Cocoa production, export quantity and prices nexus in Nigeria: An intertemporal analysis

Abstract

Cocoa was the major export commodity in Nigeria in the 1950’s, 1960’s and early 1970’s which production capacity played a significant  role in Nigeria's economy by contributing to employment, foreign exchange earnings, and rural development. Fluctuations in  international cocoa prices can impact the income of cocoa farmers and low prices may also discourage farmers from investing in the  necessary inputs, such as fertilizers and pest control measures, which are crucial for maintaining the quality and productivity of cocoa  farms. This study therefore examined the causal relationship between cocoa export quantity, prices and production. The study area is  Nigeria. Secondary data was sourced from Food and Agricultural Organisation (FAO, 2021) database while data on cocoa price was gotten  from International Cocoa Organization in 2023. Analytical techniques adopted for the study was descriptive statistics and Granger  Causality test. The trend analysis reveals patterns reflective of the cobweb theory, wherein farmers' responses to previous  season price changes influence current productivity and output. The surge in cocoa demand post-2008 financial crisis spurred increased  production, but subsequent years witnessed diminishing returns due to market saturation. Fluctuations in global cocoa prices were  observed to impact local production dynamics, with divergent patterns emerging between local production, export volumes, and global  prices in later years. Causal analysis results show a unidirectional relationship between cocoa production and export volume while,  changes in export prices drive adjustments in cocoa production, highlighting farmers' sensitivity to market signals. However, no direct causal link was found between export volume and prices, indicating the influence of additional factors such as exchange rates and export  policies.