The study was anchored on theories of production and supply response. A Nerlovian supply response model (1956) as modified by Karbasi and Tavana (2008) which captures the impact of trade and exchange rate reforms on agricultural commodities prices and outputs, and with acreage cultivated, labour and cost of agricultural machinery as control variables was explored. Major cash crops (cocoa, palm produce, palm kernel, groundnuts, rubber and cotton) and food (cassava, maize, yam and rice accounting for 28.0% of the 40.0% of staple food output) were purposively selected. Data were collected from the World Trade Organisation Trade Statistics, World Bank UN-COMTRADE statistics and World Development Indicators; Food and Agricultural Organisation Year Book Statistics and Agricultural Market Access Database; Central bank of Nigeria’s Statistical Bulletin and National Bureau of Statistics Annual Abstracts of Statistics. A Structural Vector Autoregression model was estimated via the generalized Impulse response functions and variance decomposition estimation techniques. All estimates were validated at p≤0.05.
Trade policy shifted from a restrictive regime in 1970 to a liberalized regime starting from1995. Exchange rate policy similarly moved from a fixed regime in 1970 to a managed/float regime from 1986 to 2013. These reforms had diverse significant effects on both the prices and outputs of all sampled agricultural commodities. Trade effect was positive for palm kernel, cotton, rubber and cassava, while negative for the others. The effects were permanent across the ten commodities, while the elasticities for all the commodities range between 0.002 and 0.05. Exchange rate effect was positive for palm kernel, cotton, maize and rice, while negative for the others. The effects were also permanent except for rubber which was transitory, while elasticities for the commodities range between 0.1 and 2.3. On aggregate, the cost of machinery was found to be negatively related to the commodities outputs. A percentage increase in the cost of machinery brings about a 15.0 percent decline in output. Land and labour were positively and negatively related to output, respectively. An additional acre of land cultivation increased aggregate supply by 31.1%, while an increase in the use of labour decreased output by 19.0%.
Trade and exchange rate reforms were critical in explaining the supply responses of sampled commodities, hence, the need for favourable and stable reforms.
Table of Contents
1. Introduction
1.1. Problem Statement
1.2. Objectives of the Study
1.3. Justification for the Study
1.4. Scope of the Study
1.5. Outline of the Study
2. Background to the Study
2.1. Introduction
2.2. General Overview of the Nigerian Agriculture
2.3. Structure of the Nigerian Agriculture
2.3.1. Nigerian Agricultural Production
2.4. Agricultural Sector Performance in Nigeria
2.4.1. Agricultural Output Performance
2.4.2. Agricultural Trade in Nigeria
2.4.3. Agricultural Pricing in Nigeria
2.5. Agricultural Subsector: Crop Production
2.5.1. Cocoa
2.5.2. Palm Produce
2.5.3. Palm Kernel
2.5.4. Groundnut
2.5.5. Rubber
2.5.6. Cotton
2.5.7. Cassava
2.5.8. Maize
2.5.9. Yam
2.5.10. Rice
2.6. Policy Environment for Agricultural Production
2.6.1. Trade Policy Reforms
2.6.2. Exchange Rate Policy
2.6.3. Agricultural Policy Reforms
2.6.3.1. Farm Settlement Programme (FSP)
2.6.3.2. National Accelerated Food Production Programmes (NAFFP)
2.6.3.3. Agricultural Development Programmes (ADPs)
2.6.3.4. Operation Feed the Nation (OFN)
2.6.3.5. River Basin Development Authority (RBDAs)
2.6.3.6. Green Revolution (GR)
2.6.3.7. Directorate for Food Roads and Rural Infrastructure (DFRRI)
2.6.3.8. National Agricultural Land Development Authority (NALDA)
2.6.3.9. National Fadama Development Project (NFDP)
2.6.3.10. National Economic Empowerment and Development Strategy (NEEDS)
2.6.3.11. National Special Programme on Food Security (NSPFS)
2.6.3.12. Root and Tuber Expansion Programme (RTEP)
2.6.3.13. Agriculture in 7-Point Agenda
2.6.3.14. Bank of Agriculture
2.6.3.15. National Agricultural Research Project
2.6.3.16. Agricultural Transformation Agenda (ATA)
3. Literature Review
3.1. Introduction
3.2. Conceptual Issues
3.3. Review of Theoretical Literature
4. Theoretical Framework and Methodology
4.1. Introduction
4.2. Theoretical Framework
4.3. Exchange Rate, Trade Policy, Price and Supply Response
4.4. Model Specification
4.5. The Structural Factorisation
5. Analysis of Empirical Results
5.1. Introduction
5.2. Descriptive Statistics
5.3. Time Series Properties
5.4. Empirical Result
5.5. A Synthesis of Empirical Results and the Study Objectives
5.6. Summary of Findings
6. Summary, Conclusion and Recommendations
6.1. Introduction
6.2. Summary
6.3. Conclusion
6.4. Policy Implications of Findings and Recommendations
6.5. Limitations of the Study and Suggestions for further Studies
Research Objectives and Themes
This study assesses the response of agricultural commodities' prices and outputs to trade and exchange rate policy reforms in Nigeria between 1970 and 2013, investigating the extent to which these reforms have served as incentives for farmers to produce for domestic consumption and export.
- Agricultural supply response to trade and exchange rate policy shocks.
- Dynamic analysis using Structural Vector Autoregression (SVAR) modeling.
- Evaluation of pricing mechanisms, input costs, and trade liberalisation impacts on key cash and food crops.
- Analysis of institutional and policy environments affecting the agricultural sector.
- Transmission mechanism of macroeconomic policy variables into the agricultural sector.
Excerpt from the Book
2.5.1. Cocoa
Cocoa was the most important agricultural export crop in Nigeria during the 1950s and 1960s. The period was described as decades of glory for cocoa as it was the most important foreign exchange earner for Nigeria. Production peaked at 400,000 metric tons in 1970. The oil boom of the 1970s which made employment in the oil and industrial sector more attractive, this led to the neglect of the agricultural sector. Currently, land area under Cocoa cultivation in Nigerian is estimated at 650,000 ha with production of 250,000 metric tonnes per annum. Cocoa is widely cultivated in the southern belt of Nigeria owing to the soil and climatic condition prevailing in the area. This include: Abia, Adamawa, Akwa Ibom, Cross River, Delta, Edo, Ekiti, Kogi, Kwara, Ogun, Ondo, Osun, Oyo and Taraba. In terms of capacity, Ondo State is rated as the largest cocoa producing state in Nigeria (Oluyole, 2005).
Because of its importance, the recent Federal Government’s concern of diversifying the export base of the nation has placed cocoa at the centre-stage as the most important export tree crop. Evidence has shown that the growth rate of cocoa production has been declining, which has given rise to a fall in the fortunes of the subsector among other reasons. Folayan, et.al (2006), note that cocoa production in Nigeria witnessed a downward trend after 1971 season, when its export declined to 216,000 metric tons in 1976, and 150,000 metric tons in 1986. Reasons that accounted for this included yield loss, bad quality cocoa beans used for production, unfavourable weather conditions, poor policies and policy inconsistency as well as the scrapping of cocoa marketing board in the 1980s.
Summary of Chapters
Chapter One: Introduces the study, presents the problem statement regarding agricultural supply response in Nigeria, outlines research objectives, and discusses the scope and structure of the thesis.
Chapter Two: Provides background information on the Nigerian agricultural sector, including its structure, performance metrics, and the historical policy environment from 1960 to 2013.
Chapter Three: Reviews theoretical and empirical literature related to trade policy, exchange rate impacts, and methodologies for analyzing agricultural supply response.
Chapter Four: Details the theoretical framework, specifying the SVAR model, data requirements, and sources used for the empirical investigation.
Chapter Five: Analyzes the empirical results, including stationarity tests, structural VAR estimates, impulse response functions, and variance decomposition for various crops.
Chapter Six: Summarizes the findings, provides conclusions, highlights policy implications, and discusses limitations along with suggestions for further research.
Keywords
Agricultural supply response, Trade reforms, Exchange rate reforms, Structural Vector Autoregression, Cash crops, Food crops, Commodity prices, Nigeria, Agricultural policy, Export performance, Macroeconomic policy, Production function, Output elasticity, Agricultural productivity, Economic liberalization.
Frequently Asked Questions
What is the core focus of this research?
The research examines how changes in trade and exchange rate policies in Nigeria from 1970 to 2013 have influenced the supply response of selected agricultural commodities, both in terms of output and domestic prices.
Which crops were analyzed in this study?
The study purposively selected ten major agricultural products: cash crops (cocoa, palm produce, palm kernel, groundnuts, rubber, and cotton) and food crops (cassava, maize, yam, and rice).
What is the primary goal of the study?
The primary goal is to assess whether trade and exchange rate reforms effectively incentivized farmers to increase production for both domestic consumption and international export, and to determine how these responses differ across various crops.
What methodology was utilized?
The study employed a Structural Vector Autoregression (SVAR) model. This was chosen for its capability to analyze the impulse response of endogenous variables to structural shocks, allowing for an examination of the adjustment paths of agricultural prices and outputs.
What is covered in the main body of the work?
The main body covers the historical context of Nigerian agriculture, a comprehensive literature review of supply response theories, the theoretical framework and model specification, and an in-depth empirical analysis of results, including impulse response functions and variance decompositions.
Which specific variables characterize the agricultural supply model?
Key variables include domestic prices of commodities, real exchange rate (REXR), degree of commercial openness (DCO) as a proxy for trade policy, international prices, cost of agricultural machinery, acreage, and labor.
How does exchange rate volatility impact export earnings?
The empirical analysis suggests that exchange rate volatility exerts a high level of negative impact on export volumes, though it can have different effects on export earnings depending on the specific commodity and the period under study.
What is the significance of the "Structural Factorisation" in the SVAR model?
Structural factorisation is critical as it imposes identifying restrictions based on economic theory to retrieve structural shocks from the reduced-form VAR model, enabling meaningful economic interpretation of the results.
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- Abidemi Abiola (Autor:in), 2017, Agricultural Supply Response to Trade and Exchange Rate Reforms in Nigeria, München, GRIN Verlag, https://www.grin.com/document/447234
