Nigeria’s Cocoa Exports to EU at Risk Over New Deforestation Rules

Nigeria’s cocoa industry faces a major test as exporters and hundreds of thousands of smallholder farmers race to comply with European Union anti-deforestation requirements that could determine their continued access to one of the world’s most important cocoa markets.

The EU Deforestation Regulation will require companies selling covered commodities into the bloc to demonstrate that their products are not linked to recently deforested land and can be traced back to where they were produced.

For Nigeria, the requirements pose a particular challenge because cocoa production is dominated by small-scale farmers and supply chains that can involve several intermediaries before beans reach exporters.

Nigeria has about 300,000 predominantly small-scale cocoa farmers, according to data cited by Reuters from the Nigerian Export Promotion Council.

Industry estimates suggest farmers responsible for more than half of the cocoa produced in Nigeria could struggle to satisfy the new requirements when implementation begins at the end of December.

The potential consequences extend beyond individual farmers.

The European Union is a critical destination for cocoa, accounting for about 60% of global cocoa purchases, while West Africa produces approximately 70% of the world’s cocoa beans.

Nigeria, Ivory Coast and Ghana are therefore under pressure to improve traceability across supply chains that were not originally designed to provide farm-level information for every shipment entering Europe.

Under the new regime, exporters will need detailed information showing where cocoa was produced while providing evidence necessary for European importers to conduct due diligence.

That is forcing Nigerian exporters to invest in farm mapping, digital traceability systems, verification and personnel to work directly with farmers.

Sunbeth Global has spent three years mapping approximately 124,000 hectares of farmland connected to about 60,000 metric tons of cocoa within its supply chain.

The process has cost the exporter between $30 and $70 per metric ton, according to the company.

Sunbeth has also deployed field personnel to work with farmers and established a 35-person sustainability team as it prepares its supply chain for the European requirements.

Another major Nigerian exporter, Starlink Global and Ideal, which ships around 60,000 tonnes of cocoa annually, estimates that mapping and traceability have cost it between $40 and $80 per tonne since 2023.

Those investments are creating a new financial challenge for exporters because European customers have so far been reluctant to absorb all the additional compliance expenses.

If exporters cannot recover those costs through higher prices, spending on traceability could reduce margins even for companies that successfully preserve access to the European market.

Companies that have already invested heavily in compliant supply chains could nevertheless gain a competitive advantage.

A shortage of fully traceable cocoa after the rules take effect could increase demand for beans from exporters capable of providing European buyers with the required documentation.

The adjustment could consequently divide Nigeria’s cocoa market between producers connected to well-organised and traceable supply chains and farmers who lack the infrastructure needed to demonstrate compliance.

That risk is particularly significant for smaller producers in remote communities.

Farmers supplying established exporters with mapping programmes, field agents and digital traceability systems may be better positioned to continue selling into Europe. Others could be forced to find alternative buyers or markets if their cocoa cannot satisfy EU requirements.

The problem extends across West Africa.

In Ivory Coast, which is the world’s largest cocoa producer, only around half of cocoa production could be traced to its origin, according to research cited by Reuters.

Industry participants warn that compliance difficulties across major producing countries could temporarily reduce the volume of cocoa available to European buyers.

Such a disruption could increase procurement costs for chocolate manufacturers while creating premiums for cocoa that can be independently traced through compliant supply chains.

For Nigeria, the stakes are particularly important because cocoa is one of the country’s leading agricultural exports and an important source of non-oil foreign exchange.

The coming months will therefore determine whether farmers, exporters and other participants across the supply chain can establish the traceability infrastructure required to protect Nigeria’s position in the European cocoa market.