Assessing the Performance of Cocoa and Oil-palm Production on Inclusive Growth in Nigeria

Over the years, cocoa and oil palm production have been one of the major market of export for International trade and a major source of economic growth in Nigeria. However,the production of cocoa and oil palm has been below expectation as a result of government diverting its attention to the oil and gas sector and consequent low attention in the agricultural sector. This study, therefore, examines the relationship between performance of cocoa and oil palm production on inclusive growth in Nigeria (1981- 2014). It employed Johansen co-integration test to determine the long run relationship between the performances of cocoa-oil palm production on inclusive growth in Nigeria, which is complemented with the Error Correction Mechanism (ECM). The results revealed that cocoa and oil palm production exact positive and significant effect on inclusive growth in both short and the long run. Thus, it is recommended that the Federal Government of Nigeria should invest in activities such as basic and applied agricultural research, agricultural extension and capacity building, irrigation development and agribusiness development that will promote agricultural production resulting in pro-poor growth.


INTRODUCTION
Generally, the agricultural sector contributes to the development of an economy in four major ways namely: product contribution, factor contribution, market contribution and foreign exchange contribution. The sector has the potential to be the industrial and economic springboard from which a country's development can take off (Osabuohien, 2014). Indeed, more often than not, agricultural activities are usually concentrated in the rural areas where there is a critical need for rural transformation, redistribution, poverty alleviation and socio-economic development (Stewart, 2000). However, the impact of agriculture in maintaining sustainable inclusive economic growth has been a major subject of controversy in many researches.A close examination of the agricultural sector's contribution to the Nigeria economy shows that the sector employs about 75 percent of Nigeria's labour force, similar in most Sub-Saharan African economies (Philip, Nkonya, Pender & Oni, 2009; Osabohien, Osabuohien & Urhie, 2017). Also, agriculture is the major source of food and livelihood in Nigeria, making it a critical component of programmes that seek to alleviate poverty and attain food security (Osabohien, et al, 2017). However, since the 1970s the sector had witnessed significant fall in its productivity. Inclusive growth on the other hand is broadly understood as growth that raises the pace of socio-economic progress and enlarges the size of the economy while creating conducive environment for investment and increasing productive employment opportunities (Ianchovichina & Lundstrom, 2009). Therefore, agriculture which possesses multi-dimensional effect on the economy can be a sustainable driver of inclusive growth in an agrarian and labour intensive country like Nigeria. Similarly, examining the initial role of the agricultural sector in Nigeria, the sector is seen to be an indispensable sector in establishing the framework for the country's economic growth. Some studies on agriculture and economic growth in Nigeria concluded that the current poor performance of the sector was due to the advent of oil boom and the effect of trade liberalization on the economy (World Bank, 2008;Ukeje, 2003). Some school of thought rejects this argument; Aliyu (2001) asserted that public capital allocated to the agricultural sector during the pre-oil boom (1962)(1963)(1964)(1965)(1966)(1967)(1968)(1969)(1970)(1971)(1972)(1973)(1974) were less than those of the post oil boom of 1975. Also, a number ofresearchers such as:Adofu, Abula and Agama(2012), Izuchukwu (2011), Udoh, Akpan and Effiong, (2011), Awokuse (2009), World Bank (2008), Ogundele and Okoruwa (2006), Adebayo (2006), Awotide (2004) among others examined various objectives such as effects of domestic savings, foreign direct investment on agricultural output and agricultural production as well as effect of agriculture on economic growth in Nigeria. However, these studies have not examined the isolated short and long run effects of cocoa and oil palm outputs on inclusive growth in Nigeria. Cocoa and oil palm are the two major drivers of crop production while crop productions substantially contribute not less than 70 percent of the agricultural outputs in the country. In addition, few available empiricalstudies on inclusive growth did notcapture the three dimensions of inclusive growth, which this study brought to bear. This could have provided a more robust empirical finding on dynamics of inclusive growth. Therefore, in order to address this observed gap, this study incorporated the three core drivers of inclusive growth (that include:economic productivity, human capital development, and governance) into the analysis of coca-oil palm inclusive growth nexus. Consequently, the objective of this paper include an assessment of the trends of cocoa and oil palm production, determine the short and long run implications of cocoa and oil palm production on inclusive growth in Nigeria.This study consists of five sections, namely: the introductory section followed by literature review section which covers conceptual, theoretical and empirical review of the relationship between cocoa, oil palm production and inclusive growth components.The third section focuses on methodology, whichcovers the description of the data sources and techniques of analysis. The fourth section consists of analysis and discussion of findings while final section is the conclusion.

II.
REVIEW OF LITERATURE The Oil palm tree (Elaesisguineensis) belongs to the family palmae having 225 genera with over 2600 species is one of the most important economic crops in Nigeria. It was discovered thousands of years back in western Africa as a result of European merchants who traded with West Africa and purchased palm oil occasionally for use in Europe (Adeyemo, 2015). The cocoa tree known as Theobroma Cacao belongs to the family stericuliniacea. Cocoa has its gene centre in the upper Amazon region of the South America from where it spread to different parts of the world (Amos, 2007). It is generally believed that cocoa cultivation in Nigeria started about 1879 when a local chief established a plantation at Bonny in the defunct Eastern Nigeria. Inclusive growth has been described as output growth that is sustained over decades, which is broad-based across different economic sectors, creating productive employment opportunities for a great majority of the country's working age population, and reduces poverty (Ianchovichina&Lundstrom, 2012; The Commission on Growth and Development, 2008). Inclusive growth focuses on ways to raise the pace of growth by utilizing more fully parts of the labour force trapped in low-productivity activities or completely excluded from the growth process. Olaiya (2016) examine the political economy of cocoa exports in Nigeria from 1970 to 2010. The study employed Ordinary Least Squares (OLS) analytical technique and subjective descriptive statistics such as tables, graph and trends. The study found that continued marginal decline in the aggregate output of cocoa attributes to low capacity building and utilisation for controlling the economic and ecological variables affecting cocoa producers. Likewise, Osarenren and Emokaro (2015) assessed the profitability of cocoa production under different management systems in Edo State Nigeria. A multistage sampling technique was used to select cocoa farmers in the study area. A well-structured questionnaire administered through interview schedules was used to collect data from the respondents. Data were analysed using descriptive statistics and budgeting analysis. They found that there is profitability from cocoa production irrespective of the type of government. Another state level study by Alamu (2013) provide an analysis of the seedling subsidy policy and cocoa production in South-West Nigeria used data collected through interviews and questionnaire. The study employed both content and descriptive analytical techniques. The study found that 96 percent, 95 percent and 79 percent of the local governments in Osun, Ondo and Oyo state respectively are cultivating cocoa. Also, both Oyo and Ondo states had supplied more than one million seedlings while Osun supplied about 800,000 seedlings to their farmers every year since the launch of the seedling subsidy policy. In addition, Adefila (2013) evaluate the spatial effects of cocoa production on rural economy in Idanre-Ifedore area, Ondo State Nigeria. The study employed both secondary and primary data; primary data were generated from 80 randomly sampled households in the study area. Descriptive statistics such as mean and percentages, and analysis of variance (ANOVA) with and regression statistics were employed to analyse the data. The study found that socio-economic factor such as age of the cocoa farmer, their annual income, age of their cocoa farms and farm size had strong positive influence on cocoa production in the State. They found that the adoption of innovation among the oil palm farmers is quite low. On palm oil, Adeyemo (2015) provide an analysis of the determinants of palm oil production in Nigeria. The study employed Augmented Dickey Fuller unit root test, Johansen Co-integration test and Error Correction Mechanism on secondary data coving 1971 to 2010. The study found that palm oil price and the exchange rate are the major determinants of agricultural productivity in the long-run while price of crude oil is the most important determinant of palm oil productivity in the short-run. Likewise, Ayindeet al. (2012) examine the impact of emerging innovations on palm oil production in Osun State, Nigeria. Their study employed data sourced through questionnaire administer to 100 oil palm farmers in the state. The study employed descriptive statistical, t-test analysis and the logistic regression model. Akpan, et al. (2012) established empirical relationship between agricultural productivity and some key macroeconomic variables in Nigeria. The short-run and long-run elasticity of the agricultural productivity with respect to some key macro-economic variables were determined using the techniques of cointegration and error correction model.More so, Ugwu (2009) conducted a studying assessing the problems and prospects of commercial small and medium scale cocoa and palm oil production in Cross River, Nigeria. The study employed primary and secondary data analysed with simple descriptive statistics. It found that though the farmers makes profit in the long run, they are challenged by restricted land for cultivation, high cost of starting nurseries and plantations, increase labour cost and unavailability of skilled and unskilled labour. From the foregoing and to the best of the knowledge of the researcher, there is dearth of studies evaluating the roles of cocoa and oil palm in agriculturally driven inclusive growth in Nigeria. Thus, this paper provides an empiricalassessment of the relationship between cocoa-oil palm production with inclusive growth components such as employment, income and consumption in Nigeria economy.

III. METHODOLOGY 3.1
Theoretical Framework The theoretical model in figure 1 exhibits the key drivers of inclusive growth in an economy are economic growth, human development and good governance. First and foremost, faster and sustainable economic growth is pre-requisite of inclusive growth (Elena & Susana, 2010). Perhaps this best explains why the emerging economies like Brazil, Russia, India, China and South Africa (BRICS) focus more on the accelerated economic growth in the last couple of decades. Economic growth should provide basic socio-economic amenities in the form of food security, health for all, education for all, electricity for all, access to all weather-good roads and safe drinking water (Asian Development Bank, 2013). Government should achieve administrative efficiency and should guarantee gender equity so that the trickle-down effect of the growth will actually materialise. Good governance and gender equity will enhance the human capabilities component of inclusive growth (Alfredo, 2010). Followed by economic growth productive employment is the key driver of inclusive economic growth since jobless growth is as dangerous as stagnation. Productive employment can increase the labour productivity. Employment outcome is an important outcome of inclusiveness. Naturally employment should be capable of poverty reduction. Inclusive growth assumes significant since it alone can uproot the absolute poverty. Inclusive growth can substantially reduce the income inequality both vertical and horizontal (Raunier&Kanbur, 2010). All these will enhance the quality inclusive growth in an economy (Paramasivan, Mani &Utpal, 2014).

Model Specification
This study adapts the model by Ozurumba and Onuorah(2016) where the effect of sectorial output on inclusive growth in Nigeria was employed both examined. This study modified their model by assessing of subsector of share of agriculture in Gross Domestic Product and replace HDI with inclusive growth index. Human Development Index is a composite of life expectancy at birth, education and per capita income which consist two out of the three major components of inclusive growth. Therefore, Ianchovichina&Lundstrom(2009) posit that inclusive growth should raise the pace of growth and enlarge the size of the economy, while levelling the playing field for investment (which access to electricity can foster), and increasing productive employment opportunities. Thus, the inclusive growth index employed in this study is a composite of per capita income, access to electricity (proxy by percentage change in electricity consumption per head), and active labour force (proxy by labour force participation rate from 15 to 65) using Principal Component Analysis (PCA). The PCA is used to convert three variables into one variable regarded as an index. This variable possesses the combined features and behaviour of all the time series variables involved. The model employed in this study is specified in equations (1): Techniques of Estimation This paper first ascertains the test of the stationary properties of the series using the standard Augmented Dickey Fuller (ADF) test. After which, a co-integration test is performed to identify the existence of a long-run relationship, normalized co-integration to examine long run impacts and Error Correction Model (ECM) applied to estimate the speed of adjustment of the variables towards the long-run equilibrium path in response to any divergence occurring in the short-run.   The maximum oil palm outputs of Nigeria was 949,900 tonnes, minimum was 51,700 tonnes while the mean was 768,700 tonnes with standard deviation of 122,000 tonnes (as shown in Table 2). While outputs of cocoa was maximum at 345,000 tonnes, the minimum 100, 000 tonnes while the mean was 227.700 tonnes with standard deviation of 64,000 tonnes. Additionally, maximum life expectancy in Nigeria was 52.8 years, minimum was 45.9 years and mean of 47.7 years with standard deviation of 2.3 (as shown in Table 2). The post secondary school enrolment peak at 915,586 with minimum of 7,791 and mean of 409,537. The best reported corruption index of the country was 2.7 and the worst index was 1.1 as shown in Table 2.

Stationarity Test
The summary of results of Augmented Dickey Fuller (ADF) unit root presented in Table 3 shows that all the variables are stationary after first difference at 5% significant level. Therefore, this implies that all the variables are I(1) series. This is the condition for employing Johansen technique of co-integration to assess the long run association in the model.

Co-integration Test
The co-integration test establishes whether a long-run equilibrium relationship exist among the variables of interest.The Johansen Co-integration test employed confirmed the presence of long run association in the inclusive model employed (as shown in Table  4).

Error Correction Mechanism (ECM)
The ECM is used to correct for disequilibrium in a co-integrating relationship. This mechanism serves as a means of reconciling short run disequilibrium behaviour of an economic variable of interest with its long run behaviour. The coefficient of the parameters and the t-statistics or probability value are the two parameters used in error correction model. The coefficient is expected to possess negative sign, indicating that a convergence of the variables back to equilibrium path following every period of disequilibrium. The P-value is used to check the significance of the variables testing at 5 percent level (0.05)  The adjusted R square of 0.719 indicate that the explanatory variables jointly explained 71.9 percent variations in inclusive growth drive in Nigeria which is a good fit while other factors not captured in this model explained 28.1 percent variation. Also, the error correction term of this study is statistically significant at 5 percent and indicates that the model possessed 94.4 percent speed of adjustment. This implies that the model adjust fast back to equilibrium after any disturbance (as shown in Table 5). Likewise, the model possess overall statistical significance at 5 percent since probability value of F (0.0017) is less to 0.05. The short run estimates of cocoa outputs in the last period (year) [D(LCOCOA (-1))], cocoa outputs in the previous two periods [D(LCOCOA (-2))], post-secondary school enrolment in the last period [D(POSTSEC(-1))] and corruption index in the previous two periods [D(COPI(-2))] were found confirm with expectation and statistically significant at 5 percent significant level (as shown in Table 5). Similarly, the long run estimates of cocoa outputs and oil palm outputs were found to be statistically significant at 5 percent significant level (as shown in Table 5). However, the short run estimates of oil palm and life expectancy confirmed with expectation but were statistically insignificant at 5 percent significance level. In the same vein, the long run estimates of life expectancy, post-secondary school enrolment and corruption index failed to confirm with expectation and were statistically insignificant at 5 percent significant level. Specifically, 1 percent increase in cocoa outputs induces an improvement of 2.45 percent in inclusive growth and 1 percent raise in oil palm outputs induces 5.94 percent increase in inclusive growth in the long run. Similarly, 1 percent raise in cocoa outputs in the last period and last two periods induces 2.46 and 1.31 percent improvement in current inclusive growth respectively. Likewise, 1 percent increase in post-secondary enrolment in the last period and corruption index in the last two periods induces 1.1 and 1.09 percent in inclusive growth respectively (as shown in Table 5).

Implicationof Findings
The dynamic estimated result shows that cocoa outputs have the potential to drive inclusive growth even though the foreign exchange earning potential of cocoa has not been optimally utilized in Nigeria. This support the finding by Abolagba, Onyekwere, Agbonkpolor and Umar (2010) that cocoa export exert positive and significant effect on economic growth in the country while Uremadu, Onyele and Ariwa (2016) found positive but insignificant impact on economic growth. These varied findings from literature could be due to the fact that most of the cocoa trees in the country have almost attained 30 years of age with plummeting outputs. These old trees coupled with their vulnerability to pest attack are responsible for noticeable fluctuations quantity of cocoa outputs of the country (Alamu, 2013;Nwachukwuet al., 2008). As expectation, this study found direct relationship between oil palm outputs and inclusive growth in Nigeria in the long run but insignificant in the short run. This is due to the fact that oil palm production stagnant from 1986 to 1993 and 1994 to 2007 which coincides with the indirect government involvement in agricultural production; the extension of export crops/processing facilities and the utilization of more modern technology (Antia-Obong&Bhattarai, 2012). Ugwu (2009) had equally found that oil palm positively influence the economy in the long run. In addition, this study found that corruptive index exerts positive and significant effect on inclusive growth in the short run. This implies that increase in the corruption index indicate an improvement in the prevalence of corruption in the country. This is in line with the findings of Ajie and Oyegun (2015),  and Fabayoet al. (2011) that increase in the prevalence of corruption depresses the Nigerian economy. Similarly, Adewale (2011) and Odi (2011) asserted that corruption had crowding-out effect on economic growth in Nigeria.