Can Private Investment Sustain Cocoa Subsector Output in Nigeria? Empirical Evidence using Vector Error Correction Model: 1980-2016

Nwalem, M.P,Asogwa, B.C,Abu, O

doi:10.6007/ijarbss/v8-i7/4405

Abstract

This study was carried out to analyse effect of private investment on cocoa output in Nigeria using Vector error correction model: 1980-2016. Based on the availability of data, secondary data consisting of annual times covering a period of 37 years (1980-2016) were obtained from World Bank development indicators data base, food and agriculture organization. United Nations conference trade and development (UNCTAD), analysed using VECM (vector error correction model), Impulse response and Variance decomposition. Results showed the direction of cocoa (-0.001) and FDI(-0.000) were negative and significant at 1% and 5% level of significance. This implies that the direction of growth of ccocoa was decelerated over the period under review In contrast, gross domestic private investment (0.003) was positive and significant at 1% level of significance. This implies that the direction of GDPI is accelerated over the period under review. Results showed that the coefficient of determination (R2 ) was 0.616 indicating that 61.6% variation in output of the variation of cocoa output were explained by cocoa output in the previous year, foreign direct investment in the previous year, gross domestic private investment in the previous year and labour in the previous year. The study showed that a unit increase in labour will decrease cocoa output by 16.65% and 3.25% respectively. Further, results showed that cocoa output responded negatively to foreign direct investment and gross domestic private investment in both short and long run. The result further showed that cocoa output responded positively to labour in both short and long run. The result showed that in the short run cocoa output contributed to itself by 82.09%, FDI contributed to cocoa output by 4.23,GDPI contributed to cocoa output by 3.98% and labour by 9.68. The result further showed that in the long run cocoa output contributed to itself by 80.16%, FDI contributed to cocoa output by 4.91%. GDPI contributed by 4.97% and labour by 9.93%. It was recommended that incentives should be given to domestic and foreign private investors through tax, improved varieties, credit facilities in order to significantly sustain the subsector.

Highlights

Agriculture has contributed immensely to the growth and development of the Nigerian’s economy, with high potentials for employment generation, food security and poverty reduction
The result showed that cocoa output decreases along the following periods as follows: between 1980 to 1983, it decreases from 156000 metric tons to 140000 metric tons; between 1984 to 1987, it decrease from 160800 metric tons to 150000 metric tons; between 1989 to 1990,itdecrease from 256000 metric tons to 244000 metric tons; between 1994 to 1995, it decreased from306000 metric tons to 203000 metric tons; in 1998 it was 107461 metric tons ; and, across 2004,2009,and 2015, cocoa outputs were 360570,363510, and 195000 metric tons respectively
The decrease in cocoa output over these periods could be due to pest and diseases attack, inadequate credit grants to farmers to boost their cocoa farming capacity, limited or fragmented land that discourages mechanization and environmental factors could reduce the yield of cocoa over the period under review

Summary

Introduction

Agriculture has contributed immensely to the growth and development of the Nigerian’s economy, with high potentials for employment generation, food security and poverty reduction. Prior to the discovery of oil, Agricultural sector in the early 1960s served as the major source of employment, income and foreign exchange earnings for Nigeria. A mixed economy connotes a framework in which allocative mechanism in respect of what is to be saved, invested, produced and at what prices, is left to the forces of the market and not to any planning authority or government. The existence of the state is merely to buttress the mechanism and improve its efficiency (Aromoloran, 1998; Udo, 2016). It means that in a mixed economy, private sector should play the leading role while the public sector provides the enabling economic environment. This study analysed effect of private investment on Cocoa subsector output using vector error correction model

Methods

Results

Conclusion