There are strong indications that Nigeria’s efforts to claw back some of the foreign-exchange earnings lost to falling oil prices are causing delays in exports ranging from cocoa beans to cashew nuts, and adding to a problem the central bank sought to address in the first place.
Nigeria is the world’s fifth-biggest producer of cocoa beans, a key ingredient in chocolate. As Africa’s largest economy, it also fell into a recession last quarter.
A Bloomberg report Friday quoted Pius Ayodele, president of Cocoa Exporters Association of Nigeria, as saying that about 100,000 tons of cocoa beans are trapped at the ports and another 100,000 tonnes of a variety of agricultural commodities are in warehouses around the country.
It now takes an average of 40 days, instead of seven, to get approvals to clear a container for shipping.
That’s after the central bank started insisting on additional documentation to ensure export proceeds are returned to the country.
The documentation process involves Nigerian Export Proceed (NXP) numbers, Form NXP, which is a mandatory document to be completed by all exporters through authorised dealer bank for shipment of goods outside Nigeria irrespective of the value and whether or not payment is involved. Any customer willing to engage in export business is required to register with the Nigeria Export Promotion Council.
According to the CBN rules, the basic documentary requirements for an export transaction includes, a duty completed Form NXP, a Proforma Invoice, a Sales Contract/ Agreement, where applicable, NEPC Registration Certificate, relevant Certificate of Quality as issued by one or more of the agencies stated in 1(d)(1)Shipping documents e.g. Bill of Exit, Bill of Lading, etc and other certificates, e.g. Form EUR-1.
However, in a recent virtual meeting with representatives of some shipping lines, the CBN Governor, Godwin Emefiele, noted that it has been discovered that many shipping companies do not comply with the Federal Government’s directives that such shipments carry NXP number.
The oil-price plunge is having a biting effect on dollar availability in the country. While crude contributes less than 10% to Nigeria’s gross domestic product, it accounts for about 90% of foreign-exchange earnings and half of government revenue.
The shortage of hard currency is also adding to the gap between the official exchange rate and that on the parallel market. That spread, now more than 20%, has created an incentive for exporters to divert dollar proceeds to unofficial channels.
The slowdown in trade flows since October has caused a loss exceeding 500 billion naira ($1.3 billion) in non-oil revenue for exporters, according to TolaFaseru, president of the National Cashew Association of Nigeria.
Some traders have cash-flow problems and default on loans due to the gridlock at the exporters association’s Ayodele said.
And while it’s a struggle to get shipments out of the country, the 2020-21 cocoa crop in world’s fifth-largest producer of the chocolate ingredient could exceed initial estimates by as much as 27% to reach 270,000 tonnes.
Reduced production by global chocolate manufacturers adds to their problems. Nigerian cocoa sellers are struggling to find buyers willing to enter into new forward contracts because many factories have shut operations because of the pandemic, said MufutauAbolarinwa, president of the Cocoa Association of Nigeria. International buyers are complaining of heavy stockpiles of unsold beans, he said.