Abstract
This study examined the export function of cocoa production and determined the impact of exchange rates and price volatility on the exportation of cocoa in Nigeria. The Phillips-Perron (PP) and Augmented Dickey-Fuller (ADF) unit root tests, Ordinary Least Square (OLS) and Structural Vector Autoregressive (SVAR) methodologies were employed to analyse the time series data that spanning from 1970:01 to 2016:12. The PP and ADF unit root tests findings indicated that none of the variables was stationary at levels (I (0)) however, after the first difference I (1) they became stationary. At 5%, the OLS results showed that all the variables were statistically significant in analysing the effects of exchange rates and price volatility on the value of cocoa production in Nigeria. The price of cocoa in the international market and the value of exchange rates play a significant role in cocoa exports growth in Nigeria. Further, findings from the SVAR showed that an increase in the price of cocoa would increase cocoa production and cocoa export growth in Nigeria, while the exchange rate volatility would affect cocoa export growth in Nigeria. The result further revealed that the shocks to exchange rate accounted for the greater volatility (positively significant for the entire period) to the value of cocoa exported, as against other variables in the model. Based on those findings, the paper, therefore, recommends that there should be a free exchange rate market determination, in order to enhance the export growth and increase cocoa output in Nigeria.
Highlights
The cocoa sub-sector of the Nigerian economy has received increasing attention as an essential part of the current economic reform agenda of the federal government on diversification of the nation’s export base from crude oil and boost agricultural production
The performances of the agricultural export fell below equality and the agricultural sector experienced a persistent decline after economic reform undertaken through the Structural Adjustment programme (SAP) of 1986 whereas this sector was a major contributor to Nigeria’s foreign exchange earnings
There was instability of the exchange rate movement due to the devaluation policy and this raised concerns about the effect of such policy on the flow of agricultural trade in the Nigerian economy (Okunmadewa, 1999). Both the exchange rates and prices of cocoa export in Nigeria between 1970 and 1977 were stable. This stability was attributed to the Nigeria Commodity Board (NCB) policy impacting on the controlled export prices
Summary
The cocoa sub-sector of the Nigerian economy has received increasing attention as an essential part of the current economic reform agenda of the federal government on diversification of the nation’s export base from crude oil and boost agricultural production. Prior to the 1980s, cocoa was a major source of foreign exchange earnings, the leading agricultural export commodity and economic development in Nigeria (Abang & Ndifon, 2002; Nkang et al, 2006). There was instability of the exchange rate movement due to the devaluation policy and this raised concerns about the effect of such policy on the flow of agricultural trade in the Nigerian economy (Okunmadewa, 1999). Both the exchange rates and prices of cocoa export in Nigeria between 1970 and 1977 were stable. This stability was attributed to the Nigeria Commodity Board (NCB) policy impacting on the controlled export prices
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