
major sources of raw materials for companies in the United Kingdom and
was established focusing on the introduction of new cash crops under the
British colony. Cocoa which is a major primary cash crop in Nigeria was
introduced to Nigeria in 1874 from an island ‘Fernando Po’ which is off the
coast of West Africa. The preliminary expansion of the Nigerian cocoa
industry was completely due to the entrepreneurship and initiative of local
farmers. Shortly, the colonial government developed interest in cocoa
cultivation and seedlings from the botanical garden were supplied for field
trials up country (Opeke 1982 and FGN 2005). The lucrative production of
cocoa in Nigeria begun in the 19th century and Nigeria by the time she gained
her independence in 1960 had developed into one of the world’s major
cocoa producers. The 1960s and early 1970s were the magnificence decades
for cocoa production in Nigeria, as it was the most essential foreign
exchange earner. In 1970, the highest production peak of over 380,000
metric tons was attained although there was a decline in production in the
mid-1970s. On the contrary, the expression of the ‘Dutch disease’ in
neglecting the agricultural economy while focusing on oil resulted in Oil
boom in the 1970s, which later became the lone foreign exchange earner. In
the early 1980s, there was a severe economic recession that demanded the
establishment of the economic structural adjustment programme (SAP),
which was introduced in the mid-1980s, precisely in 1986. SAP upon its
introduction, achieved certain amount of success by increasing the number
of cocoa production. Akanji (1992) in his research reported that there was an
increase of more than 99,000 metric tons in same year of introduction and
255,000 metric tons of cocoa in year-end 1989. Titilola (1997) on the other
hand reported that by the year end 1993, Nigeria made the progress of
becoming the fourth biggest cocoa producing country after Ghana, Cote

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D’Ivoire and Brazil. Although afterwards, (CBN 2004) reported that there was
a decrease in cocoa production in the year 2000 to production as low as
160,000 metric tons. To this effect, the Government introduced the National
Cocoa Development Committee (NCDC) in 2004 to resuscitate production
rate in the cocoa industry; subsequently, there was an improvement of
201,000 metric tons in 2004. The National Cocoa Development Committee
was masterminded by the Minister of Agriculture and Water Resources in
partnership with other government agencies pertinent to the cocoa industry
and delegates from the private sector, stakeholders and representatives from
the country’s 14 cocoa producing states namely (Ogun, Cross River, Abia,
Delta, Ondo, Ekiti, Akwa Ibom, Osun, Kogi, Taraba, Ekiti, Adamawa, Edo,
Oyo). The representatives from the cocoa growing states include the deputy
Governors of the 14 cocoa producing states and other delegates from the
Cocoa Farmers Association. The National Cocoa Development Committee has
sub- boards responsible for cocoa manufacturing, cocoa processing, cocoa
marketing and value addition, whose efforts increased the consumption
cocoa and cocoa derivatives (NCDC 2006). Though presently, the small
farmers are the major producers of cocoa in Nigeria. These minor farmers
account for approximately 59% of the total production of cocoa in Nigeria
with an average of 2ha farmhouse. (FGN 2006) reported that the 14 cocoa
growing states in 2005 produced an entirety of 5,976,755 cocoa seedlings,
which on the order hand can replant 5354 ha of fresh cocoa farms and a free
distribution of cocoa seedlings to the various farmers. For the sustainability
and improvement on these various executions, the Government introduced
an exceptional programme in February 2005 branded as the ‘Cocoa Rebirth’.
This programme was mainly designed to create the awareness of the profit
capabilities of cocoa, boost the rate of production and industrial processing,
draw the attention of the youths into cocoa farming, and raise funds for
industrial development (FGN 2006). Nigeria is seen to have the capability for
industrial processing of cocoa particularly into its intermediary products.
There are currently five cocoa manufacturing organizations functioning
effectively in Nigeria. The overall fixed cocoa processing capability of
Nigerian cocoa industries is a minimum 104,000 tons per year while the

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minimum of 44,000 tons is processed into intermediary products for
provincial use or export. It is worth mentioning that one of the local
beverage industries (Cocoa Industries Ltd.) not only deals with the
processing of the cocoa beans into the intermediary stage but also produces
a well consumed and popular beverage. In 1990, the Government made an
attempt to outlaw the exportation of cocoa beans. The censure was to be
carried out from the early 1991 with an objective of evolving the Nigerian
cocoa industry to elevate local industrial development, reduce
unemployment, improve foreign exchange revenues, and enable
technological transference. Nevertheless, the law was abrupt for the reason
of strategy failure and demands from stakeholders, particularly the Cocoa
association of Nigeria (CAN), which emphasized that that the capability for
local industrial manufacturing was incapable for processing the amount of
cocoa beans produced nationally (Olomola et al., 1993; Ojo 2005).
Apparently, there was a positive aftereffect on the censure, which is the
founding of two cocoa manufacturing industries in 1992 namely; Stanmark
Ltd which was founded by a subsidiary of an international company Cadbury
Nigeria Plc and the other company Cooperative cocoa Products Ltd which
was founded by the Cocoa Association of Nigeria (CAN) with sponsorship
from the governor of one the cocoa producing states (Ondo State).

3.2.3 THE COCOA TRADE IN NIGERIA

Before the oil flourishing times in Nigeria, the primary trade commodities
were cotton, groundnut oil, palm oil, rubber and cocoa. However, after 1975
only cocoa remained significant with the trade adjustments. The government
in the late 1970s and mid -1980s with aid from the World Bank reinstated
the rate of cocoa production through reforestation programs and
manufacture expense supports (Nwachukwu et al, 2010). Operational
amended rules led to market liberalization, followed by the closure of
commodity boards, the initiation of free market pricing rules and the
instability of cocoa prices. In the olden times, cocoa was sold in Nigeria
through monopoly- monopsony market boards same with Ghana but

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differently with other cocoa producing West African countries like Cote
d’Ivoire and Cameroon where it was sold through ‘Caisses destabilization’
(Gilbert 2008). The internal and external crop marketing decisions were
made by parastatal agencies that were in charge of the marketing boards.
However, Caisses destabilization regulated the internal prices and also was
in the custody of the product all through the supply chain, whereas private
agents chosen by the Caisse handles the physical control of the product
from the harvester to the exporting stage. In 1986, Nigeria liberalized the
cocoa trade making it the number one African country to liberalize cocoa
trade in the wake of the World Bank’s proposition that agricultural marketing
boards in Africa were not productive and the idea to free agricultural trade
due to the free access of foreign exchange motivated the abolishment of
marketing boards by the Nigerian Government (Gilbert 2008).

3.2.4 THE NIGERIAN COCOA VALUE CHAIN AND PROCESSING

Not more than 29.000 farmers grow cocoa in Nigeria and the overall
production of cocoa in Nigeria is abandoned to smallholders. The deficiency
in rural labour is the chief limitation to growth in production as well as the
fairly aged labour force (Ogunleye and Oladeji 2007). Oxfam (2001),
reported that approximately 56 percent of the cocoa growing households in
Ogun state are food vulnerable. An average cocoa cultivator in Nigeria has a
farm size of about 2.4 hectare, although the size of the harvested area varies
across the 14 cocoa producing states (Oguntade 2000). In general the
approximate production from one harvester is more than 4 bags per season
which is approximately 298kg per hectare of cocoa (Nwachukwu et al 2010).
The high season for harvesting the cocoa beans is between December and
early June. The cocoa beans are usually harvested by hand due to the lack of
infrastructure. The seeds are thereafter fermented at a pulverized stage for
about one week and then left to drain for 21 days after which it’s packaged
and ready for exportation (World Bank 2007). The early stages of cocoa
processing and other cocoa derivatives are done in Nigeria; moreover a bulk
part of cocoa is sold abroad as beans. The processing of cocoa comprises of

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the transition of the beans into powder or cocoa butter, these are the two
major intermediate cocoa derivatives and such transition is often done by
cocoa grinders. The amount of butter derived from the cocoa beans is totally
dependent on the quantity of fat in the beans whereas the powder is usually
taken into account as a by-product of cocoa manufacturing from paste and
shells. The butter and powder are afterwards mixed in various quantities to
derive chocolate including the addition of milk and sugar although cocoa
powder is however used as an ingredient in producing other confectionary
products (Gilbert 2006). Nigeria has been proved to have the ability to
produce locally of some measure of cocoa derivatives such as butter, but the
product is often very low in quality when sold locally or shipped overseas.
Gilbert (2006) also reported that the quality of cocoa beans shipped abroad
is inspected by grading agents after been purchased for sale by local area
agents or local buying agents. The purchase is usually done at the farm gate
and then taken for inspection before been exported or sold to locally. The
local buying agents could be individuals or companies (USDA 2007). The
demolition of the Nigeria Cocoa Marketing Board (NCMB) nearly took along
with it the organized marketing of cocoa both locally and internationally. A
group of researchers, (Nkang et al 2007) carried out a study in Cross River
State which is the third cocoa producing state in Nigeria, the research was
carried out specifically in Ikom and other bordering rural markets, reviews
that the markets are entirely united and the rate of price communication
from the urban markets to the rural markets is above average. Ikom is a
popular city in Cross River State generally known for the exportation of
cocoa beans and also for local use. The demolition of the commodity board
also resulted to random buying and selling of cocoa which increased
networks for manufacturers to advertise their produce. The networks was
approved in response to the mode of transaction and the price of the
commodity, other expenses such as transportation, distance and the grading
results were huge criteria (Nkang et al 2007). Another research carried out in
Osun state which is the second cocoa producing state in Nigeria reviewed
that farmers would rather sell their products to nomadic buyers to reduce
cost due to transportation and lack of infrastructure. Also, insecurities are

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usually attributed to grading of the product because of the reoccurrences of
price reduction or product rejection. In addition the manufacturers would
rather not have to deal with these effects and prefer to sell only to middle
men (Nkang et al 2007). The multinational grinders or domestic
organisations controlled by the grinders are usually the chief exporters of
cocoa in Nigeria. According to Ajetombi (2011), there about 122 registered
cocoa exporting companies with the Nigeria Export Promotion Council
(NEPC) but a hand full are responsible for approximately 55 percent of cocoa
exports per annum; the cocoa export market is controlled by three major
export firms in Nigeria. These organizations however have to deal with
challenges such as tax and levies and free market structure enforced by the
Nigerian Government and other cocoa bodies. The inadequate mechanism
and lack of communication in cocoa trade also affects the general
performance of cocoa international trade. In overall the marketing network
between the manufacturers and exporters comprises of at least two
intermediaries who are the petite traders and the wholesalers. In various
instances, the product will be sold without the use of intermediaries to the
exporters with the aid of farmer’s associations. The market prices are usually
very unstable and are received mainly by the producers and cocoa
companies. The early times of the liberalization of cocoa, battled with high
increase of transport cost, exportation cost and increased tax which solely
affected the farmers. Also, a price communication analysis carried out by
Ajetombi (2011), on three cocoa manufacturing states (Ogun, Ondo and
Cross river State) respectively showed that the local cocoa market is
theoretically less competitive particularly with the price performance of the
cocoa exporting organizations.

3.3 CONCEPTUAL FRAMEWORK

It could be said from the above review that globalisation to an extent has an
influence on the development of a sovereign state. The impact of
globalisation on the cocoa industry in Nigeria in my opinion, will best be
looked upon looking at the influence of globalisation on the development of

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infrastructures, well-being of the farmers, price and export quality. Due to
the evolution of globalisation, the importance of natural resources has come
to play a primary role in the development (economic) of the country in
question. Having said that, I decided the appropriate way of analysing my
findings will be using three variables namely Structural Change, External
Influence on Government and Environmental conditions (Schuurmans 2001).
These variables according to Schuurmans (2001) depend on each other and
are suitable for analysing changes on development. Changes in any of the
variables affect the other. Having the above concept, I have come up with the
following model framework to aid in the analysis. The idea behind the model
is to show how globalisation has impacted on the cocoa industry in Nigeria
using these three variables.

Nigerian Cocoa
Industry

Globalisation

Effects on External Effects on

Structural Influence on Enviromantal
Changes Government Conditions

Figure 1: Conceptual Framework (Own model).

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4.0 EMPIRICAL DATA

This chapter will concentrate on providing documented data on the

background of the Federal Republic of Nigeria, the Economic history of
Nigeria, a background of the cocoa sector in Nigeria and policy decisions and
actions taken due to role of globalisation to improve the Nigeria cocoa
sector.

4.1 BACKGROUND INFORMATION ABOUT NIGERIA

Nigeria, the most popular country in Africa and densely populated with
approximately 140million individuals is located on the Gulf of Guinea in West
Africa. Its former capital was Lagos before it was taken over by Abuja in
December 1991 with the location of the ‘Aso rock’ which is the presidential
home for the ruling president. On October 1st 1960, Nigeria gained its
independence from the British colony. From 1960 to 1999, the country was
ruled by military Government and had seven different military rulers of which
three were assassinated. From 1999 till date however, the country has
sustained civilian governance. Nigeria is seen to be an under developed
country, although its economy has been recently declared the largest in
Africa. With an estimated GDP of $191.4billion (CIA 2014), its major industry
earner is the petroleum industry which is followed by agricultural exports
accounting for a huge part of the local and foreign exchange income.

4.2 ECONOMIC HISTORY OF NIGERIA

For about 500years, international trade has positively impacted on the

economic development of Nigeria (Metz 1991). Firstly it was the trade of
goods before it extended to slave trade. It is notable to say that slave trade
although an immoral behaviour had a positive impact on the economic
development of Nigeria. Even though the economy gained this when people

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was being enslaved, farmlands suffered cultivation. After slave trade was
announced illegal, Nigeria sought for their resources which could be traded
international for the further development of their economy (Metz 1991).
During the times of the British regime in Nigeria, the country’s economy was
governed by the rules and regulations assigned to them. Like every other
colony, the country started its trade with the export of their natural
resources as raw materials for manufacturers in Europe who in return sold
the final produce to Nigeria on a much higher profit margin. As the years
went by, the British revolutionised and developed the infrastructure of
Nigeria. This assisted in the local manufacturers to acquire the leading
position over imported goods which boosted Nigeria as a net exporter (Metz
1991). Though a huge number of Nigerians were dependent on the
agricultural sector where their income was just enough for survival, the
country to a large extent benefited from globalisation of industry by the
British regime (Ekundare 1976). The British Government during their regime
in 1914 merged the northern region and the southern settlements to form
the country ‘Nigeria’. The early times of the century and the recession
contributed on the decline on the economic development of Nigeria.
However, at the end of the Second World War and the impact of globalisation
with international trades and foreign exchanges brought hope to the
economy of the country. Even though Nigeria stayed an agro economy, it
built lots of modern industries. The oil discovery although in the years of the
British colony and a stable political and political situation at the time helped
the country step into its independence with the expectation of becoming a
better place of inhabitant.

4.3 THE NIGERIAN COCOA SECTOR

The cultivation of cocoa started in Nigeria in 1874 after a local chief founded
a plantation at Bonny in the redundant Eastern part of Nigeria (Amos 2007).
The FGN (2006) reported that Nigeria was capable of producing about
5,976,755 metric tons of cocoa, which summed up to 10.25 percent of the

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world’s total cocoa production (FAO 2004). The production of cocoa is a key
agricultural interest in Nigeria which has contributed to one- third of the
country’s gross domestic product on an average of 36 percent GDP (CBN
2004). It is notable to say that the world production of cocoa in Nigeria is on
a scale of over 2.8million tons. The largest cocoa producing state in Nigeria
is Ondo State which is located on the southern region of Nigeria (Amos and
Adeleke 2011). The state (Ondo) is populous known as the cocoa belt or the
land of cocoa farmers in Nigeria. Agriculture is the highest non-oil export
earner and a major influence on the reduction of poverty, creation and jobs
and income earnings (CBN 2005). In regards to this, the export of cocoa
plays a very huge rule. In regards to foreign exchange earnings, cocoa has
earned more than any agricultural export commodity in Nigeria. In regards
to employment, the cocoa sector and sub sectors has offered tremendously a
huge amount of employment in various ways to people both directly and
directly. Cocoa with no doubt is a vital source of raw material and source of
revenue to the governments and the people of cocoa producing states
(Nkang et al 2007). However due to its significance of cocoa, the Federal
Government was concerned on expanding the export base of the nation and
this notion placed cocoa as the most important agricultural export crop in
Nigeria. It has been proofed that however there has been a decline in the
rate of production of cocoa in Nigeria and this led to the affluences of other
sub sectors (Nkang et al 2007). It was recorded that Nigeria experienced its
first decline of cocoa production in 1976 when its exported decline was up
to 215, 000 metric tons and in 1988 it further decline to 99,000 metric tons
which as a result reduced the country’s market share to approximately 7
percent to the fourth largest cocoa producer till date. In a meeting with the
cocoa stakeholders in Nigeria in 2013 held in Abuja, there was a debate on
how to attract investors and strengthen other issues ranging from lack of
infrastructure, the well-being of the farmers and recondition governments
concern to boost the production of cocoa both for domestic and
international use (CBN 2013).

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4.4

Cocoa is no doubt the key contributor in foreign exchange earnings in the

Nigerian agricultural sector. It became a significant produce in the
agricultural sector in the early 1950s with an approximate of 317 000 metric
tons in a period of 4years, from1950 to 1954 (Akinwunmi 1996). However,
in 1976 there was a decline in the general national output which further
declined to at least 215 000 metric tons per year. In the process of trying to
regain the glory days of cocoa in Nigeria, other producing countries like Cote
d’Ivoire, Indonesia, and Ghana progressively boosted their output. In that
regard, the total World cocoa productions multiplied but while the world
total output increased progressively, the world prices became unstable in the
period of 1987 with a price value of $2264 per metric ton and a decrease in
1992 for $1326 per metric ton. The price instability continued over a decade
and gradually increased only in the year 2006 (Akinwunmi 1996 and
Ajetunmobi 2011). The cocoa manufacturing and price movement had a
tremendous influence on subsistence and food security of the local farmers
and their families. Also, the main actors in the value chain of cocoa were
also affected by this price instability apart from the local farmers. The major
players in the cocoa value chain that was affected includes the exporters, the
itinerant buyers, transporters, cocoa grinders and companies and shippers. It
was clear by the middle 1990s that the industry needs to be revolutionized
in the quest to grow and improve the income earnings and general standard
of living for its dependants (Adegeye 2006, Akinwunmi 1996). The decline
of the general output of cocoa happened for decades and the first outbreak
of decline which happened before 1985 was linked to elements. The most
obvious is the exploitation of oil (Adegeye 2006). Secondly the most
important but ignored reason is that several players in the cocoa industry
was more attentive to sales than production. Some other contributing factors
includes the demolition of the Nigerian cocoa boards which built a huge gap
in the areas of farmer’s financial support, input supply and manufacture
quality control. This gap steered the poor administration of the cocoa farms,
this increased the growth of pest and disease, thus steering the high cost of

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administration and management of these crops, crop loss and loss of
farm lands. Farmers were also deprived of their farmlands if they were in
debt due to the lending structure of using lands as collaterals to money.
Such trying times for farmers led to poor management of their farm lands by
their lenders who will at the return a dead farm land at the end of their loan.
The structure of the loan refund usually prevented farmers from alternative
plans for their farm lands therefore increasing decline in production, low soil
fertility, causing aging of the farmers, rural- urban resettlement and lack of
education all contributed to the low productivity output (Adegeye 2006).
Another decline outbreak happened after the introduction of the Structural
Adjustment Program (SAP) which had a direct impact on the value chain
of cocoa and its effects had the international cocoa market making
alternative arrangements over a long period of time in the exportation of
cocoa. In the beginning, manufacturers of cocoa exported them through
intermediaries in Europe and other consuming places where it was sold.
Shortly after the marketing board was established, the complete right of
individual purchase and export of cocoa together with the obligation of
producer price stability piled up excess suppliers. The marketing boards
were in charge of buying the product through an appointed licensed buying
agent yearly. The intermediaries opposed for the gathering of cocoa
through storehouses which were located in the rural areas of the cocoa
manufacturing states and organised the transportation of cocoa to the cocoa
marketing board warehouses and ready for export. Also they were paid by
commission per tonne of cocoa bought to take care of expenses and leave
them with a realistic profit. The cocoa marketing board was in charge of
exporting and other administration work ranging from insurance and related
expenses. In terms of quality control, the marketing board through cocoa
inspection sector took up a price discrepancy policy to promote quality
advancement of the produce (Adegeye 2000). The Nigerian government in
1985 approved the application of a Structural Adjustment Programme (SAP)
towards the achievement of an extensive liberalization of the agricultural
sector and to also aid in putting policy measures in place to actualize set
targets. The adjustment policy instantly piloted about 250 percent increase

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on the cost of maintenance of the farm lands while the manufacturing cost
also piloted to about 750 percent. The boost produced a definite gross
margin of N1, 474.00 per hectare in the 1988 whilst the approximate gross
margin per hectare was N104.99 in 1984. The first progressive effect of
liberalization drew the attention of several novel entrants as buyers and
hoarders. The novel members generated a huge space between producers
and the end markets. In that effect, the early post- liberalization phase was
synonymous with low source of income and lack of diversification, low
structured trade, vulnerable and weakly managed farmer establishments.
Decline is production and low quality of produce led to domestic and
international market loss. The deficiency of a controlling body also resulted
in the vulnerability of the market price instability and quantity falsification by
intermediaries. Inadequate governmental maintenance, expensive farm care,
lack of cocoa seedlings, however, contributed to the decline in production
and low quality of produce. This is the main reason for the low quality beans
shipped overseas and the rapid collapse of the Nigerian cocoa value
(Oguntade and Adegeye 2000). The principal organisation in charge of the
improvement of the Nigerian cocoa sector is the Ministry of Agriculture and
Rural Development. This organisation has implemented various policies that
anticipated certifying growth in productivity, superior cocoa quality and
better means of support for the local cocoa farmers. The strategy push was
concluded in the recent Cocoa Transformation Agenda (CTA) and the
government took an additional wide-ranging and practical method by
creating an Agricultural Transformation Agenda from the Cocoa
Transformation Agenda project. One of the major push is to fund chief layers
in the cocoa value chain via public private collaborative programs example
the recuperation of approximately 195 000 hectares of cocoa farm lands
through private sector funding. The time consuming project of the Nigeria
Cocoa Transformation Agenda is to increase the Nigeria’s cocoa world
market share as well as eradicating disputes such as low quality
manufacturing, little produce, sustainable environment, labour, land tenure,
eradicate poverty and improve the well- being of small scale farmers, inspire
youths, increase market access, stabilise price, improve access to funds and

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other issues such as migration. The transformation agenda also intend to
increase the rate of cocoa production in the next couple of years with the
funding from the International Institute of Tropical Agriculture (IITA 2007).
The International Institute of Tropical Agriculture is anticipated to employ
developed micro fertilization procedures to improve uncontaminated and
disease free cocoa tress to improve standardized produce and increase the
revenue of local farmers and also ensure the sustainability of cocoa and the
environment in the future. The organization in collaboration with Cocoa
Research Institute of Nigeria (CRIN), National Centre for Genetic Resources
and Biotechnology (NACBRAG) and other government parastatals are
anticipated to construct the nation-wide capability on the new machinery.
The International Institute of Tropical Agriculture’s approach will also involve
the preservation and sustenance on the diversification of cocoa in Nigeria. A
production increase in the strategy is to multiply the amount of semi-
manufactured cocoa shipped overseas in order to improve revenue for local
farmers. Also, change farmer’s location from the farm gate to the factory
gate to go beyond local grinding and processing into cocoa butter, liquor
and other cocoa derivatives. Enhanced domestic utilization of the cocoa
powder is however being promoted through advertisements and awareness
promotion on the health benefits and nutritional impacts of cocoa. This
awareness has been successful through the aid of the Ministry’s
collaboration with the various government schools and health care centres
in different states. Another vital action is the marketing of the new cocoa
hybrid produced at the Cocoa Research Institute of Nigeria (CRIN). The
institute is also in charge of the improvement and fertilization of quality
produce and good manufacturing procedures that will improve productivity
and high income returns. The newly developed hybrids are seen to be very
productive and are distributed free of charge. A total amount of 420,000
new hybrid pods were reported distributed in early 2012 and another
320,000 pods in 2013. There were distribution centres in the 14 cocoa
producing states in Nigeria, in the North East, South West, South South and
lastly Taraba State. Approximately 10,700 small scale farmers in over 260
communities in 7 cocoa producing states benefited from trainings on farm

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recuperation and sustenance, among others. The major aim of the Ministry’s
strategy is to increase the rate of cocoa production of small scale farmers
which is aimed at increasing from 300, 000 metric tons to 440, 000 metric
tons yearly by year ending July 2013. The growth was accredited to the
Cocoa Growth Enhancement Scheme (CGES) which was created to take care
of the needs of the small scale cocoa farmers to ensure maximum inputs like
provide good seeds, pesticides and fungicides (eradicate black pods and
other insects that affect the quality of the crop) and create more awareness
to entice the youths into the cocoa farming business (Omolaja et al 2011).
By the year 2020, the Federal Ministry of Agriculture in collaboration with the
World Cocoa Foundation intends to train over 75,000 cocoa farmers. As the
project includes, the Ministry is supporting cocoa farmer groups and
organizations to be ardent business individuals with expertise on
exportation. A further critical attribute in the development of the cocoa
value chain is the idea of founding the Cocoa Corporation of Nigeria (CCN).
The structure for its management was designed with the contribution of
several cocoa farmers, delegates from the South- East, South-West and other
delegates from the cocoa shipper’s council and Non-governmental
organisations in Nigeria to deal with dead farm lands resulting from oil
spillages and terrorism. The organisation is however proven not effective has
terrorism is on the rise in the northern part of the country and farmers fled
their farmlands increasing low production rate. The combined efforts being
made to improve the country’s world cocoa market share is a sign that the
capability of the agricultural sector is after so much attention to the
petroleum industry being acknowledged and it brings hope to the fact that
the resources in the agricultural sector can be utilized for economic
development. The endeavours of these institutions are also anticipated to
supply suitable farming equipment for farmers and also increase sources of
revenues to improve the system of living for small scale farmers and their
families. However, the possibility of an accomplished plan can only be more
successful with a re-evaluation of the critical issues that needs to be solved
from a different point of view and maybe require innovation.

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4.5 GLOBALISATION AND THE NIGERIAN COCOA SECTOR (POLICY
DECISIONS AND ACTIONS)

In spite of the great capabilities of cocoa in contributing immensely in the

development of the agriculture in Nigeria, it is shocking and fateful to note
that the development of cocoa production in Nigeria is not stable, at some
point the country desperately sought for expansion from its monolithic
economy that revolves around the exportation of petroleum to promote
herself into top 20 world’s greatest economies by 2020 which was
envisioned in the Vision 2020 project (CBN 2013). Apart from the reports on
low productivity from cocoa farms among other issues in Nigeria, a
substantial amount of cocoa produced in Nigeria are moreover done in poor
environments (Daniel 2009). Child trafficking which is a critical issue and
other practices of child labour, funding of religious and political conflicts are
major issues associated within the Nigeria cocoa sector (Obadan 2001).
Other serious issues barely stated includes: poor health and safety measures
of the farmers, loss of property rights, the crop harvesting techniques
(methods of use of pesticides and fertilizers) and the effects on the health of
consumers as well as the environment. The local farmers up to date still
cultivate with traditional equipment known as hoe-cutlass tradition and the
source of revenue can only be structured in form of the capability of the
traditional tools and frequent usage of underage children and family labour.
However due to the advent of globalisation, as stated earlier in this report
the government initiated policy decisions to eradicate these problems facing
the growth of the Nigeria cocoa sector (CBN 2004). The major push is to
multiply food production and generally improve the agro-business industry.
The National Investment Plan (NAIP) involves cocoa and other commodity
which includes (cassava, wheat, sugar, rice, palm oil, cotton) has been
chosen for particular attention. A policy review report by the World Trade
Organization (2011), stated that there are three major initiatives which have
effected on the Nigerian agricultural sector through recent publicized
expenses: the fertilizer program which includes purchasing and supply, the

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National Special Program for Food Security (NSPFS) and the procurer of the
final recourse seed purchase. These are responsible for 42, 21 and 25
percent of the recent expenditure in 2010. Among these three programmes,
the fertilizer program has a major impact on the Nigerian cocoa sector,
although detailed data on fertilizer expenses related to the cocoa sector is
not reachable (WTO Review 2011). These particular policy measures and
initiatives listed below have been proven to have a direct impact on the
development of the Nigeria cocoa sector which also includes a combination
of involvement and financial support: The National Cocoa Development
Program (NCDP) and the National Cocoa Development Committee (NCDC)
and these two initiatives were created in the year 2000. The idea behind the
introduction of the National Cocoa Development Committee is to organize
the cocoa development programmes in the 14 cocoa producing states in
Nigeria. The future goal of this programme is to reach the yearly
manufacturing height of over a million metric tons by 2011 by equipping the
recuperation of 16,000 hectares of cocoa farms yearly, develop pest and
disease infestation resistance diversities; classified agro-chemicals among
other contributions were supplied to support farmers to replant with the
objective of eradicate the implications of low quality production farms in
Nigeria. Although other objectives include the improvement of cocoa
producers revenue earnings and expansion of foreign exchange earnings by
multiplying the rate of production. Apart from the fertilizer policy there are
several other recent initiatives that has direct influence on the Nigeria cocoa
sector, thou their particular influence cannot be measured. Moreover, it has
been documented that both the federal and state government supply
fertilizer and other means of support to cocoa farmers to improve output.
The support from these legislators however varies from one state to the
other from one year to another. The Federal Market Stabilization Programme
(FMSP) permits qualified organizations to manufacture and purchase
fertilizer overseas for distribution to the state governments with a
sponsorship of 25 percent. In addition, it’s dependent on the state
government to decide on increasing the percentage of sponsorship.
However, this agreement resulted to exploitation by government employees

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and contractors who stockpile or avert the produce (Olomola 2010). For this
reason, regardless of the government’s yearly investment, it was deliberated
that fertilizer only received exactly 10% sponsorship. Furthermore, the
National Investment Plan (NAIP) placed an objective of 35 percent growth of
fertilizer consumption in the period of 2010 to 2016, with a total
requirement estimated to increase to about 2.5 to 3.5 metric tonnes by the
year 2016. Three major programmes were initiated by the National
Investment Plan to dynamically aim at the growth in the utilization of
fertilizer includes: The Organic Fertilizer Development Programme (OFDP)
which campaigns for the adoption of organic fertilizer 15 with support from
the Public Private Partnership (PPP) strategy. Secondly, the Fertilizer Quality
Control (FQC) design targets at growing the superiority of fertilizer supplied
and utilized. Lastly, the National Foundation Seed Multiplication targets at
emancipating very high superiority foundation plants to specialize
manufacturers. Local cocoa programmes as for local polices, in a meeting of
local cocoa policies held in Abuja in 2006 with delegates from core cocoa
producing countries agreed to improve the utilization of cocoa in their
various countries with the aid of a national awareness of user campaign
tagged ‘sensibilization’ including the improvement of cocoa derivatives
(Gilbert 2006). In reference to Nigeria, it has been reported that the Cocoa
Research Institute of Nigeria (CRIN) has functioned on the improvement of
cocoa derivatives such as cocoa butter, cocoa liquor, cocoa cakes among
others, alongside the improvement of virtual copyrights and resource
mobilization to improve individual financing in the sector and innovative
products. As of early 2008, the Cocoa Association of Nigeria (CAN), whose
approach focuses on growing the rate of regional cocoa utilization, was the
solitary developing country’s member of the International Cocoa
Organization (ICCO 2007). The Presidential Transformation Agenda (PTA)
which was inaugurated in 2011 focused on the distinguishing agricultural
business, supporting individual financing in agriculture and also the
improvement of the private sector propelled marketing companies and the
publicity of the Nigerian Incentive based Risk Sharing for Agriculture for
Lending (NIRSAL). Several commodities including cocoa, rice, wheat, cotton

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among others was highlighted by the Presidential Transformation Agenda as
a nation-wide commodity with particular transformation agenda especially in
the producing states (Nigeria Direct 2008). The particular objective of the
cocoa transformation agenda is to promptly boost the amount of cocoa
production with a joint strategy of bigger output and sowing fresh and
reproductive cocoa trees. Specifically, the plan envisions multiplying old
cocoa farms by 35 percent, through a plant expansion program and the
founding of fresh farms over a cocoa improvement sponsorship. In addition,
the Presidential Transformation Agenda strategy appeals for modified cocoa
fertilizer melds to be used for a positive and improved harvest of up to
550kg per hectare. In regards of the trade policy measures, Nigeria has
applied the Common External Tariff routine (CET) among ECOWAS nations
since 2006. The country is recently operating on the 35percent charge on
167 pricelist of commodities; the World Bank (2010) stated that none of
these commodities has non-zero trading value. Nigeria’s pricelist remains at
13percent while the approximate trade charge for agricultural product is
16percent. Working on its restraining local trade policy strategy, the country
deployed a protective policy with other international cocoa producing
countries. The ECOWAS Commission (2008), reported that Nigeria refused an
Economic Partnership Agreement (EPA) with the European Union. The country
also banned the international purchase of a lot of agricultural products in
2004, as a motivation to the improvement and utilization of domestic
manufacturing. Products such as poultry and poultry products are still facing
the ban strictly by the Nigerian Customs. The country affirmed no local
support or trading sponsorships to the World Trade Organisation
commission on agriculture in the 1996-2010 times (WTO 2011). A total of 15
shipping commodities including cocoa still face challenges such as price
instability alongside unpredictable set of laws by the Nigerian Customs.
However, local cocoa derivative producers profit from the specific cocoa-
trade policies from the export processing industry status policy which
sponsors local companies. This policy excludes the domestic producers from
paying tax and other charges inflicted by the government. Moreover, the
trade charges for cocoa in 2008 was 5 percent according to the Export

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Expansion Grant (EEG), the trade charges for cocoa derivatives was 25
percent in a report by (ICCO 2010) although a detailed data on other years
were not obtainable. According to a research on the ideal trade charges for
cocoa producing countries, ICCO authenticated a 5percent ideal trade charge
for cocoa in Nigeria (ICCO 2007). In addition to that the national custom
tariff stated that the 5percent charges remained from 2007 to 2012. The
World Integrated Trade Solution (WITS 2007), also reported a 5percent
charge in the year 2007. Besides, the cocoa producing states inflict taxes on
cocoa shipped out of their various states. Inspection is also done at the state
borders afterwards wrapped in order to measure the weight and taxed
according to the number exported.

Table 1

YEARS METRIC WORLD/ MT PRICE PER WORLD

TONNES M/T ( PRICE
PRODUCED NAIRA) PER M/T
(US$)

1874/ 1949 - - - -

1950/59 317 000 1,526,000 800 1, 157

1960/75 380 000 1,868, 000 2, 000 1, 289

1976/79 215 000 1, 229,000 3, 000 1, 500

1980/85 60 000 1, 259,000 8, 000 1, 800

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1986/88 99 000 1, 765, 000 10, 000 2, 264

1989/99 255 000 1, 980, 000 90, 000 1, 326

2000/03 160 000 2, 220, 000 70, 000 1, 970

2004 201 000 2, 340, 000 180, 000 2, 890

2005/08 220 00 2, 510, 000 250,000 2, 890

2009/13 240 000 2, 994, 000 300, 000 3, 200

Sources: IMF 2014, ICCO 2010.

This table shows the increase and decline rate of cocoa produce from the
year it was introduced in Nigeria till the millenniums and also the unstable
world prices and price per tonne traded in Naira.

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5.0 ANALYSIS

This chapter will analyse the empirical data getting suggestions from the
literature review on the impact these occurrences have had on the
development of the Nigerian cocoa sector.

5.1 INTRODUCTION

In this analysis, the empirical data on the Nigerian cocoa sector will be

related to 3 variables described earlier on this report namely: the Structural

Changes, the External influence on the Government and the Environmental

Conditions. As suggested by Matsuyama (1997), structural change implies

economic developments such as difference in unemployment and

constitution of industries. According to Miller (1992), the External influence

on Government can be seen clearly through the policy and political volatility

of a country. Hackett (2008) also argued that the task carried out by the

Government is a vital element on the development of the country. In

reference to the Environmental conditions (Service Canada 2005 and NEC

2006), stated that changes to the environment can also ensue from firm’s

interests and such lead to underperformance of natural resources. However

to ensure the development of a country, Pearson Education (2002) argues

that all these differences should make a positive impact. Although every

single action taken for the development of the Nigerian cocoa sector can

have an impact on more than one variable, this report will however

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concentrate on the effect their actions have on the variable that is majorly

impacted.

5.2 COCOA (NIGERIA)

Heyer et al (2010), stated that globalisation impacts partly on the

development of Nigeria cocoa sector and their economy at large through the
payment of taxes and levies that create direct and indirect employment
which has multiplied their environmental and societal activities. However, the
aim of this report is to look at these impacts on the improvement of the
Nigerian cocoa sector.

5.2.1 STRUCTURAL CHANGES ON THE COCOA INDUSTRY

The cocoa industry as an important agricultural sector in Nigeria has effects

on the structural change in several direct and indirect approaches. One of
the major direct impacts is the improvement on the wages of the farmers
and employment. As (CBN 2004) stated, the Nigerian cocoa industry initiated
policies and campaigns for the improvement of the local farmers and the
general economic growth of the country, but the effects are not as strong as
the industry is showing. These policies and initiatives do not seem to be
enough to oppose the everyday growth of poverty and unemployment.
Although these programs tend to improve the livelihood of these farmers,
half of the expenditure goes acquiring of traditional technologies,
transportation and exportation. A perfect and undamaged cultivation and
farmland cannot be achieved with these out-dated tools neither can the job
be done by unskilled farmers as more farmers need to be trained. The
interest of private investors in acquisition of farm plantations and the
agricultural sector has turned Nigeria from a country which was at least
satisfactory in basic food production to a country which has to trade in these
fundamental products. The changes in the cocoa industry in Nigeria can be

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seen from two angles. By initiating policies to improve the revenue income of
farmers, even thou only few farmers are benefiting from it, these policies in
one way or the other improved the development of the cocoa sector by
offering farmers a higher income revenue and improved livelihood. As for
the local economy this change is still having an overwhelming effect because
these farmers are still living below poverty standard and the industry is less
attractive with such standards to entice the youths and intenders. Analysing
findings on the liberalisation of trade, it can be said that Nigeria was not
prepared for competition from the West and thus the benefits of trade
liberalisation has not been affirmative. According to Reinhart and Tokatlidis
(2003), trade liberalisation policies have appeared deficient in organizing
savings, expanding intermediaries or increasing investors. However, majority
of economists acknowledge that in the future, open economies tend to
progress compared to the closed economies and that moderately open
policies extensively contribute to the development (Winters et al 2003).
Nigeria, however after more than 25 years of trade liberalisation is yet to
experience positive impact on the Structural Change of the cocoa sector as
well as the economic development of the country. Also the discovery of
petroleum led to a decline in the agricultural sector which had a negative
effect on the structural change. Another issue affecting the structural change
of the Nigerian cocoa industry is the use of traditional equipment known as
‘Hoe and cutlasses. This equipment’s are used manually and doesn’t
guarantee a green environment like the safety of the farmers. However, this
traditional equipment can be also attributed to the damage of the harvested
crops. The policy for the improvement of infrastructure needs revaluation for
a successful vision 2020 to take place. Deliberating on Matsuyama’s (1997)
explanation of Structural Change, it can be noted that globalisation’s impact
on the cocoa industry in Nigeria has been reasonably positive and improved
the development of the sector as well the development of the economy of
Nigeria. These positive effects can be seen on the increase on employment in
regards to the establishment of the cocoa boards and policies for the
improvement of the sector and better livelihood of the farmers. Lastly, the
table above proved the instability of the price (domestic and international) of

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cocoa. The market performance of this produce can only be better with a
stable market price.

5.2.2. EXTERNAL INFLUENCE ON THE GOVERNMENT

The cocoa sector as one of the biggest agricultural foreign exchange earner
has due to its economic strength, impacted on the Government of the
country. This impact was been carried out through the implementation of
laws and initiatives to help better the development of the cocoa industry in
Nigeria. These changes are often refused by the people and had often led to
riots because the farmers feel the government is using the benefits for their
own cause. An unsteady government was the cause of these riots. Another
disrupting action that had a negative impact on the Government was the
drawback on agriculture after the discovery of oil and the undivided
attention to the oil industry, giving cocoa dealers the possibility to pay less
taxes and levies to the government. This money would have contributed
positively in supporting projects in the development of the cocoa and the
economic development of Nigeria. An indirect impact of the reduction of
taxes and levies paid to the government is highlighting the problem of
money regulatory. In Nigeria this regulatory symbolises power and for this
reason there has been cases of civil conflict and even wars. The cocoa sector
does not seem to have a direct impact on the political instability of Nigeria in
terms of impeding on the change in the state of affairs. According to my
findings, the cocoa business is barely unaltered by the change in laws and
regulations as the interest in agricultural revenues will remain same which
proves the agenda of improvement programs. Considering the explanation
of Miller (1992), it can be seen that the cocoa industry is negatively affecting
the political and policy unsteadiness in Nigeria. Even if the government said
the payment of taxes and levies are not hoarded and used for the
development of the sector, the overall belief of the people and the standard
of the farm lands says otherwise therefore leaving a negative effect on the
development of the sector.

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5.2.3 ENVIRONMENTAL CONDITIONS

The negative impact the cocoa industry activities is having on the

environment of Nigeria has increased several grievances mostly on the
poverty rise of livelihood affecting individuals with cocoa farming as a major
source of income (IMF 2014). Also the act of lending in collateral with farm
lands stalls an effective farm land and therefore the affecting the economy
and development of dependants. Not to mention the act of terrorism this is a
major defunct in productive farm lands. Neglected farm lands with oil
spillages, have the highest negative influence on low production and the
environment at large. The plan to ban imported foods will hopefully increase
the dependence of people on domestic produce and encourage effective
farming which will only yield from a productive farm land. The industry
however, waste productive farmlands due to the usage of old equipment,
this act not only destroys the environment but also waste harvested produce.
The low quality produce has reduced the value of the natural resources of
Nigeria. Even if these initiatives are working to improve the quality of
produce, the value lost will require more to innovation for a breakthrough.
After years of international trade, the Nigerian cocoa industry has only
reduced the value of agricultural resources in the country. Considering the
explanation for environmental conditions by the (Service Canada, 2005 and
NEC 2006), it will be seen that the cocoa industry through the manufacturing
of low quality produce and destruction of agricultural resources has a
negative influence. However, it can be said the negative environmental
condition in the country is influencing the development of the cocoa sector.

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6.0 CONCLUSIONS AND RECOMMENDATIONS

This last chapter will summarize the analysis on the contribution of

globalisation to the development of Nigerian cocoa sector.

6.1 CONCLUSIONS

Looking at the analysis of this work, it can be seen that globalisation to

some extent has had not so much positive impacts on the development of
the Nigerian cocoa sector even thou it still has lots of setbacks. The value of
globalisation for an under developed country like Nigeria is situated on the
capability of wealth creation by means of exportation growth, profits from
diversification of exported goods and services and approach to new
inventions intended in the world markets. Globalisation has however been
discerned to be managed in suitable ways using applicable fiscal policies
despite the opportunities it brings. Globalization brings increase in macro-
economy instability that has depicted the Nigerian government. This issue
indicates that the Nigerian economic development may stay only a fantasy
and tough to objectify. An extremely globalised and incorporated financial
market grows speedily across nations. Price instability leads to financial
shocks, loss of market value, affects exchange rate and interest rate as well
as output, employment and eventually social effects. The rate of Nigerians
living below the poverty line has been on the rise since the 1980’s despite
the fact that the country itself is a very rich country. Majority of the time, it’s
the minority farmers that benefit from these programs and that is the reason
why the effectiveness of these programs are vague and the eradication of
poverty with these initiatives and sponsor are still questionable. The IMF
once reported that for globalisation to succeed it must impact the life of
every individual of the global community and the Nigerians are not excluded
from this theory. In addition, for globalisation impacts in the Nigeria cocoa
sector to be successful it ought to bring not more of poverty but riches and
offer social justice and equity, economic bloom and improved
communication to the farmers. Nigeria has been observed to be

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impassionate about technological and economic marvel of globalisation but
forget that majority of the regions and sectors still remain omitted and
obscure. Africa has been the number one continent still wallowing in poverty
irrespective of the impacts of globalisation. The revenues generated from the
cocoa sector should be put back into the development of the sector for a
sustainable future. The act of hoarding and not carrying out contracts also
draws back the development of the sector. Agricultural globalisation should
not be shoved by the zeal to make money because profit desire seldom takes
into consideration the poor and the effects or future needs of the planet.
Finally, more action is needed to ensure the development of the cocoa
sector. The Nigerian government have to see globalization as a contest and
should explore better means to encounter the impacts as well as contending
with the challenges of globalisation.

RECOMMENDATIONS

I think that the cocoa sector if given necessary development actions can
generate more wealth that can impact immensely on the people and the
economic development of Nigeria. The need for the government to
investment on infrastructure is very crucial and should be given urgent
attention. Also the price instability of the produce if stabilized will be a huge
influence on the value of the product both locally and internationally because
it will stabilise the cost of other expenses such as shipping, transportation
from farm gates as well as profits. In addition price stability will attract
investors and increase the chances of the produce regaining its international
market value. Furthermore, the government needs to improve their
environmental policies by placing laws for oil companies to manage and take
responsible for damage of farmlands caused by oil spillages. This will
contribute on the improvement of the quality of the produce and also reduce
the neglect of dead farm lands. Lastly, the decision making process of the
initiated programs should be effective enough to see positive results of their
actions. The cocoa sector can only be effective if directly affected parties
persist on their decision making.

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