COMPETITIVENESS OF NIGERIAN COCOA IN THE DUTCH MARKET: AN ERROR CORRECTION MODEL (ECM) APPROACH

Abstract

The study analyzed the competitiveness of Nigerian cocoa (Theobroma cacao) in the Dutch market using the Error Correction Model (ECM) over 1961–2009 periods. Data were published in national aggregates on specific trade and macroeconomic variables from reputable sources. Prior to ECM estimation, the variables were subjected to stationarity and cointegration tests before instrumenting for simultaneity. Findings showed that the cocoa exported was positively influenced by the quantity produced by non-participating countries, and negatively by the export price of cocoa and that of substitute crop in the long run. On the part of supply relation, cocoa exported had a negative sign implying decreasing marginal output with respect to cost in both long and short run. The coefficient of market power was -0.626 and -0.005, in the long and short run, respectively. Based on the findings, the study advocates intervention from government, private sector and donor agencies to revitalize the export capacity.