ABSTRACT
Export is an economy boaster. Analysis of factors affecting performance is aimed at understanding more fully the degree of effects and with a view to proffering solutions. In many instances, a careful analysis reveals the trend of such performance. This dissertation seeks to ascertain the performance trend of the selected non-oil products of cocoa, groundnut and palm oil from 1980 to 2018. Of significance would be the ascertainment of the financial contributions of each of the products to the total export values within the referenced period. The study also seeks to ascertain from statistical analysis, how foreign exchange rate, government expenditure, inflation and unit value index affect the export performance of these selected non-oil products. Moreover, it is important to note that the selection these non-oil products stems from the fact that each product represented the three former regions in Nigeria, namely, the Northern, Western and Eastern regions. Above all each of these products contributed financially to the foreign income and reserve of the country. Analytically, the study employed descriptive statistics, quadratic trend model and auto recession distributed Las model (ARDC) as they suit the characteristics of interest. The findings revealed that foreign exchange rate, government expenditure, unit index value affected the export performance of the non-oil products. Inflation had no significant impact on the performance of the non-oil products. In addition, the quadratic trend, model reveals that the selected non-oil products experienced the three different stages of the trend namely acceleration, stagnation and deceleration at different periods. Conclusively, on an average, the selected products experienced more of stagnation than acceleration. While in comparison, Cocoa took the lead, followed by Groundnut and Palm oil in terms of export sales volume. From these findings, it is recommended that government expenditure, not only be increased but its disbursement be monitored to avoid partiality. That foreign exchange rate which Central Bank of Nigeria has the constitutional responsibility to manage should be given proper attention. In addition, government and its agencies should control inflation towards single digit and improve the naira value to dollar, fulfill all promises made to exporters, create enabling environment and importantly invest on technology based agriculture. The take way from all these, is that there is still a total neglect of non-oil products in term, of not having adequate funding from the government among others. There is also laxity in terms of improving the foreign exchange value as prices of Nigeria exports are not competitive in the foreign markets.
TABLE OF CONTENTS
Title Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Table of Contents viii
Lists of Tables xiii
List of Figures xvi
Abstract xvii
CHAPTER 1: INTRODUCTION 11
1.1 Background of Study 1
1.2 Statement of the Problem 5
1.3 Objectives of Study 6
1.4 Research Questions 7
1.5 Hypotheses 8
1.6 Significance of Study 8
1.7 Scope of the Study 9
1.8 Limitations of Study 10
CHAPTER 2: REVIEW OF RELATED LITERATURE 11
2.1 Conceptual Review 11
2.1.1 Concept of export 12
2.1.2 Concept of export benefits. 12
2.1.3 Concept of countries’ exports 14
2.1.4 Concept of export of non-oil products 15
2.1.5 Concept of export barriers 16
2.1.6 Concept of export prices and terms of sale 18
2.2 Factors Affecting Export Performance 19
2.2.1. Foreign exchange rates and prices 19
2.2.2 Concept of government expenditure, incentives and
Implementation 22
2.2.3 Inflation rate 24
2.2.5 Exporters’ commitment/infrastructural development 27
2.2.6 Cost (price) and volume of production 29
2.3 Export marketing performance measurement 31
2.3.1 Sales growth 35
2.3.2 Profitability 37
2.3.2.1 Profitability control 39
2.3.2.2 Cost control analysis 39
2.4 Trend Analysis 40
2.4.1 Types of trend 40
2.4.2 Importance of trend analysis 41
2.5 Some Selected Non-Oil Products 41
2.5.1 Groundnut products 41
2.5.2 History of groundnut production in Nigeria 42
2.5.3 Challenges of the groundnut export business 43
2.5.4 Setting up groundnut export business in Nigeria 44
2.6 Cocoa as a Non-Oil Product 46
2.6.1 History 46
2.6.2 Cocoa production in Nigeria 46
2.6.3 Cocoa processing and cocoa processing plants in Nigeria 47
2. 6.4 The price of cocoa in Nigeria 47
2.6.5 How to export cocoa from Nigeria 48
2.6.6 Largest cocoa producing state in Nigeria 48
2.6.7 Challenges affecting cocoa export in Nigeria 49
2.7 History of Palm-Oil Produce 50
2.7.1 What is palm oil and its uses (Elaeisguisineessis) 50
2.7.2 The economic potential of palm oil 51
2.7.3 The Nigerian palm produce areas 52
2.8 Theoretical Review 57
2.9 Review of Empirical Literature 64
2.10 Summary 71
2.11 Gap in Literature 71
CHAPTER 3: METHODOLOGY 74
3.1 Research Design 74
3.2 Study Area 75
3.3 Source of Data Collection 77
3.4 Method of Data Analyses 78
3.5 Model Specification 78
3.6 Autoregressive distributed lag (ARDL) Model 79
3.7 Test of Hypotheses 80
CHAPTER 4: RESULTS AND DISCUSSION 81
4.1 Presentation of Data 81
4.1.1 Trend of selected non-oil export products from 1980 to 2018 81
4.1.2 Total export values of the selected non-oil products and individual
product percentages within 1980 to 2018. 81
4.1.1 The graphical presentation of the trend of each of the
selected products. 84
4.2 Data Analysis 94
4.2.1 Descriptive statistics 94
4.2.2 Stationarity test for selected non-oil products export, price and
macro economic policy determinants 97
4.2.3 Co-Integration analysis of the models
4.2.4 Impact of foreign exchange rate on export performance of the
Selected products 98
4.2.5 Test of hypothesis 99
4.2.6: Diagnosis test of the impact of foreign exchange rate on
export performance 100
4.2.7 Stability tests of the impact of foreign exchange rate on export
performance
4.2.8 Impact of government expenditure on export performance
of selected products 101
4.2.9 Test of hypothesis 102
4.2.10 Diagnosis test of the impact of government expenditure
on export performance 103
4.2.11 Stability tests of the impact of government expenditure
on export performance 104
4.2.12 Impact of export unit value index on export performance of
non-oil products 106
4.2.13 Error correction model for the impact of unit index on export
performance of selected non-oil products. 107
4.2.14 Test of hypothesis 108
4.2.15 Diagnosis test of the impact of export unit value
index on export performance 108
4.2.16 Stability tests of the long run impact of export unit value
index on export performance 109
4.2.17 Effect of inflation rate on sales trend of the selected non-oil
products (1980 -2018) 110
4.2.18 Test of hypothesis 111
4.2.18 Diagnosis test on the effect of inflation rate on sales trend of
the selected non-oil products 111
4.2.19 Stability tests of the short run effect of inflation rate on
sales trend of the selected non-oil products 112
4.2.20 ARDL Estimation of export performance of selected
individual non-oil exports in Nigeria 113
4.2.20.1 Long run estimates of the ARDL model export performance
of selected individual non-oil exports in Nigeria 113
4.2.20.2 Error correction model (ECM) of the ARDL estimates of export
performance of selected non-oil Exports in Nigeria 115
4.3 Discussion of Findings 117
4.3.1 Preamble 117
4.3.2 The trend of the selected non-oil products (1980 – 2018) 118
4.3.3 Impact of foreign exchange rate and government
expenditure on export performance 119
4.3.4 Impact of export unit value index on export performance of
non-oil products 123
4.3.5 Effect of inflation rate on sales trend of selected non-oil
products (1980 -2018) 123
CHAPTER 5: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of Findings 125
5.2 Conclusion 126
5.3 Recommendations 126
5.4 Suggestion for Further Studies 128
5.5 Contributions to Knowledge 129
REFERENCES 130
APPENDICES 144
LIST OF TABLES
4.1.1 Percentage distribution of individual products total export value 1
4.1.2: Quadratic trend analysis of non-oil export products in Nigeria
(1980 – 2018) 87
4.1.3: Percentage distribution of export ratios of cocoa products
(1980-2018) 88
4.1.4 Percentage distribution of export ratios of groundnut product
(1980-2018) 90
4.1.5 Percentage distribution of export ratios of palm-oil products
(1980-2018) 91
4.1.6: Percentage comparison of the three selected non-oil products
(1980-2018) 93
4.1.7: Descriptive statistic 95
4.2.2 Augmented dickey fuller analysis of unit root test 97
4.2.3 Autoregressive distributed lag bound test result 98
4.2.4 ARDL long run impact of foreign exchange rate on export
performance of the selected products (1980 – 2018) 99
4.2.6: Diagnosis test of the impact of foreign exchange rate on export
performance 100
4.2.8 ARDL long-run impact of government expenditure on export
performance of selected products (1980 – 2019) 103
4.2.10 Diagnosis test of the impact of government expenditure
on export performance 104
4.2.13 Error correction model analysis of impact of export unit value
index on export performance of selected products. 107
4.2.15: Diagnosis test of the impact of export unit value index
on export performance 108
4.2.17 ARDL long-run effect of inflation rate on sales trend of the selected
non-oil products (1980 -2018) 111
4.2.18 Diagnosis test on effect of inflation rate on sales trend of the
selected non-oil products (2008 – 2018) 112
4.2.20.1: Long run estimates of the ARDL models of export
performance of selected individual non-oil exports in Nigeria 114
4.2.12 ARDL Long run impact of export unit value index on export
performance of selected products (1980 – 2018) 115
4.2.20.2: ECM for the LNCE model of export performance of selected
individual non-oil 115
4.2.21 ECM for the LNGE model of export performance of selected
individual non-oil exports in Nigeria 116
4.3.1: Regression result dependent variable in LOG: EXNO 122
LIST OF FIGURES
1.1: Relative percentage share of oil and non-oil exports in
total exports (1970-2014) 2
2.1: General overview of the construct framework showing
factors that are impactful to export growth performance of
non-oil products. 11
2.3 Production Volume Curve 30
2.4 Production Volume Curve 30
2.5: Global palm oil commodity prices 54
2.6: Consumption pattern of palm oil to production in Nigeria 54
2.7: Domestic consumption in Nigeria (‘000 MT) 2018 54
2.8: Operationalization of the conceptual framework for sales
growth and trending of the selected non-oil products,
with factors affecting them from
1980 to 2018 73
4.1.2 Graphical representation of groundnut export value from
1980-2018 74
4.1.3 Graphical representation of palm oil export from 1980-2018 86
4.1.4: Graphical representation of non-oil export products value from
1980 to 2018 96
4.1.5 Graphical representation of CUSUM test on impact of foreign
exchange rate on export performance 101
4.1.6 Graphical representation of CUSUM of Squares test on impact
of foreign exchange rate on export performance 102
4.1.7: Graphical representation of CUSUM test on impact of
government expenditure on export performance 105
4.1.8: Graphical representation of CUSUM of Square test
on impact of government expenditure on export performance 105
4.1.9 Graphical representation of CUSUM test on impact of export
unit value 109
index on export performance in the long run
4.1.10 Graphical representation of CUSUM of Square test on impact of
export unit value index on export performance in the short run 110
4.1.11 Graphical representation of CUSUM of squares test on impact of
inflation rate on export performance 113
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND OF STUDY
Analysis of performance is always important as life can only be understood backwards, but it must be lived forward. Exportation of goods is required by any economy to enhance its revenue and usher in economic growth and development (Owuru & Farayibi, 2016). Export performance is seen as catalysts for overall development and it increases the earnings of the country thereby creating an avenue for growth by raising the national income of the country, (NEPC, 2013).
Export according to Anyanwu (1989) involves the production of goods and services at the home company and subsequent sales in the foreign market. It is therefore the process of earning profit by selling products in foreign market. Nigeria has been a country of paradoxes. It is a country abundantly blessed with natural and human resources but in the last five decades of its independence, the potentials remained largely untapped and even mismanaged. Again, prior to independence, agriculture was the major component of exports and it contributed immensely to Nigeria’s export earnings. But the advent of crude oil or the oil boom of 1970s brought with it attendant fundamental changes in the Nigerian economy, such that attention was diverted only to the oil sector while the agricultural sector was neglected (Ewetan & Okolua 2015). The following graphical representation speaks volume about the comparative share of oil and non-oil products from 1970s and the neglect suffered by non-oil sector.
Figure 1.1: Relative percentage share of oil and non-oil exports in total exports (1970-2014)
The histogram buttressed the claim that Nigeria economic leaders paid more attention to the exportation of crude oil than non-oil products. It can be observed from the histogram that the performance of oil export had steady increases from 84.7% in 1970-1974 fiscal years to 96.1% in 1980-1984, though fluctuated down to 93.6% in 1985-1989 fiscal periods but rose from 97.4% in 1990 -1994 to 97.6% in 1995 -1999 periods, majorly during the military regime. However, after the emergence of a democratically elected government in 1999, oil export fell slightly by 3% in 2020-2014 fiscal years. On the part of non-oil export, volume percentage in the figure has been so meager with average performance of less than 10%, except for the early years (1970-1974) when the discovery of oil was still fresh. In this case, the performance of the non oil share with total export reduced from 6.4% in 1985 to 1989 to 2.6% and 2.4% in 1990 to 1994 and 1995 to 1999 respectively. This paradigm shift from non-oil to crude oil made Nigeria to depend heavily on petroleum as the main source of foreign exchange earnings and government revenue. The few notable increases may not be unconnected with the impact of the SAP policy which was meant to put the economy structure of Nigeria on a firm footing again.
Given the above parallel situations of the nation's economy thrust, this study aims at examining the records from 1980 to 2018, with a view to ascertaining the export performances of the selected non-oil products. However, the selection of the non-oil products of Groundnuts, Cocoa and Palm oil are significant in the context of the sentiments expressed by Chinue Achebe in his maiden book entitled "There was a country". Yes, there was a period when the names of these selected products ring bell in different regions of the country, besides being a major foreign exchange earners for the country, it absorbed the teeming unemployed youths in the rural areas (FAO, 2015 Becvarova, 2014) Furthermore, the choice of these products for study is not unconnected with the fact that each product was associated with three former regions, namely; Groundnut pyramids of the North, the Cocoa House of the West and the Palm oil, from the East, all managed by the marketing board established by the government (Nkamnebe, 2004).
In the aspect of palm oil, FAO (2017) observed that Nigeria was a leader in the world palm oil markets. Its production exceeded the domestic consumption and the excess was exported. It accounted for 45% of the world population, producing about 645,000 metric tones annually (Oyejide et al., 2003).0n the part of groundnuts, its production oscillated between one and two million metric tones, making it the largest African producer, the largest world exporter(Olu, 1990). Cocoa at independence was second only to Ghana as world producer, reaching a peak production in the 1970s (Federal Ministry of Agriculture 1984, Olajide and Olatunbosun, 1985). Udeh (2005) posited that the performance of these products today are hanging in the balance. Partly what went wrong according to lyanga (1988) was the advent of the crude oil, which changed the orientation of the economy leaders. The leaders realized that "money making was no longer a problem but how to 'spend it". In his study, Yesufu (1996), reported that crude oil exportation constituted about 97.4% of total export earnings, while non-oil products (Groundnuts, Cocoa and Palm oil) dropped to 2.6%. No doubt, Nigeria's over dependent on crude oil, whose price volatility cannot be predicted relegated the needed attention deserving of non-oil products to the background. (Olu, 1990).
This study is bent at either agreeing or not, when all data relating to the products and periods are statistically analyzed. In addition, Onodugo (2013) submitted that since the oil sector which produces about 90% of export earnings is in the hands of less than one percent of Nigerians and dominated by expatriates and members of the political class, the country cannot get it right (Agbakoba 2009). As laughable as it may appear is the fact that any increase in the price of crude oil in the international markets, immediately bounces back on the nation's local petroleum pump price and exchange rates (Abubakar, 2015).
Understandably and worried by this scenario and the consequences of over dependence on oil trade, heightened the need and call to diversify the economic base of the country.
Subsequently the Federal Government of Nigeria established Nigeria Export Promotion.
Council (NEPC), Export -import Bank (NEXIM) and Standard organization of Nigeria (SON), Each has a vital role to play towards realization of having an economy not dependent on crude oil (Usman, 2019). These were charged also with responsibility of ensuring that Nigeria regains its lost glories in export business, while government roles out support initiatives. Essentially, what these establishments with their attendant tasks have done will be shown as government expenditure over the period under review one way or the other, as this study takes a closer look at their performances over the years (1980-2018).
Finally, this study seeks to examine the export records of these three selected non oil products of cocoa, groundnut and palm oil over the years, with a view to ascertaining trends and effects of some independent factors on their performance. However, the outcome will help appraise government efforts and provide valuation information for exporters. With the engagement of secondary sources of obtaining data, all the required information will be obtained and statistically analyzed.
1.2 STATEMENT OF THE PROBLEM
Nigeria export trade of the 60s witnessed great success with agricultural products playing a major role as the main source of foreign earnings or income for the country (Ojo, 1994). Literatures abound with evidences depicting Nigeria as leader in almost all the three selected non-oil products of Groundnut, Cocoa and Palm oil. Ogwo (1988) however commented that the advent of the oil boom of the 1970s changed the orientation of the country and its leaders. This resulted in total neglect of their former sources of income for one whose future is not guaranteed (Iyanga, 1998).
The abandonment of agriculture export products for crude oil and dissolving its marketing board constituted a problem (Stephen, 1989). Okey (2008) observed that the price of Nigeria's crude oil continued to fail, given that its major buyer- United States, has increased its domestic production. China being the second importer of the nation's crude oil has many attractive suppliers to choose from. The consequence of this downturn is on the poor infrastructure development, which has continued to rake havoc on the exporters.
Consequently the nation's unattractive position of its non-oil products is not unconnected to its high costs of production and packaging thus making her price uncompetitive (Adeboye, 2013, Olayinka and Okodu, 2010).The diversification policy of the government with its attendant incentives and supports are yet to yield the needed results as our exports of non -oil products remain at the lowest level (Ilona, 2014). The exporters lament on the non fulfillment of government promises toward export support. The general increase in price of goods supports the presence of inflation which also affects the export performance. According to Onayemi and Ishola (2009), most time-series studies in line with investigation on Nigeria economy have focused on export performance strategy as a way of diversifying the productive base of the economy without clear information on how strong the impact of non-oil exports have on the rate of change on the gross domestic product (GDP), hence this study bridges this gap by establishing the ratios percentage of each of these three selected non-oil products to the total exports for the period under review.
The foregoing are some of the problems that this study will address with the use of secondary sources of data, obtained from Central bank of Nigeria (CBN), Nigeria bureau of statistics (NBS) and Federal annual statistics and Nigeria export promotion council.
1.3 OBJECTIVES OF STUDY
The broad objective of the study is to ascertain the effects on some factors on export performance of non-oil products in Nigeria (groundnuts, cocoa and palm oil) from 1980 to 2018. However, the specific objectives will be to;
i. to examine the trend of the selected non-oil products export from 1980 to 2018 with respect to acceleration, deceleration and stagnation.
ii. to examine and compare the individual product’s share and percentages within the referenced period
iii. to ascertain the impact of foreign exchange rate on export performance of selected products
iv. to determine the impact of government expenditure on export performance of
selected products
v. to ascertain the impact of export unit value(price)on export performance of the selected products
vi. to analyze the effects of inflation on the sales trend of the selected non-oil
products
1.4 RESEARCH QUESTIONS
i. What is the performance trend of the selected non-oil products within the referenced period?
ii. What are the individual product comparative share and percentages of the total export value?
iii. Does fluctuation in foreign exchange rate have affect on export performance of the selected non-oil products
iv. How does government expenditure influences export performance of selected products?
v. What is the impact of export unit value index on export performance of non-oil products?
vi. Does inflation have any significant effect on the sales growth of the selected non-oil products within the reference period?
1.5 HYPOTHESES
The following null hypotheses were formulated and tested in the study:
i. H0: the trend analysis did not reveal whether the export performance of the selected products experienced acceleration, stagnation or deceleration modes.
ii. Fluctuating foreign exchange rate had no significant effect on export performance of selected non-oil products.
iii. H0: Government expenditure had no significant effect on export performance of selected non-oil products.
iv. H0: Export unit value index had no significant effect on the export performance of the selected products within the referenced.
v. H0: Fluctuating inflation had no significant impact on the sales trend of the selected products within the referenced period.
1.6 SIGNIFICANCE OF STUDY
The turmoil in marketing is matched by turmoil in all markets. This demands that businesses are monitored to ensure effectiveness of their activities with regards to fully exploiting their marketing resources. However, this cannot be achieved if such businesses ignore the past records. This study is therefore aimed at analyzing the past export records, with a view to ascertaining what has transpired within the referenced period. It is hoped that lessons learnt will benefit the government and its agencies, the exporters (old and new), the academia/students and the society in general. Undoubtedly, a positive balanced of trade terms of a country is as a result of having its exports trade above its imports. Therefore, the government will benefit from the analysis which will provide some unexpected figures of export sales lurking in the system for decades, such information will assist in planning export promotion. The study will also jolt the government, thus reminding government of its responsibility to fulfill promises made to exporters. To the exporters (old and new), they will likely want to reminiscence on how the trend has been over the years and from which, adjustments or otherwise will be needed if they have to continue in the business. As for new exporters, knowledge of which will enable them to tread cautiously in investing massive resources, as they observe how government has not always been fulfilling their promises. Therefore, studying this will enable them make informed decisions on how and when to invest their resources. The society will benefit a lot because it is when a country's exports outmatch its import will its balance of payment be on the positive side. When this happens, there will be excess funds domestically to build more infrastructures. Such infrastructure like Refineries for example will engage many workers, thus reducing the unemployment rate or indexes of the country. Additionally, more businesses will operate on minimal costs, unlike now when high cost of energy is almost consuming the better part of their profit. Good roads and transportation are all part of the benefits to society. The academia and students will draw from the historical facts to enhance academic knowledge, as they quote relevant references to backup their research studies.
1.7 SCOPE OF THE STUDY
This study of the analysis of factors affecting export performance of selected products is domiciled in export trade and the focus is on non-oil products of cocoa, groundnut and palm oil associated with the then three major regions in the country. Which are North, West and East. With regards to the unit of study analysis, it would have covered all exportable products within each region, but for convenience, time and financial involvement and more importantly the known enormous financial contribution the selected products made to the economic development of the regions and the country then. Also, the time frame work is between 1980 to 2018.The content scope will be limited to factors that can easily be sourced from secondary sources. These include but not limited to, foreign exchange rate, inflation, government incentives among others.
Further to this, the tools of analysis are limited to the use of time-series model and Autoregressive Distributed Lag (ARDL) statistical model as it concerns the various objectives.
1.8 LIMITATIONS OF STUDY
The study is limited to several factors which however did not invalidate the outcome of the study. The major limitations are the scope of the study and the sources of obtaining required data. For the scope's limitation, the study is limited to only three selected non-oil products, namely groundnut, cocoa and palm oil. The study is also limited to the time frame, namely 1980 – 2018. The sampling technique adopted was limited to secondary sources. Primary sources have their merits but for this particular study where exporters are already suspicious of every letter or questionnaire from researchers, especially when the needed information deals on their sales performance which they considered personal and confidential. Given this position about primary sources, this study is limited to only secondary information which has already been documented by various government institutions. These institutions like the Central bank of Nigeria (CBN), Nigeria Bureau of statistics (NBS), Federal Annual statistics (FAS), are authorized by law to gather, store and publish such relevant information. In all, secondary sources cannot claim to provide all the answers to the questions of the study. Bryman (2004), supports this view by saying that research findings and reporting cannot claim one hundred percent error-free so long as majority of the tested issues are valid.
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