1.1 BACKGROUND TO STUDY
Cocoa is a bean that is in high demand all over the world
especially by developed countries. Cocoa has several uses and benefits
to an economy. Africa is the largest producer of cocoa to the
international market, which are normally in Europe and America. Ivory
Coast, Ghana and Nigeria share the largest contribution to the world
market and with Ivory Coast by far the highest producer producing up to
39% of world output (UNCTAD, 2004). While the contribution of Nigeria
and Ghana is 19% and 6% respectively (UNCTAD, 2004). But our focus is
on Nigeria. World cocoa output was estimated to have increased by
50% in the early period of independence of the countries output
(between 1958 and 1966) with practically the whole increase coming from
West Africa (Ivory coast, Ghana & Nigeria mainly). Explaining
the basis of this increase, the FAO (1966) had this to say.
The remarkable upsurge in west African production
-in which Nigeria participated fully- can only be explained by the
coming into bearing of your trees, an increasing proportion of which
were of Amazon and selected high yielding Amelonado varieties, and the
effects of spraying against diseases and pests.
Thus, research findings can be said to have made a significant
impact on the Nigerian cocoa industry. This view was given credence and
quantitative support by some empirical studies which found that cocoa
research in Nigeria has generated an internal rate of return as high as
42 percent (Abidogun, 1982). Against this background of impressive
payoff to investment in cocoa research, it may be pertinent to access
the distributional impact of benefit generated in the process. In
particular, an export oriented industry like the cocoa industry, the
relative size of consumer surplus is of interest to policy makers on
account of its implication for research financing, allocate efficiency
and international equity.
Nigeria is an important player in the cocoa sector and as such,
the Nigeria output has effects on the international aggregate output
and price level. Cocoa production in Nigeria is done in the South
West of the country especially in Ondo state and some are seen in the
South -South zone especially in Akwa-Ibom state.
In the early part before and after the independence in Nigeria,
Nigeria was solely dependent on agricultural output such as cocoa as
means of foreign exchange and income for the government and citizenry.
The bulk of the country was run with revenues got from agricultural
produce. The Southwestern part of the country was reliant on the
production and sales of Cocoa. So also were the Northern part of the
country that gets its output from monkey nut (also know as groundnut).
The southern parts were not left out because they had vast amount of
land at the time providing them with palm kernel. Though, this region
also had additional income from coal from Enugu. But deductively, it
has been shown that the South West which founded were only cocoa was
richer that the Eastern part that had both palm kernel and coal. This
is an indication of the commercial viability and economic importance of
cocoa in the community of other cash crop. It is widely acknowledged
that Nigeria has a wide range of natural resources which agriculture
can be said to be included. This enormous base (e.g. cocoa) if well
managed, could be a support to the manufacturing sector
(industrialization) by providing supplies of raw material for the raw
material needs of the industrial sector as well as providing gainful
employment for the teeming population. One of the major development
expectations of the cocoa industry in Nigeria is the supply of raw
materials for the emerging agro-industrial processing and manufacturing
sector. This expectation, which is in consonance with economic
theory, which assumes that with the growth in the industrial sector,
the excess labour, would be absorbed in to the modern sector. This
relationship would eventually lay the foundation for an accelerated
economic growth. The expansion of cocoa production is expected to
eliminate possible trade distributions arising from externally dependent
economy by ensuring availability of raw material for industries. This
process could lead to an expansion in the country’s industrial
activities with a multiplier effect in employment opportunities for all
the stakeholders in the economy such as the farm workers, factory
processors, and product distributors among others.
Using a basket of four agricultural commodities: - cash crops
(Cocoa, Coffee, Rubber, Groundnut oil). An analysis shows that as at
the period of 1980’s cocoa production in Nigeria was at its peak. Over
time, the output has fallen by over 50% from 1980 to 2002, while these
have a been a steady but contributes rise in the product output the
cost per tonnes of cocoa in amongst the highest, so there is a prospect
for an increase in the total Gross Domestic Product (GDP) of there is
an increase in the output per tonnes.
In Nigeria, cocoa is a very important part of the cash crop family
in the agricultural sector. So, the downturn trend of the aggregate
agricultural output is as a result of downward movement in the whole
composing variables in the sector. And of course, the composing
variable includes all other agricultural products contributing to
aggregate agricultural output. The resultant output is a result of the
declining level/pace of growth in the composing output. Countries
that have a higher or increasing rate of growth in each composing
products tends to have an overall increase in the aggregate
Countries like Cote d’ivoire and Ghana have their aggregate
agricultural output on the increase solely or primarily because they
have a growing and versatile cocoa sub sector which is probably one of
the largest in the international commodity market. As it is commonly
said, Agriculture in the mainstay of a traditional society, in a
country like Cote d’ivoire, it is right to further say that cocoa in
their mainstay in their economy because cocoa contributes the bulk of
the agricultural sector.
The importance inherent in cocoa in any economy is rather vast
because it serves as food and raw material (beverages, butter) in local
use, and export. Cocoa production can be the main source of a
country’s foreign exchange earnings as well as a significant part of the
GDP. At least post independent (1960- early 1970s) Nigeria belonged
to this category/cadre. At the said time, cocoa was sufficient to
produce a bulk of the national need of foreign exchange while other
agricultural produce complemented the efforts therein.
The decline in cocoa was also reflected in the other crops. In
the past, crop production has been classified basically into two broad
categories of food and cash crop. This classification recognizes the
use of output for domestic consumption and for export. The evaluation
of the performance of the agricultural sector in industrial crop
production is given in three places 1970-1985 which is regarded as the
pre Structural Adjustment Programme (SAP) era, 1986 – 1993 SAP era and
1994-2001 post SAP or era of deregulation.
1.2 STATEMENT OF THE PROBLEM
Overtime, there has been dwindling level of output in the
agricultural sector in general and the cocoa sub sector specifically.
As we know, at a point in the Nigeria economic history, agricultural
production has a major priority of the Nigerian state. But as time went
by, there has been a gradual and small fall in the output overtime.
Factually speaking, Nigeria produces a little more than half of what
she used to produce in the 1970s (CBN, 2004). Production of cocoa
though can be increased but some factors will militate against
attaining it most especially because productivity is not too great in
the sector. Also several factors overtime have led to the decline in
productivity starting from over-regulation of the sector, international
market price, marketing boards, illiteracy, etc. Data available from
both the statistical bulletin and FOS publications has shown a large
decline over time. At different times, there have been growth and
other times, some slumps in the overall output. The problem this
project is set to address the cases of decline in the cocoa production
1.3 SCOPE OF THE STUDY
The scope to the study is to cover relevant areas as regards the
contribution of cocoa to overall improvement in a country’s economic
status. The study basically would highlight the challenges inherent in
the cocoa production which is a very valuable part of the output of
agriculture production from1970 to 2004. A further study would be done
on the contribution of cocoa into the gross domestic product (GDP) of
the country. A critical and analytical study would be done to
comprehend happening before, during and after SAP. The overall impact
to the contribution of cocoa to the non oil export would be analysed in
the study. Available data from 1970 to 2002 would be used to cover the
data. In closing, some very relevant areas would be examined with a
view to addressing some lingering issues and also for the purpose of
contributing to knowledge.
1.4 OBJECTIVES OF THE STUDY
The objective of the study is the basis for the research work. It is the crux of the work.
1. To know the amount that the Nigeria has got from cocoa
in terms of international market value over time.
2. To make comparative analysis of the cocoa output in the pre SAP, during SAP, and post SAP period.
3. To make recommendations necessary in moving the Nigeria cocoa production to her desired output.
Further objectives of the study on the determinants of cocoa
production are given. The reasons or factors for whatever decline or
boom experienced can then be expatiated as relevant to the respective
years. Then, a further analysis will show the solution to the problems
which leads to the output decline or stagnation in the agricultural
sector especially cocoa.
1.5 SIGNIFICANCE OF THE STUDY
The study would identify the problems/challenges over time and
also proffering solutions that would return to the nation but to its
glory days which would be impactful on the GDP per capita as well as
reduction in unemployment became may people would be employed in the
sector as well as other sector has the Agricultural sector plays a
supportive role for the other sectors that use Agricultural output
especially cocoa for their input. . The project goes further to show
that level of output of the cocoa production has been declining and
recommendations are made forthwith. The knowledge of this is relevant
so that Nigeria would return back to its leading role which has been
taken over by Ivory Coast.
1.6 RESEARCH QUESTION
The study seeks to answer several questions which have to do with the determinant of the production of cocoa.
1. How has been the trend of cocoa output over time?
2. What are the determinants of cocoa production?
3. Can the present trend be reversed?
1.7 RESEARCH HYPOTHESES
The study is to prove the following null hypothesis and whatever
decision made would made on the basis of the given hypothesis.
H0. There is no statistical significant relationship between
the value of cocoa and government expenditure on cocoa at a lagged
year as a percentage of total capital expenditure in Nigeria.
H0. There is no statistical significant relationship between
the value of cocoa and infrastructural development at a lagged time.
H0. There is no statistical significant relationship between the value of cocoa and the international price.
H0. There is no statistical significant relationship between
cocoa and rainfall in cubic millimeters at a lagged time.
The methodology of the study has to do with the
formulation of a typical linear production function. The available data
would be regressed using ordinary least square (OLS) method of
estimation. However, if the estimated result shows the presence of
autocorrelation because the DW-statistic was less than 2, then, the
Cochrane-Orcutt would be used at different reiteration. Though, more
often than not, the OLS is the best linear unbiased estimates (BLUE).
Furthermore, trend analysis would be used to analyse the growth and
decline of value of output.
The data obtained are wholly secondary in nature
and were gotten from the CBN statistical bulletin (2004). In some
regards some data were derived from data provided by the statistical
bulletin. An example is the value of output: which is derived by output
as provided by CBN and the prices as provided by International Cocoa
Organisation (ICCO). To this extent, the validity of our findings is
dependent mainly on the accuracy of these data and on how real our
various theoretical assumptions are.
This research work is carried out to analyze the
production of cocoa with the relation on the output. To do this, our
paper shall be divided into five chapters / parts.
Chapter one shall entail the introduction / background to the
study. Under the introduction, we shall have; background to the study,
statement of the problem, objectives of the study, hypothesis to the
study, justification of the study, scope of the study, limitations and
structure of the study.
Chapter two shall feature the literature review. This should show or lead us to the “why” of the study.
Chapter three shall talk about the theoretical framework or
methodology. This part should lead us to the “how” of the study.
Chapter four shall feature the empirical analysis. Here, we shall
have data presentation and trend analysis, statistical analysis and
presentation of results and interpretation or discussion of results.
Lastly, chapter five shall show the summary, recommendations and conclusion of the study.