Trade Openness and Cocoa Output in Ondo State

Abstract

The study was carried out to provide further evidence on the concept of openness by examining its effect on cocoa output and the direction of causality between cocoa output and identified variables of interest in Ondo state. Data collected for the period 1980 – 2012 was analyzed using the dynamic ordinary least square (DOLS) method. The study also applied the error correction method and conducted both stationarity and co-integration tests. Results showed that all the variables were non-stationary at level but stationary at first difference i.e 1(1). The co-integration test showed the existence of co-integration among the variables implying the existence of sustainable long run relationship among the variables of interest. The ECM also showed that 57% of changes in the short run toward long run will be corrected per year. The result of granger causality test showed the evidence of unidirectional causality between cocoa output in Ondo State and ratio of credit to private sector, which run strictly from cocoa output in Ondo State to the ratio of credit to private sector. It follows from the result that increase in cocoa output will serve as a positive indicator that will encourage lending to cocoa farmer and subsequently boost productivity. The study concluded that trade openness did not significantly influence cocoa output in the study area while domestic price was significant, though negative. The study therefore recommends that the government should ensure that cocoa farmers are adequately motivated by getting appropriate value for their cocoa output.