ANALYSIS OF INTRA-INDUSTRY TRADE IN AGRICULTURAL PRODUCTS BETWEEN NIGERIA AND PARTNER NATIONS WITHIN THE ECONOMIC COMMUNITY OF WEST AFRICAN STATES (1979-2008)

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ANALYSIS OF INTRA-INDUSTRY TRADE IN AGRICULTURAL PRODUCTS BETWEEN NIGERIA AND PARTNER NATIONS WITHIN THE ECONOMIC COMMUNITY OF WEST AFRICAN STATES (1979-2008)

ABSTRACT 

The basic tenet of the study was that intra-industry trade occurred when commodities of the same industry are simultaneously exported and imported by partner nations within the sub-region. The objectives of the study were to review Nigeria’s merchandise trade, assess the simultaneous exports and imports of agricultural products by partner nations, evaluate the share of intra-industry trade in agricultural products between Nigeria and the ECOWAS partner nations, and determine the effects of national and partners’ characteristics on the intra-industry trade within the sub-region. The study was carried out on the 15 countries within the Economic Community of West African States (ECOWAS). However, simultaneous exports and imports were only prevalent between Nigeria and four of these countries, namely Benin, Cote d’Ivoire, Ghana, and Togo. These countries have similarities in factor endowments, tastes and fashions of the partner nations. Exports and imports of agricultural products were collected from Federal Office of Statistics, now National Bureau of Statistics, publications. The data on national and partners’ characteristics such as GDP nominal, GNI per capita, size (population), foreign direct investment, value added by manufacturing, agriculture value added, household final consumption expenditure, and government final consumption expenditure were obtained from the United Nations Statistic Division as well as from ECOWAS Statistical Bulletin.

Descriptive statistics were used to achieve objectives (i) and (ii), while objective (iii) was achieved by employing the Grubel-Lloyd   approach of measuring intra-industry trade index. Objective (iv) was achieved by adopting the binary logistic analytical technique. The results revealed that the mean value of Nigeria’s merchandise trade with partner nations ranged from ₦201.7, 731.96, 4,480.84, 35,166.6,92, 965.64, to ₦346,029.9 million between 1979 and 2008, respectively. These represent an annual average of 2.66 and 97.34 percents, respectively, of her total merchandise trade to the partners and the other parts of the world for the period 1979-2008. Nigeria’s mean export value of all agricultural commodities ranged from ₦4.35 million between 1979 to ₦2,109.45 million between 2004 and 2008, while the mean import values ranged from ₦3.43 million between 1979 and 1983 to ₦8,215.73 million between 2004 and 2008. These represent 1.72 and 4.0 percent, respectively of the exports, and 16.97 and 16.75 percent, respectively of the imports within the referred periods. The Grubel-Lloyd intra-industry trade indices were computed for agricultural commodity as a whole, live animals, chilled meat, coffee/mate, and product of milling industry, preparation of cereals, miscellaneous edible preparations and residue from food industry for the 30-year period, for each product. The value of the trade indices were either zero or one, and formed the dependent variable.

The key results from the binary logistic model were that the Grubel Lloyd intra-industry trade indices in agricultural commodities were influenced by national population and average partners’ final consumption expenditure, while trade indices in live animals were influenced by partners’ GDP, national agriculture value added, partners’ agriculture value added, and national GDP. Also, intra-industry trade indices in chilled meat were influenced by GNI per capita, national population, and national agriculture value added. Trade indices in Coffee and mate were influenced by national GDP, GNI per capita, and partners’ foreign direct investment, while intra-industry trade in the products of mill industry were determined by GNI per capita, partners’ FDI, and national household final consumption expenditure. In cereal preparations, intra-industry trade indices were influenced by partners’ GNI per capita and partners’ FDI, while trade indices in miscellaneous edible preparations were influenced by partners’ GNI per capita, and partners’ household final consumption expenditure. Trade indices in residue from food industry were influenced by partners’ GDP, partners’ population, national value added by manufacturing, national population, partners’ value added by manufacturing, and national agriculture value added.

It was recommended that ECOWAS nations should encourage its member states to continue to incorporate regional development policy into the national development agenda, sustain macroeconomic stability, further liberalize the economy, promote private sector activity and investment, and reduce vulnerability to exogenous shocks. Also, ECOWAS nations should continue the development of infrastructure and deepen institutional reforms, so as to realize maximum benefits                                                               from globalization through diversification of its agricultural production base and export commodities that have value addition. There is the need for ECOWAS policy makers to continue to make concerted efforts to ensure the effective implementation of the ECOWAS trade liberalization scheme and to stimulate the private sector to enhance value addition to the manufactured products of agricultural origin within the community. There is also the need to sustain horizontal differentiation (i.e. different varieties of a given good), and vertical differentiation (i.e. different qualities of a given variety) of agricultural products, given the level of competition the regional economies will be subjected to when the economic partnership agreement Economic Partnership Agreements between the ECOWAS and the European Union (EU) goes into operation.

TABLE OF CONTENTS                                                                                 Page

Title Page                                                                                                                    i

Certification                                                                                                                ii

Dedication                                                                                                                  iii

Acknowledgment                                                                                                       iv

Abstract                                                                                                                      v

Table of Contents                                                                                                       viii

List of Figures                                                                                                             xiii

List of Tables                                                                                                              xiv

CHAPTER ONE                                                                                                     

1.0       INTRODUCTION                                                              

1.1       Background Information                                                                                1

1.2       Problem Statement                                                                                         2

1.3       0bjectives of the Study                                                                                   3

1.4       Hypotheses of the Study                                                                                4

1.5       Justification of the Study                                                                                4

1.6       Delimitation and Limitation of the Study                                                      5

CHAPTER TWO                                                                                                      7

2.0       LITERATURE REVIEW

2.1       Theoretical Frame Work                                                                                 7

2.2       Empirical Evidence of Intra-industry Trade                                                   10

2.3       Significance of Intra-industry Trade                                                              11

2.4       Occurrence of Intra-industry Trade                                                                12

2.5       Nigeria’s Merchandise Exports and Imports                                                  13

2.6       International Arrangements to Stimulate Regional Trade                              13

2.6.1    Economic Union                                                                                             13           2.6.2 Economic integration                                                                                           14

2.6.3    International Arrangements to Stimulate Agricultural Trade                         14

2.6.4    The idea of Common Market                                                                         14

2.6.5    The Customs Union                                                                                        15

2.6.6    Free Trade Areas (FTA)                                                                                 15

2.7       ECOWAS Common External Tariff (CET)                                                   16

2.7.1    Growth Prospects of ECOWAS Region                                                         20

2.7.2    Free Movement of Persons                                                                             23

2.7.3    Industry, Promotion of Partnership and Competition                                     24

2.8       Intra-ECOWAS Trade Transport                                                                   27

2.9       Analytical Framework Telecommunication                                                    28

2.9.1    The Wald Statistic                                                                                          33

2.9.2    R2 for Logistic Regression                                                                              33

CHAPTER THREE                                                                                   

3.0       RESEARCH METHODOLOGY                                                               35

3.1       The Study Area                                                                                               35

3.1.1    The West African Economy                                                                           35

3.2       Sampling Procedures                                                                                      36

3.3       Data Collection                                                                                               37

3.4       Data Analysis Technique and A-priori Expectations                                    38                                          3.5            Model Specification                                                                                        38

3.5.1    Grubel-Lloyd Analytical Model                                                                     39

3.5.2    Binary Logistic Regression Analytical Model (Explicit)                               40

3.5.3     Logistic Regression Model for Intra-industry Trade in Agric. Commodity 41

3.5.4    Logistic Regression Model for Intra-industry Trade in Live Animals           41

3.5.5    Logistic Regression Model for Intra-industry Trade in Chilled Meat            42

3.5.6    Logistic Regression Model for Intra-industry Trade in Coffee and Mate      42

3.5.7    Logistic Regression Model for Intra-industry Trade in Prdct. of Mill Ind.   43

3.5.8    Logistic Regression for Model Intra-industry Trade in Preps. of Cereal       43

3.5.9    Logistic Regression for Intra-industry Trade in Misc. Edible Preps             44

3.5.10  Binary Logistic Regression for Intra-industry Trade in Residues from Feed Industry                                                                                                                     44

3.6       Hypotheses Testing                                                                                         45

CHAPTER FOUR                                                                                      

4.0       RESULTS AND DISCUSSIONS                                                                47

4.1       Nigeria’s Total Merchandise Trade                                                                47

4.2        Exports by Agricultural Commodity Sections (fob)                                     49

4.3       Exports of Live Animals and Animal Products: HS Code I                           52

4.4       Exports of Vegetable Products: HS Code II                                                  42

4.5       Exports of Animal and Vegetable Fats and Oils: HS Code III                      54

4.6       Exports of Prepared Foodstuffs; Beverages, Spirit etc. HS Code IV            56

4.7        Imports by Agricultural Commodity Sections (cif)                                       58

4.8       Imports of Live Animals and Animal Products: (HS Code I)                        61

4.9       Imports of Vegetable Products: HS Code II                                                  63

4.10     Imports of Animal and Vegetable Fats and Oils: HS Code III                      65

4.11     Imports of Prepared Foodstuffs; Beverages, etc. HS Section IV                   65

4.12     Intra-industry Trade in Agricultural commodity and Product Subsections   67

4.13     Values of Variables used in the Regression                                                   69

4.14     Classification of Trade in Agricultural Commodity                                       74

4.15      Determinants of Intra-industry Trade in Agricultural Commodity               75

4.16     Summary of the Relationship between Variables                                           76

4.17     Test of the Significance of the Coefficients of the Determinants                  77

4.18     Classification of Intra-industry Trade in Live Animals                                  77

4.19     Determinants of Intra-industry Trade in Live Animals                                  78

4.20     Summary of the Relationship between Variables                                           80

4.21     Test of the Significance of the Coefficients of the Determinants                  80

4.22     Classification of Intra-industry Trade in Chilled Meat                                  81

4.23     Determinants of Intra-industry Trade in Chilled Meat                                  82

4.24     Summary of the Relationship between the Depend. and Indepen. Variables 83

4.25    Test of the Significance of the Coefficients of the Determinants                  83

4.26     Classification of Intra-industry Trade in Coffee & Mate                               84

4.27     Determinants of Intra-industry Trade in Coffee and Mate                            85

4.28     Summary of the Relationship between the Depend. and Indep Variables     86

4.29     Test of the Significance of the Coefficients of the Determinants                  86

4.30     Classification of Intra-industry Trade in Product of Mill Industry                87

4.31     Determinants of Intra-industry Trade in Product of Mill Industry               88

4.32   Summary of the Relationship between the Depend. and Indep Variables       90

4.33     Test of the Significance of the Coefficients of the Determinants                 90

4.34     Classification of Intra-industry Trade in Preparation of Cereals                    91

4.35     Determinants of Intra-industry Trade in Cereal Preparations                        92

4.36     Summary of the Relationship between the Depend. and Indep Variables     93

4.37     Test of the Significance of the Coefficients of the Determinants                  93

4.38     Classification of Intra-industry Trade in Misc. Edible preps                         94

4.39     Determinants of Intra-industry Trade in Misc. Edible Preparations               94

4.40     Summary of the Relationship between the Depend. and Indep Variables     95

4.41     Test of the Significance of the Coefficients of the Determinants                  96

4.42     Classification of Intra-industry Trade in Residue from Food Industry          97

4.43     Determinants of Intra-industry Trade in Residue from Food Industry          97

4.44     Summary of the Relationship b/w the Depend. and Indep Variables           100

4.45     Test of the Significance of the Coefficients of the Determinants                100

CHAPTER FIVE    

SUMMARY, CONCLUSION AND RECOMMENDATIONS                          102

5.1       Summary                                                                                                       102

5.2       Conclusion                                                                                                    107

5.3       Recommendations                                                                                        108

5.4       Areas Needing Further Research                                                                 110

xi

References                                                                                                               111

Appendix 1                                                                                                               116

Appendix 2                                                                                                               118

Appendix 3                                                                                                               121

Appendix 4                                                                                                               122

Appendix 5                                                                                                               125

Appendix 6                                                                                                               127

Appendix 7                                                                                                              129

Appendix 8                                                                                                              131

Appendix 9                                                                                                              133 Appendix 10                                                                                                                    135

Appendix 11                                                                                                            137

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