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