2018 was quite a good year for cocoa farmers and investors, as cocoa prices firmed up. While other major commodity prices softened on the back of a stronger dollar and the impact of changing market dynamics (demand & supply), cocoa finished the year 27% stronger after being subdued for two consecutive years.

Increased production in Ivory Coast and Ghana (boosted by favourable weather conditions) fueled the high global supply of cocoa over the 2016/2017 season, resulting in a slump in cocoa prices at the time. The record low-pricing on cocoa (a ten-year record low) resulted in much stronger demand for cocoa bean seeds and supported the commodity’s 2018 price rally.

So far this year, prices have continued to firm further due to a confluence of demand and
supply factors. On the supply side, key producers (Cote d’Ivoire and Ghana) had threatened to stop selling their products to buyers unwilling to meet a minimum price floor of US$2,600/ton, compared to the International Cocoa Organisation’s average price of

Although the stakeholders in the cocoa value chain have since agreed to the price floor, the key producers still went ahead to suspend the sale of cocoa beans to the open market under the 2020/2021 crop season until further notice for preparation of the implementation of the floor price. This has created artificial scarcity for cocoa beans in the market and supported a rise in price as both countries account for 60% of global cocoa supplies.

On the demand side, the price of cocoa is being supported by increasing chocolate consumption in emerging markets. In the past, chocolate used to be considered an exotic
product to EM consumers. The current trend in EM consumption patterns reveals gradually
increasing chocolate consumption, particularly during festivities.

In China for instance, during the Chinese New Year or Valentines’ Day celebrations, half of the top ten items sold in the food and beverage category are chocolates and chocolate products. Eurostat also confirmed that emerging markets are lifting chocolate sales volumes. The agency identified the ten fastest-growing chocolate markets in the world and all the listed countries were emerging markets including India, Algeria, and Nigeria.

In our opinion, the potential for growth in chocolate sales in emerging markets is highly
attractive and could lead to major investments by the big players in the chocolate industry
in Africa where 65%-70% of global cocoa beans are sourced (Cote d’Ivoire, Ghana, Nigeria,
Cameroon and Togo). Such investments in a country like Nigeria can create opportunities
for employment while improving the standard of living of the citizens.

That said, attracting investments into Nigeria will largely depend on the ability of the government to create an enabling environment for foreign direct investments.