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COCOA EXPORT AND ECONOMIC GROWTH OF NIGERIA (1981-2014)

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Nigeria, a major exporter of cocoa beans, has historically relied on agriculture as a significant contributor to its economy. Cocoa production plays a crucial role in Nigeria's agricultural sector, impacting both rural livelihoods and national economic dynamics. Understanding the relationship between cocoa export and economic growth is essential for policymakers and stakeholders aiming to foster sustainable development.

The oil boom of the 1970s brought with its fundamental changes in the Nigerian economy particularly the agricultural sector. The first is the heavy dependence of the economy on crude oil export as the main source of foreign exchange earnings and revenue to the government. Secondly, agriculture was relegated to the background resulting in a declining trend in its contribution to export earnings. Cocoa contributed immensely in 1960s and 1970s growth of Nigerian economy (Adeyeye, 2014).  For example, it served as source of raw materials, employment generation and made a significant contribution to gross domestic product (GDP). In1960 Nigeria ranked among one of the highest cocoa producers in the world. For instance, cocoa output peaked at 308,000 tonnes in1964, unfortunately the figure dropped sharply in 1980 and 1981 to 155 tonnes and continually down to 110,000 tonnes by 1990 and 1991 farming seasons. This trend has being since and it has negatively impacted to economic growth and general economic development.

This study investigates if there is a significant long – run relationship between cocoa exports and economic growth in Nigeria. The study covers the periods between 1981 to 2014. The underlying models are the export led growth, hypothesis, neo – classical growth model, presbich trade model and Keynesian model. In the formulated model, real gross domestic product was used as a proxy for economic growth. The explanatory variables used were cocoa export earnings, exchange rate and government expenditure on agriculture. The study made use of unit root test and Johnsen maximum   likelihood test of co-integration. It was discovered that a long – run equilibrium relationship exist between cocoa export and economic growth such that it is elastic in nature meaning that a unit increase in cocoa exports will bring more than a proportionate increase in the real gross domestic products in Nigeria. 

1.2 Statement of the Problem

Despite Nigeria's substantial cocoa production, questions remain regarding the direct impact of cocoa export on the overall economic growth of the nation. The fluctuations in cocoa export earnings and their correlation with broader economic indicators require detailed analysis to inform effective economic policies.

1.3 Objectives of the Study

The main objective of this study is to determine the impact of cocoa export on the economic growth of Nigeria from 1981 to 2014. Specific objectives include:

i. To evaluate the impact of cocoa export earnings on GDP growth in Nigeria.

ii. To determine the relationship between cocoa export volume and foreign exchange earnings.

iii. To find out the effects of global cocoa price fluctuations on Nigeria's export revenue.

1.4 Research Questions

i. What is the impact of cocoa export earnings on GDP growth in Nigeria?

ii. What is the relationship between cocoa export volume and foreign exchange earnings?

iii. How does global cocoa price fluctuation affect Nigeria's export revenue?

1.5 Research Hypotheses

Hypothesis I

H0: There is no significant impact of cocoa export earnings on GDP growth in Nigeria.

H1: There is a significant impact of cocoa export earnings on GDP growth in Nigeria.

Hypothesis II

H0: There is no significant relationship between cocoa export volume and foreign exchange earnings in Nigeria.

H2: There is a significant relationship between cocoa export volume and foreign exchange earnings in Nigeria.

Hypothesis III

H0: There is no significant effect of global cocoa price fluctuation on Nigeria's export revenue.

H3: There is a significant effect of global cocoa price fluctuation on Nigeria's export revenue.

1.6 Significance of the Study

This study is significant as it provides insights into the role of cocoa exports in Nigeria's economic growth strategy. Understanding these dynamics can guide policymakers in optimizing agricultural policies and international trade relations to enhance economic stability and growth.

1.7 Scope of the Study

The study focuses on the period from 1981 to 2014, analyzing data related to cocoa production, export volumes, export earnings, GDP growth rates, and global cocoa prices specifically concerning Nigeria.

1.8 Limitations of the Study

Limitations may include data availability, reliability of historical records, and external factors impacting cocoa production and global trade dynamics during the study period.

1.9 Definition of Terms

Cocoa export: The shipment of cocoa beans and cocoa products to foreign markets.

Economic growth: The increase in a nation's production of goods and services over time, typically measured by GDP growth.

GDP (Gross Domestic Product): The total monetary value of all goods and services produced within a country's borders in a specific time period.

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