The price of shea nuts, which are used in cosmetics and confectionery, plunged in Nigeria after the government joined other West African countries in banning exports.

The nuts sold for 800,000 naira ($521) a ton at the close of trade on Thursday, down 33% from a few days earlier, according to Rildwan Bello, chief executive officer of Lagos-based Vestance, a consultancy that tracks agricultural commodity prices.

President Bola Tinubu said the six-month moratorium on shipments was needed to “secure supply for local processors, create jobs, and protect a value chain where 95% of pickers are women.”

While the move was well-intentioned, there would be serious financial implications for major exporters, who now face defaulting on contracts, Bello said.

“Exports made the market vibrant. Local demand is not as high as local supply,” he said by phone from Lagos. “The idea of growing the local industry doesn’t happen overnight. You don’t set up a processing industry within two months. The manner of the implementation leaves a lot to be desired.”

The slow-growing trees that produce shea nuts are indigenous to West Africa. Nigeria produces about 500,000 tons of the nuts annually, government data shows. Burkina Faso, Ghana, Mali, Ivory Coast and Togo – all of which restrict exports to promote local processing — are the other main producers.

Shea butter can be used as a substitute for cocoa butter and US regulators have granted approval for it to be added to baked goods and moisturizers. Two leading global producers of plant-based oils— Dutch company Bunge Loders Croklaan, a subsidiary of Bunge Ltd., and AAK AB — produce the butter in West Africa, with the former operating a processing plant in Ghana since 2019.

Since taking office in May 2023, Tinubu has sought to generate jobs by restricting the sale of raw materials to other countries. The ban on nut shipments will help correct an imbalance whereby the country produces nearly 40% of the world’s supply, yet captures less than 1% of a $6.5 billion global market, he said.

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Mobola Sagoe, CEO of Lagos-based beauty products company Shea Origin, expects the ban to “halt the massive illegal exportation of raw shea nuts from the country and the sub-region.” The “decision could not have come at a better time,” she said.

Ali Saidu, chief executive officer of Nigerian processor Salid Agriculture Ltd., which supplies oils to Bunge and AAK, sees the moratorium as an opportunity. His company aims to sharply increase production of its own shea butter from its plant in central Niger over the next six months.

But Adesuwa Akinboro, country director at TechnoServe, a US-based nonprofit that tries to help smallholder farmers in middle- and low-income countries increase their earnings, is skeptical the move will have a positive effect.

“The ban will initially shrink the market and result in reduced incomes,” she said. “Six months is too short to really reap the benefits.” (Bloomberg)