Response of Cocoa Export Market to Climate and Trade Policy Changes in Nigeria

Abstract: This study examined the response of cocoa export market to climate and trade policy changes in Nigeria. Specific objectives were to describe the trend in cocoa export market and climate/trade policy changes in Nigeria; analyze the level effects of climate change in cocoa productivity arising from farmland area and labour changes, analyze the effects of cocoa productivity and trade policy changes on cocoa export market in Nigeria; forecast the possible future changes in cocoa export market due to climate and trade policy changes; and  make policy recommendations based on the research findings. For the purpose of this study, secondary data were used. A comprehensive trend in cocoa export market and climate/trade policy changes was described. A 2-stage Least Square Dynamic Panel Regression Model was used to address cocoa production and export responses, respectively, while a Monte Carlo simulation test was used to simulate, under various climate and trade/price policy scenarios, for possible climate and trade policy impacts on future cocoa output and export. It was observed that the Nigerian cocoa export market has been fluctuating and would likely continue over time. It was also observed that there has been consistent fluctuation in temperature and precipitation although relatively smaller in comparison to the export market fluctuations but still significant since a minimal increase or decrease in these climate change variables could have a significant impact especially in agriculture compared to trade policy influencing factors. The Monte Carlo simulation test recorded a slight level of relationship between cocoa output/export and climate/trade policy variables. This implies that a 10% increase or decrease in these variables, would have slight effects on cocoa output/export in Nigeria. Based on the findings, it was recommended, among others, that there should be a trade-off between trade policy gains and losses due to forest conversion as a result of cocoa hectarage expansion.