Rising local prices induced by high cost of delivery to Lagos and a bigger-than-expected supply deficit and have caused a lull in the Nigerian cocoa market, traders said on Wednesday.
Exporters said the price of cocoa had climbed to 210,000 naira ($1,636) per tonne in the port city of Lagos from 195,000 naira last month, making it impossible to break even.
"There is very little business because the price is far above the international market price," one Lagos-based exporter told Reuters. London cocoa futures traded down on Wednesday, with the March contract shedding 6 pounds to 869 pounds per tonne.
The local price is also being driven up by grinders, who have expanded capacity in the last few years on favourable margins and investment climate, traders said.
"Only local crushers are buying, you can't buy for export at that price," said another trader. The price however, dropped to 180,000 naira per tonne at the farmgate in the south-western growing region after hitting a season high of 190,000 naira in early January, farmers and traders said.
They have predicted a big shortfall in Nigeria's main crop output due to scarcity of agro-chemicals and heavy rainfall before the harvest began in October.
"The fear of a supply shortfall is also driving up prices," one trader said. Licensed Buying Agents (LBAs), who purchase cocoa upcountry for exporters, attributed the high price in Lagos to the rising cost of transporting beans from the bush to the ports.
"It is a big problem transporting cocoa to Lagos. The roads are bad and there is no fuel, we usually pay 75,000 per trailer (articulated truck)," said one LBA in Akure, capital of Nigeria's leading cocoa farming state of Ondo.
Nigeria is the world's eighth-biggest oil exporter but it suffers frequent gasoline shortages because it has insufficient refining capacity and has to import the bulk of its needs.
Nigerians have been queuing around the clock for fuel for a month. The fuel import business is notoriously corrupt and prone to manipulation by middlemen with powerful patrons. The state-owned energy firm said that the latest crisis was due to pipeline vandalisation and hoarding by filling stations in anticipation of an official price hike.
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