Competitiveness of Nigerian Palm Oil in the World Market: An Econometric Analysis

Abstract

The dependence on crude oil exports as a dominant source of foreign exchange earnings has retarded the growth of agricultural export and earnings in Nigeria. The steady decline of competitiveness in the foreign agricultural export market has been of great concern. The study investigated competitiveness of Nigerian palm oil in the global market. Annual time-series data obtained from Food and Agriculture Organization Statistics (FAOSTAT) databases were used in the study. The time trend analysis was used to examine the trends in the movement of production, export supply and competitiveness (market share) of palm oil in the world market. Cointegration and error correction analysis was used to understand the relationship between the competitiveness (market share) of palm oil and its selected determinants. Results revealed an increasing trend in the domestic production of palm oil over the study period. The average domestic production of palm oil over the study period was 77632.40 tonnes. The export supply and market share of palm oil fluctuated over the period of the study reaching an average of 5762.41 tonnes and 36.09 percent respectively Results of error correction analysis revealed that the exchange rate, export tax, the interest rate on the agricultural loan, and the inflation rate negatively affect the market share of palm oil. However, technological progress in agriculture positively affects the market share of palm oil.