Can Private Investment Sustain Cocoa Subsector Output in Nigeria? Empirical Evidence using Vector Error Correction Model: 1980-2016
Journal Title: International Journal of Academic Research in Business and Social Sciences - Year 2019, Vol 8, Issue 7
Abstract
This study was carried out to analyse effect of private investment on cocoa output in Nigeria using Vector error correction model. Based on the availability of data, secondary data consisting of annual times series covering a period of 37 years (1980-2016) were obtained from World Bank data base, food and agriculture organization and United Nations conference trade and development (UNCTAD). Data were analysed using vector error correction model (VECM) Impulse response and Variance decomposition. Results showed that the direction of cocoa (-0.001) and FDI (-0.000) were negative and significant at 1% and 5% level of significance. This implies that the direction of growth of cocoa decelerated over the period under review. In contrast, gross domestic private investment (0.003) was positive and significant at 1% level of significance. This implies that the direction of GDPI is accelerated over the period under review. Results showed that the coefficient of determination (R2 ) was 0.616 indicating that 61.6% variation in output of cocoa output were explained by cocoa output in the previous year, foreign direct investment in the previous year, gross domestic private investment in the previous year and labour in the previous year. This study showed that a unit increase in labour will decrease cocoa output by 16.65% and 3.25% respectively. Furthermore, results showed that cocoa output responded negatively to foreign direct investment and gross domestic private investment in both short and long run. In addition, results also showed that cocoa output responded positively to labour in both short and long run. The result showed that in the short run cocoa output contributed to itself by 82.09%, FDI contributed to cocoa output by 4.23,GDPI contributed to cocoa output by 3.98% and labour by 9.68. The result also reviewed that in the long run cocoa output contributed to itself by 80.16%, FDI contributed to cocoa output by 4.91%. GDPI contributed by 4.97% and labour by 9.93%. In conclusion, cocoa output responded negatively to foreign direct investment and gross domestic private investment in both short and long run. Finally, foreign direct investment contributed mostly to cocoa output in the short run while gross domestic private investment contributed mostly to cocoa output in the long run. It was recommended thatincentives such as credit facilities, tax reduction and improved seed varieties should be given to domestic and foreign private investors in order to significantly sustain the subsector.
Authors and Affiliations
Nwalem, M. P . , Asogwa, B. C . , Abu, O .
Keywords
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- EP ID EP564421
- DOI 10.6007/IJARBSS/v8-i7/4405
- Views 40
- Downloads 0
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