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Export Function of Cocoa Production, Exchange Rate Volatility and Prices in Nigeria

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  • Alaba David Alori
  • Adebayo Augustine Kutu

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.

Suggested Citation

  • Alaba David Alori & Adebayo Augustine Kutu, 2019. "Export Function of Cocoa Production, Exchange Rate Volatility and Prices in Nigeria," Journal of Economics and Behavioral Studies, AMH International, vol. 11(2), pages 1-14.
    • Handle: RePEc:rnd:arjebs:v:11:y:2019:i:2:p:1-14
    DOI: 10.22610/jebs.v11i2(J).2813
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    2. Simla Tokgoz & Summer Allen & Fahd Majeed & Bas Paris & Olajide Adeola & Evans Osabuohien, 2020. "Distortions to agricultural incentives: Evidence from Nigerian value chains," Review of Development Economics, Wiley Blackwell, vol. 24(3), pages 1027-1045, August.
    3. J. Zivanomoyo & A. Mushunje & W.N. Bandura, 2022. "The effects of exchange rate volatility on trade performance in Southern African Development Community countries: Pooled mean group approach," Journal of Economic Policy and Management Issues, JEPMI, vol. 1(1), pages 12-20.
    4. Mukhlis MUKHLIS & Raja MASBAR & Sofyan SYAHNUR & M. Shabri Abd. MAJID, 2020. "Dynamic Causalities Between World Oil Price And Indonesia’S Cocoa Market: Evidence From The 2008 Global Financial Crisis And The 2011 European Debt Crisis," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 217-233, June.

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