In this interview with EDIDIONG IKPOTO, the Chief Executive Officer of CapitalSage Holdings, John Alamu, highlights some of the challenges bedevilling Nigeria’s cocoa industry. He also talks about the growth prospects of the tech sector
Can you tell us a little about CapitalSage Holdings?
CapitalSage Holdings is a business conglomerate with business interests in finance, health and agriculture. We have over 15 different subsidiaries. We have businesses across all the states in Nigeria, and we are also present in five African countries — Ghana, Gambia, Kenya, Cameroon and Togo.
According to the Nigeria Export Promotion Council, the country is the fourth-largest cocoa producer, having a 6.5 per cent share of global production. Does this claim reflect the revenue made from cocoa going by trade statistics?
All available data clearly show that Nigeria is the fourth cocoa-producing country in the world after the Ivory Coast, Ghana, and Indonesia. We used to be number, but we know what is responsible for our position as number four. This includes the fact that we are not planting trees, while every other country is planting trees.
The second reason is our over-dependence on crude oil. The third reason is that our youths are not really interested in the cocoa business. This is traced to the fact that cocoa takes a lot of years to grow. What we earn as a country compared to what other countries earn is relatively small. This is because we export more raw cocoa rather than processed ones. Other countries have multinationals processing in their countries, thereby exporting finished goods and not raw materials.
If you export the finished product, which is chocolate, you will get ten times the value compared to what you get when you export the raw bean. So, what we are earning is far behind the potential of what we are supposed to earn. Until we start planting more trees, until the body language of the government at the federal level starts tilting towards cocoa again, I think the status quo will not change.
What can be done to make the country attain its full potential in cocoa production?
We are far behind. We have not even started reaping the benefits of our potential at all. You will recall that when Nigeria was running a regional government, cocoa was our oil in the South. You could see from investments, including the cocoa house in Ibadan and many other major O’odua investments that were funded by Chief Obafemi Awolowo. Cocoa still has that potential, and until we start adding value, that is when we will achieve that potential.
Cocoa has the potential of serving as raw material for food and beverages, cosmetics, and pharmaceuticals. In what area do you think Nigeria has a comparative advantage?
When you process the cocoa bean, the major product from the cocoa bean is cocoa butter while the by-product is cocoa cake. The cocoa cake can be turned into what we call cocoa powder. Premium quality cocoa butter is what is exported to Europe to consumers in the Western world as a major raw material for chocolate production. The powder is used by the confectionary industries to produce biscuits, cookies, etc. and by the beverage companies to produce different kinds of beverages.
In Nigeria, we do not consume a lot of chocolates and I think that is also a big problem. Even though we process cocoa, the majority of the core products from the processing are exported.
This is because chocolate is regarded as an affordable luxury. An average Nigerian with the current minimum wage would not select cocoa in his priority consumption list. He would rather go for garri and things that can take care of the family. I think the poverty line in the country is affecting the consumption of chocolate.
Secondly, chocolate needs to be included in school feeding programmes so that the children already have it in their taste buds. It is only when they have it in their taste buds as children that they will use their money to buy chocolate when they grow up.
Currently, the demand for chocolate is growing. We have seen a lot of actors in the country developing different brands of chocolates to address Nigeria’s demand market. They are doing well, but the effort of the private sector is not enough. Until chocolate is included in school feeding programmes, we still have a long way to go. Such programmes can be very capital-intensive. It can only be funded by the Federal Government. So, when we say we need government intervention, these are some of the things we are talking about.
As a company, what exactly have you done to address some of these issues that you have mentioned?
The majority of our investments are in Ondo State. We acquired a cocoa factory in Akure and we also purchased the assets of cocoa products in Oluji, which makes us, in terms of capacity, the second-largest cocoa processing plant in Africa after a factory in Ghana. We are very deliberate in our forward integration. We have developed quite a number of chocolate varieties and we are also investing in the chocolate business.
The problem with chocolate in Nigeria is cold storage. Because of our temperate climate, we do not sell chocolate in public like we sell other snacks, and that is one thing we are working on in order to promote chocolate consumption locally. We are also working with the Ondo State government. They have really been supportive. The Ondo State government has a factory in Idanre. We are working with the state government towards the production of more chocolates in the factory and spreading these chocolates across different marketing channels. We hope that with the new government, we will be able to take this advocacy to the federal level.
Has the government done enough to incentivise the cocoa business in Nigeria?
At the state level (Ondo), Governor Rotimi Akeredolu is doing a very good job when it comes to the cocoa value chain. When you look at his policies, he has very positive body language about the cocoa value chain in the state. That is why we are very much comfortable investing billions of naira in the state. However, we need more than state-level advocacy. If you look at the cocoa value chain from the national perspective, we still have a long way to go.
For people to invest in value addition, there have to be some incentives. Power is very expensive. Most factories run on diesel. So, many factories have closed down because of the cost of power. Secondly, the Federal Government needs to support cocoa plantations. We have seen different Anchor Borrower schemes for different groups. If such a gesture is extended to cocoa, then, problems like land and access to finance for farmers would be addressed at a much more national scale.
Unlike rice, maize and other crops, cocoa cultivation requires a lot of land area. The loan structure for cocoa has to be different because the newest variety could take a minimum of 18 months to start having some meaningful yield. This is very long compared to maize which takes 90 to 180 days, or cassava which takes one year. So, the government still has a lot to do in the areas of power, loans to farmers and other incentives, not just for the cocoa sector alone, but for the other value chain actors.
You refer to yourself as a “Tech Bro”. How do you think the recent contraction of the global tech industry will affect funding for Nigerian startups?
One mistake we have always been making is that when people talk about tech, the first thing we think about is finance. There are different sectors in tech. We have the social media space. We have the finance space. Even for finance, it is quite broad. We have crypto finance and regulated finance. If you look at social media, the likes of Facebook and Twitter are laying off. A few of the finance leaders are also laying off. But then, if you look at what is happening in Africa, we have seen the news that some major stakeholders have laid off employees. If you come to Nigeria and look at what is happening from the top, you will see that there are deliberate policies made to move from traditional banking to a cashless economy. This means that the outlook for the fintech industry in Nigeria is very bright.
The recent policy has caused a surge in the banking system. We have seen many complaints relating to failed transfers. This is because the banks and the tech companies were not ready for that surge. So, there seem to be a lot of opportunities for the tech companies in Nigeria to quickly tap into. Investors and funders will be motivated to fund tech companies that are aligned with their own company goals. So, I think that there are opportunities in the Nigerian fintech industry considering the body language of the regulators in transiting from traditional to cashless banking.
There seems to be a growing appetite for tech among Nigerian youths. Do you think we have enough job opportunities for these youths?
I think the question is not about employment. Those who are interested in the tech space will rather become job creators than people who are looking for jobs. That is what makes tech unique — the fact that you are able to create a product that is a service makes you become more of an employer than an employee.
Tech guys are one of the most sought-after currently. The ones who do not have talents for entrepreneurship have guaranteed jobs with good pay. This interest in the tech industry is really positive. However, I would be very cautious in saying that because we are also aware that there is a lot of emigration of this population.
A lot of programmers are leaving Nigeria. This is one of the reasons fintech and banks struggled during this cashless period. Yes, we have the talents here, but there is a growing concern about social incentives and security that is not here. So, they go outside in search of greener pastures.
