Cocoa grinders threaten to quit Nigeria over high cost

The last may not have been heard of companies relocating from the country as a result of high cost of doing business in the country, as high cost of raw beans and crippling power shortages may soon force cocoa grinders to relocate to neighbouring countries with an easier business climate.
According to the National Chairman of Cocoa Processors Association of Nigeria (COPAN), Mr Akin Olusuyi, “the Nigerian cocoa industry faced its worst moment in 2010. But we have gone from bad to worse in the last one year. In my factory, we've been on generators since Monday last week. There has not been a minute of public power supply.” Olusuyi told Reuters that the same applied to other cocoa plants.
Scores of firms in other industries have already relocated from Nigeria in the last five years, citing poor infrastructure, erratic power supply, excessive bureaucracy and multiple taxation among the factors that make business uncompetitive.
Nigeria's cocoa processing capacity has slumped by about 90 percent in the last two years due to these problems and a weak global demand for products, COPAN said at a news conference late on Thursday.
Nigeria, which ranks as the world's No 4 cocoa grower, had about 18 grinders crushing over 200,000 tonnes a year in 1986, when the sector was deregulated, but only few are now partially operational, processing less than 40,000 tonnes.
Many have closed due to the rising cost of beans, which have hit an all-time high at the farmgate of N550,000 a tonne, compared to $3,775 in the international market on Friday. The cocoa processors have invested over N100 billion in the sector over the last five years, industry experts say, but the return on investment has been weak. Cocoa is Nigeria's biggest non-oil foreign exchange earner.
Olusuyi said though his plant can crush 10,000 tonnes of beans a year, he only managed to process 4,000 tonnes last year and will be lucky to grind a few hundred in 2011. "When you factor in...that the cost of your raw materials is not determined by you and the cost of your final product is not determined by you either, then you ask yourself why are you in operations at all," he said.
COPAN blamed the sharp rise in domestic cocoa bean prices on deregulation, which has allowed exporters to buy beans directly at the farmgate where they outprice local crushers, who have to pay interest rates of up to 22 percent to borrow from the banks. Another major obstacle stifling the sector is long delays in the payment of the Export Expansion Grant (EEG) by the government, Olusuyi said.

(Source: http://www.sunnewsonline.com/webpages/news/businessnews/2011/mar/07/bussines-07-03-2011-003.htm)