ABSTRACT
The study examined the effects of Cashew Nut production and export on economic growth of Nigeria (1980-2019). The study specifically estimated the trends of Cashew Nut production and export in Nigeria; estimated the rates of growth of Cashew Nut production and export, also forecast the doubling time in the growth rate of Cashew production and export in Nigeria; estimated the level of acceleration, deceleration or stagnation in the growth processes of Cashew Nut production and export; estimated the determinants of Cashew Nut production and exports in Nigeria; and determined the effects of Cashew Nut production and exports on economic growth in Nigeria. Secondary data were used for the study. Data collected were analyzed using descriptive statistics, exponential trend analysis and regression. Findings from the study showed a huge decline in Cashew Nut production of about 53.32% in 2013. From 2016 and 2017, the production of Cashew Nut increased at a very low rate of 1.18% and 1.74% respectively. The trend in export of Cashew Nut with shell in Nigeria from1986 to 2019 revealed a high level of fluctuation. The highest percentage increase in export was 2583.18% in 2012 and decrease was 93.13% in 2000. The result of exponential trend for Cashew Nut production and export in Nigeria from 1980 to 2019 showed positive coefficients of 0.073 and 0.145 respectively. The compound growth rate of production and export of Cashew Nut with shell were 7.57% and 15.60% respectively. The period required for Cashew Nut production and export to double the rate of growth were 9.25years and 4.49years respectively. Cashew Nut production and export decelerated and accelerated respectively. The values of R-squared and F-ratio were 0.983 and 228.80 respectively for the determinants of Cashew Nut production in Nigeria in the long-run and it was positively influenced by producer price, harvested area, quantity exported, government capital investment in agriculture and export value of Cashew Nut with shell. The rate at which Cashew Nut with shell production adjusts to the long-run equilibrium was 38.6% at the end of each period. The R-squared and F-ratio value were 0.956 and 63.399 respectively for the determinants Cashew Nut with shell export in Nigeria in the long-run and it was positively influenced by exchange rate, quantity of Cashew Nut produced, producer price, value of government credit to agriculture and external reserve, and negatively influenced by population growth. The rate at which Cashew Nut with shell export adjusts to the long-run equilibrium was 42.3% at the end of each period. Cashew Nut with shell export had significant effect on economic growth in Nigeria. Among others the study recommended that there should be more investment in the production of Cashew Nut as well as replanting of old Cashew farms or estate with improved varieties by stakeholders in Cashew Nut industry and the yearly fluctuation in Cashew Nut with shell export in Nigeria should be controlled through policies that will enhance steady upwards trend in Cashew Nut export by government.
TABLE
OF CONTENTS
Title
Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Table
of Contents vi
List
of Tables viii
List
of Figures ix
Abstract x
CHAPTER 1: INTRODUCTION 1
1.1 Background of the Study 1
1.2 Problem Statement 4
1.3 Objectives of the Study 6
1.4 Hypotheses of the Study 6
1.5 Justification for the Study 7
CHAPTER 2: LITERATURE REVIEW 9
2.1 Conceptual Literature 9
2.1.1 Agricultural
production and economic growth 9
2.1.2 Export and economic growth 10
2.1.3 History of Cashew in Nigeria 11
2.1.4 Cashew Nut production in Nigeria 12
2.1.5 Problems of Cashew Nut
production in Nigeria 13
2.1.6 Cashew Nut export trend in Nigeria 14
2.1.7 Policies among Cashew growing countries in
Africa 15
2.1.7.1 Export taxation and export bans 16
2.1.7.2 Incentives for processors 17
2.2 Theoretical Review 18
2.2.1 The classical theory of economic growth 18
2.2.2 Neoclassical growth theories 19
2.2.3 Theory of endogenous economic growth 20
2.2.4 Export base theory 21
2.3 Empirical Review 22
2.4 Analytical Framework 25
2.4.1 Non-stationarity 25
2.4.2 Test for unit roots (non-stationarity) 26
2.4.3 Co-integration 27
2.4.4 Error-correction model (ECM) 28
2.4.5 Trend analysis model 30
2.4.6 Regression analysis 32
CHAPTER 3: METHODOLOGY 35
3.1 Area of the Study 35
3.2 Method of Data Collection 37
3.3 Method of Data Analysis 37
CHAPTER 4:
RESULTS AND DISCUSSION 47
4.1 Trend in Cashew Nut production and export
in Nigeria from 1980 to 2019 47
4.1.1 Trend of Cashew Nut production in Nigeria from
1980 to 2019 47
4.1.2 Trend of
Cashew Nut with shell exports quantity in Nigeria 1980-2019 49
4.1.3 Exponential trend for Cashew Nut with shell
production and export in Nigeria from
1980 to 2019 50
4.2 The rate of growth in Cashew Nut production
and export in Nigeria 1980-2019 51
4.2.1 Compound
growth rate for cashew nut production and export in Nigeria for the period of 1980-2019 51
4.2.2 Doubling
time for the compound growth rate of cashew nut production and export in Nigeria for the period of 1980-2019 52
4.3 Acceleration,
deceleration or stagnation in cashew nut production and export within the
period of study 53
4.4 Determinants
of Cashew Nut production and export in Nigeria 54
4.4.1 The unit root test 54
4.4.2 Co-integration
test (the Engle-Granger test) and specification of the error correction model (ECM) for Cashew Nut
with shell production and export 55
4.4.3 Long run
regression estimate of the response of Cashew Nut production to changes in the
independent variables in Nigeria 57
4.4.4 Short
run regression estimate of the response of Cashew Nut production to changes in the independent variables in
Nigeria 59
4.4.5 Long run
regression estimate of the response of Cashew Nut with shell export to changes in the independent
variables in Nigeria 61
4.4.6 Short
run regression estimate of the response of Cashew Nut with shell export to change in the independent variables
in Nigeria 64
4.4.7 Effects
of Cashew Nut with shell production and export on economic growth 66
CHAPTER
5: SUMMARY, CONCLUSION AND RECOMMENDATIONS 69
5.1 Summary 69
5.2 Conclusion 72
5.3 Recommendations 72
LIST
OF TABLES
2.1 Export quantity of Cashew Nut with shell 14
2.2 Export value of Cashew Nut with shell 15
4.1 Estimated
exponential trend equations for quantity of Cashew Nut produced and exported in
Nigeria for the period of 1980-2019
50
4.2 Growth
rate for Cashew Nut production and export in Nigeria 51
4.3 Doubling
time for the compound growth rate of Cashew Nut production and export in
Nigeria 52
4.4 Estimated
quadratic trend equations for quantity of Cashew Nut with shell produced and
exported in Nigeria for the period of 1980-2019
53
4.5 Results
of unit root test for the variables used in the regression analysis 54
4.6 Residual
based co-integration test (The Engle-Granger test) for Cashew Nut with shell
production and export
56
4.7 Long
run regression estimate of the response of Cashew Nut production to changes in
the independent variables in Nigeria 57
4.8 Short
run regression estimate of the response of Cashew Nut production to changes in
the independent variables in Nigeria 60
4.9 Long run
regression estimate of the response of Cashew Nut with shell export to changes in the independent variables in
Nigeria 62
4.10 Short run
regression estimate of the response of cashew nut with shell export to changes in the independent variables in Nigeria
65
4.11 Long-run
regression estimate of effects of cashew nuts with shell production
and export on economic growth 67
LIST OF FIGURES
4.1 Trend of cashew nut production in Nigeria 47
4.2
Trend of cashew nut with shell export quantity in
Nigeria 49
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Cashew
Nut is one of the important agricultural export commodities in Nigeria. Its
importance to the Nigerian economy cannot be over-emphasized as it contributes
substantially to the nation’s national income, Gross Domestic Product (GDP) and
most importantly to foreign earnings (Oluyole, Yahaya,
Uwagboe, Mokwunye, Agbeniyi, Orisajo, Otunoye, Ndagi, Shittu, and Aderolu,
2015). In 2017, the crop generated about 24billion naira export revenue for the
country (Lawal and Uwagboe, 2017). Cashew Nut production provides huge employment
opportunities for people who engage themselves in one or more activities along
its value chain. It serves as additional source of income for those who
participate partially or fully along its value chain as harvesters in the
field, processors in the factory as well as those who market, transport and
export its products (Nugawela and Oroch, 2005). The proportion of women participation
in the Cashew Nut industry is higher than men especially for cash crops
production in Nigeria (Adeigbe, Olasupo,
Adewale, and Muyiwa, 2015).
Cashew
came into Nigeria over 400 years ago, however the cultivation of the crop began
in the early 1950’s. From 1965 to 1989, the production of Cashew Nut was at
constant level of 25,000 tonnes and the estimated land area for Cashew production
as at 1990 was 50,000 ha. The report in 2002, showed that Cashew is being grown
in the following states: Enugu, Abia, Imo, Anambra, Ebonyi, Cross River, Oyo,
Osun, Ondo, Ekiti, Ogun, Kwara, Kogi, Nassarawa, Benue, Taraba, Niger, Kaduna,
Plateau, Sokoto, Kebbi States and Federal Capital Territory (Ezeagu, 2002; USAID,
2002). Presently, its cultivation can be found in 27 states of Nigeria, and output
has increased hugely from 30,000 MT in 1990 to 836,500 MT in 2012, also the land
area for production has increased by 632% from 1990 to 2012 (FAO, 2013).
The
export of Cashew Nut is very promising because it is largely consumed globally,
especially in countries such as India, United States of America, Countries of
European Union, China and Middle East (United Nations Conference on Trade and
Development (UNCTAD), 2021). Africa is responsible for 55% of world Cashew Nut
output while India and Vietnam are the top Cashew processing countries. The
main importers of Cashew Nut in the world are Vietnam, India, USA, and China (African
Cashew Alliance (ACA), 2018). While the top ten exporters includes Vietnam,
India, Cote d’Ivoire, Ghana, Cambodia, Nigeria, Tanzania, Netherland, Indonesia
and Germany (Observatory of Economic Complexity (OEC), 2021). Export being
trade between two or more countries is a potential vehicle for stimulating the economic
activities by providing knowledge, resource efficiency, productivity,
inter-industry competition, economies of scale and technology spill-overs (Duru
and Ezenwe, 2020). Exports influences investment, government revenue,
producer’s revenue, import capacity and serves as an important source of
foreign exchange. It also enhances improvement of local industries, institutional
and technological advancement (Nyasulu, 2013).
The
improvement in economic activities of Nigeria which is reflected in upward trend
of the Gross Domestic Product (GDP) has been reported to be the result of
agricultural growth (Osabohien,
Afolabi and Godwin, 2018). Nigeria witnessed a growth rate of about
7% on its real annual GDP growth from 2000 to 2012. One of the sectors that
have grown massive in Nigeria is the agricultural sector and it grew by over
70% especially in crop production (CBN, 2012). This growth rate in the
agricultural sector is linked to favourable climatic condition combined with
good vegetation of Nigeria, which is suitable for the production of different
types of crops and livestock within the country (Osabuohien, Okorie and Osabohien, 2018).
In
addition, export growth is also recognized as the major contributor to
agricultural productivity and economic growth in Nigeria. In order to encourage
the export of agricultural commodities in Nigeria, which Cashew Nut is among
the potential identified commodities for export, the Nigerian government
through Nigerian Export and Import Bank (NEXIM) provided export incentives,
grants and credit to exporters in the country. The Nigerian Export Promotion
Council (NEPC) initiated the Export Expansion Grant Scheme for the stimulation
of export activities that will significantly affect the growth of the non-oil
export sector, especially agriculture in the country. Added to this, agricultural commodities produced in the country
enjoy exemption from export tax and also enjoy export holiday which is no-tax
for the period of first five years (Adamgbe, Belonwu, Ochu, and Okafor, 2020).
In
recent time, the export of agricultural commodities has greatly benefited the
economy of Nigeria. Hence, the importance of exports for the development of the
financial and economic progress of a country cannot be overemphasized as it
helps to accelerate the overall economic activities of the country (Abou-Stait,
2005). In addition, exports are a means of foreign exchange earnings, due to
the fact that trade activities between countries are settled in foreign exchange
(Matthew, Ede, Osabohien,
Ejemeyovwi, Fasina and Akinpelumi, 2018), and job openings
are created for their citizens consequently reducing the social costs of
unemployment (Osabohien and Bamigbola, 2017).
According
to Usman and Salami (2008), the drive towards export promotion will boost
developing nation’s economic growth by its multiplier effects on the income
level of the country. For instance, the income earned as a result of exports
enhances the aggregate demand in the country. Over the years, trade openness
had attained a high degree in the Nigerian economy, thus, promoting the
efficiency of trade openness through its advancement is key for economic growth
in Nigeria. Primarily, agriculture has been the main dominant sector of non-oil
export as it contributes immensely to the nation’s foreign exchange (Osabohien
and Osuagwu, 2017).
Agricultural
produce have the distinguished features of low prices, unfavourable terms of
trade earnings resulting from export instability. The fluctuation of
agriculture export contributes to low earnings from export of agricultural
commodities; also the decrease in production of agricultural commodities has
made emerging economies rely on importation of food. Among the very important
objectives of emerging economies in general and Nigeria to be specific, is the
achievement to accelerate overall wellbeing of Nigeria. In this regard, production
and exports are seen as a promoting factor for economic growth (Iyoha, 2002;
Matthew, Fasina, Olowe and Adegboye, 2010; Adeleye, Osabuohien, Bowale, Matthew and Oduntan,
2017). Based on the synthesized literatures, this study examined the effects of
Cashew Nut production and exports on economic growth of Nigeria (1980 – 2019).
1.2 PROBLEM
STATEMENT
There
is high level of fluctuation in Cashew Nut production in Nigeria. The country
was number two in terms of Cashew Nut production in the world for the period of
2010 to 2012 with an estimate of 650,000 to 835,500 MT (Aliyu, 2012; FAO,
2013). Since 2013, Nigeria Cashew
Nut production has continued to decline yearly. In 2018, the country was
number 13 among top twenty Cashew Nut producing countries in the world with
output record of 97,863 MT. However, Nigeria witnessed a huge decline in Cashew
Nut production while some countries have continued to increase their production
level as the global demand for Cashew Nut continues to increase. For example, Colombia
witnessed the best average annual increase in Cashew Nut output to 58.2% in a
year (NationMaster, 2021).
The
decline in Cashew Nut output in Nigerian is linked to the use of unimproved
varieties by smallholder farmers in planting. Most of these materials are
sourced from open field without giving consideration to the genetic make-up (USAID,
2002). The continuous practise of using poor varieties for planting has
strongly impeded the trend of Cashew Nut production and exports in the country.
Also, plantations with aged trees constitute another potential factor to the
low and variability in yield of Cashew Nut. According to Oluyinka, (2012), 60%
of Nigeria Cashew plantations are reported to host very old trees which have
outlived their productive years, that is 30 years. The factors that reduce the
value of exported Nigerian Cashew Nut have small nut, low quality and kernel
size, alongside the poor removal of peel from the kernel. The decline in
production is one of the major factors affecting the country’s Cashew Nut
export along with fluctuation in world market price. This also constitute a
high level of risk and uncertainty of Cashew Nut industry contributions to
economic growth in Nigeria.
The
theoretical relationship between agriculture export and economic growth have
been supported by several studies, however disagreements still persist. Previous
study on Nigerian Cashew Nut focused on its competitiveness in the global
market (Alawode and Adeniranye, 2020). Hence, this study seeks to determine the
effects of Cashew Nut production and exports on economic growth in Nigeria. In
light of the aforementioned gap, this study provided answers to the following
research questions:
i.
What are the trends of Cashew Nut
production and exports in Nigeria from 1980 – 2019?
ii.
What are the rates of growth of Cashew Nut
production and exports in Nigeria from 1980 – 2019?
iii.
What is the level of acceleration,
deceleration or stagnation in the growth processes of Cashew Nut production and
exports from 1980 – 2019?
iv.
What are the determinants of Cashew Nut
production and exports in Nigeria from 1980 – 2019?
v.
What is the effects of Cashew Nut
production and exports on economic growth in Nigeria?
1.3 OBJECTIVES
OF THE STUDY
The
broad objective of the study was to examine the effects of Cashew Nut
production and exports on economic growth in Nigeria from 1980 – 2019.
The
specific objectives were to:
i.
estimate the trends of Cashew Nut
production and exports in Nigeria from 1980 – 2019;
ii.
estimate the rates of growth of Cashew Nut
production and exports, also forecast the doubling time in the growth rate of Cashew
production and exports in Nigeria from 1980 – 2019;
iii.
estimate the level of acceleration,
deceleration or stagnation in the growth processes of Cashew Nut production and
exports from 1980 – 2019;
iv.
estimate the determinants of Cashew Nut
production and exports in Nigeria from 1980 – 2019;
v.
determine the effects of Cashew Nut
production and exports on economic growth in Nigeria;
1.4 HYPOTHESES
OF THE STUDY
The
following hypotheses were tested
HO1: There is no acceleration,
deceleration or stagnation in the growth processes of Cashew Nut production and exports from 1980 – 2019.
HO2: Cashew Nut production in
Nigeria is not significantly influenced by producer price, harvested
area, quantity exported,
government capital investment in agriculture,
export value of Cashew Nut with shell, labour force in agriculture, and average annual rainfall.
HO3: Cashew Nut export in
Nigeria is not significantly influenced by exchange
rate quantity of Cashew Nut
produced, producer price, value of government credit to agriculture, external reserve, population growth, harvested area, government capital investment
in agriculture and export value of Cashew Nut with shell.
HO4: Cashew Nut production and
export have no significant effects on economic growth
in Nigeria from 1980 – 2019.
1.5 JUSTIFICATION FOR THE STUDY
Development
policies have witnessed remarkable changes throughout the last decades. Up till
the mid-1970s development policy was confined to the import-substitution model
that urged countries to focus only on their domestic markets and substitute
domestically produced goods for imports. However, economic troubles emerged in
the 1970s, leading different countries to suffer from slower growth and
accelerating inflation. The import-substitution model was no more advocated as
the means to prosperity as countries following it were no longer in an
advantaged position. An alternative approach had to be searched for. Economists
thus started to think in favour of market directed economic activities. This
shift led to the extensive interest of researchers to examine the relationship between
trade and growth (Khazragui, 2011). Ever
since there has been a tremendous redirection of policy towards an export-led growth
model which urged countries to concentrate and aim at producing for exporting
rather than focusing on production for domestic markets (Palley, 2003). This
study therefore will provide empirical information on the effects of Cashew Nut
production and exports on economic growth of Nigeria from 1980 - 2019. The
period of the study only covered 1980 to 2019 because of missing data on Cashew
Nut production and exports in Nigeria in previous years.
The
findings from the study will provide information on the trends, growth rate,
determinants of Cashew Nut production and exports within the period of study
that are relevant to policy makers to
formulate policies that will lead to the expansion of Cashew Nut production
thus increase the level of exports. The results from this study will also
reveal the need for government, non-governmental organizations, private sector
and other stakeholders who are interested in Cashew Nut production and exports
to increase investment along the Cashew value chain. The study methodology will
provide building blocks for further studies.
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