Nigeria’s Cocoa Board Debate: Why Price Fixing Without Productivity Reform Risks Repeating History -By Adeyinka Adebayo

Nigeria’s renewed debate over reintroducing a national Cocoa Board has resurfaced at a moment of extraordinary global cocoa market disruption. While the proposed Cocoa Management Board Bill has been stepped down at the National Assembly, farmers are increasingly demanding clarity on the government’s intentions. This uncertainty is understandable as cocoa export revenues have surged to historic highs, yet farm-level realities remain stubbornly constrained.

A careful examination of historical experience, international price data, farm-gate price transmission, and Nigeria’s own export composition suggests that price fixing alone will not solve Nigeria’s cocoa sector challenges. In fact, if poorly designed, it risks recreating the very inefficiencies that once undermined farmer incentives and long-term output growth.

Nigeria’s Cocoa Export Boom: Nominal Growth Without Real Expansion

Nigeria’s cocoa export earnings expanded sharply between 2023 and 2025. National statistics indicate that cocoa export receipts rose by several hundred percent year-on-year, crossing the trillion-naira threshold. However, this surge reflects nominal value growth rather than real volume expansion.

FAOSTAT, NBS, Author’s Computation

The data reveals a classic price-driven export expansion, amplified by global cocoa supply shocks (West African weather stress, disease), rapid appreciation in international futures prices, and domestic currency depreciation. Crucially, output volumes and yield per hectare have not increased proportionately. In economic terms, Nigeria is experiencing terms-of-trade gains, not structural productivity gains. This distinction matters deeply for policy design.

Cocoa Boards in Practice: Ghana and Côte d’Ivoire

Ghana and Côte d’Ivoire operate centralized cocoa marketing boards that announce farmgate prices ahead of each season. These institutions perform an income-smoothing function by insulating farmers from short-term price volatility.

However, during periods of sharp international price increases such as the 2023–2025 supply shock-fixed producer prices result in implicit taxation. Farmers receive a declining share of the international price, while cocoa boards accumulate surplus revenues, effectively operating as quasi-fiscal institutions.

Price Fixing and the Illusion of Farmer Prosperity

Proponents of a cocoa board often argue that fixed producer prices protect farmers from volatility. This is partially true. However, international evidence shows that price stabilization comes at the cost of asymmetric price transmission. To illustrate this, let us consider quarterly international cocoa prices versus farmer prices in Ghana and Côte d’Ivoire.

International prices rose from about USD 2,700/MT in early 2023 to over USD 9,500/MT in early 2025. Ghana’s producer price remained fixed within seasons, moving from about USD 2,070/MT to around USD 5,040/MT with long lags. While price transmission ratio fell below 45% during peak price periods, this implies that more than half of global price gains were not transmitted to farmers. From a welfare economics perspective, this represents a deadweight transfer away from producers during positive price shocks.

Côte d’Ivoire’s Conseil du Café-Cacao operates a comparable forward-selling and fixed-price regime with Ghana Cocobod. Despite strong institutional capacity, it exhibits delayed price adjustment, suppressed upside income capture, increased incentives for side-selling during price spikes and this reinforces a key empirical conclusion: price fixing smooths downside risk but systematically suppresses upside rewards.

Nigeria’s Historical Experience with Cocoa Board

Nigeria’s pre-liberalization marketing boards were characterized by administered pricing, delayed payments, and weak reinvestment mechanisms. While these boards reduced price volatility, they ultimately suppressed farmer incentives and failed to raise productivity. The failure was institutional rather than conceptual: revenues were not systematically reinvested into yield enhancement, replanting programmes, or extension services.

The Central Policy Misdiagnosis

The current policy conversation implicitly assumes that: “Higher export revenues imply higher farmer welfare.” Data contradicts this assumption.

In other words, Nigeria’s cocoa sector is benefiting from exogenous price shocks, not endogenous productivity growth. Any institutional reform that focuses primarily on price administration while neglecting supply-side constraints will be inherently incomplete.

From an economic standpoint, rigid cocoa boards introduce several inefficiencies. Fixed prices can distort market signals, weakening farmers’ incentives to respond to favorable global conditions. Forward-selling at pre-agreed prices exposes boards to intertemporal misallocation, as they face basis risk when futures prices diverge sharply from spot markets. Additionally, cross-border price differentials create opportunities for arbitrage and smuggling, which undermine official supply chains and further reduce market efficiency. These are not theoretical risks; they are empirically observed outcomes in regulated cocoa markets.

What a Reformed Nigerian Cocoa Board Should Look Like 

A reintroduced cocoa board in Nigeria should not function as a pure price-fixing institution, rather than reinstating rigid price fixing, Nigeria should consider hybrid governance mechanisms that preserve market signals while managing volatility. 

Policy Option 1: Indexed Producer Pricing
This approach links farm-gate prices to a trailing international price average, adjusted for local cost-of-production indices, and incorporates explicit volatility bands. By tying domestic prices more closely to global market realities while accounting for local production costs, it helps farmers respond efficiently to market signals and reduces distortions caused by fixed pricing.

Policy Option 2: Risk-Sharing Instruments
Under this option, cooperative-level hedging using futures and options is promoted, shifting the focus from rigid price controls to proactive risk management. Farmers and cooperatives can better manage exposure to international price fluctuations, stabilizing incomes without suppressing market signals.

Policy Option 3: Productivity-First Intervention
This strategy redirects institutional attention toward addressing the fundamental bottleneck of stagnant output per hectare. Key measures include providing yield-enhancing inputs, implementing replanting programs, expanding extension services, and promoting quality upgrading and traceability. By focusing on productivity improvements, the sector can achieve sustainable growth and stronger competitiveness in global markets.

Nigeria stands at a crossroads in its cocoa policy. Replicating Ghana’s cocoa board model without addressing Nigeria’s structural productivity deficit risks repeating historical failures. Sustainable reform requires aligning price stabilization with aggressive productivity enhancement. Without this, a revived Cocoa Board will redistribute rents rather than transform the sector and cocoa export revenues will not translate into sustainable farmer prosperity, but just impressive headline numbers.

– Adeyinka Adebayo is a finance professional experienced in managing global trading operations for cocoa and other agri-commodities.