JAFE Vol. 4 (1): 47-58
Nigeria's Cocoa Export Response to Selected Macro-economic Variables (1971-2013): A Co-integration Approach
B. U. Odara and R. A. Isiorhovoja
ABSTRACT
This study examines Nigeria's cocoa export response to selected macro-economic variables, namely: export price, exchange rate,interest rate, domestic price of cocoa, quantity of cocoa produced and trade openness from 1971 to 2013. The specific objective was to evaluate the response of Nigeria's cocoa export to variations in these variables in the international market. Secondary data were utilized for the study and they were sourced from Central Bank of Nigeria (CBN) Statistical Bulletin, National Bureau of Statistics, Federal Ministry of Agriculture Production Yearbook and the Food and Agriculture Organization reports. Data were analyzed using graphical method to ascertain the trends in cocoa export (the dependent variable) and export price, foreign exchange rate, interest rate, domestic price, domestic cocoa production and trade openness (the independent variables respectively). Temporal properties were checked using Autoregressive Integrated Moving Average (ARIMA) model, and the meaningful long-run and short-run relationships between the variables were determined by the use of Johansen Maximum Test of Co-integration and Vector Error Correction model (VECM) respectively. The elasticity of cocoa export to the independent variables was measured by constant elasticity model. Findings revealed that the long- and short-run VECM estimated coefficients of cocoa export price (0.14 and 0.06) and foreign exchange rate (0.29 and 0.06) respectively were not significant at 5% level of significance. Furthermore, it showed that the long-run (0.14 and 0.29) and short-run (0.06 and 0.06) elasticity of export price and foreign exchange rate respectively were not statistically significant at 5% though they possessed a long-run relationship with the volume of cocoa exported over the period under review. Finally, the elasticity of other macro-economic factors such as interest rate (0.329), cocoa production (0.88) and domestic price of cocoa (0.37) favoured cocoa exports in the period under review both in the long-run and short-run. The volume of Nigeria’s cocoa export was increasing, though not dramatically. Increases in the independent variables, however, appeared to be more marked. Based on the findings, it was recommendedthat effective promotion of cocoa exports through the National Export Promotion Council (NEPC) should be more proactive by way of providing information to farmers on the prevailing conditions in the world cocoa market to inform timely action/reaction.
KEYWORDS: Elasticity, Cocoa export, ARIMA, Vector Error Correction Model