Climate Change and Cocoa Output: Evidence from
CCR and FMOLS Approaches in Nigeria.
By
P.B.Eregha, PhD
Department of Economics,
University of Lagos.
bright049@yahoo.com
+2348052350021
Being a paper Presented at the 6th NAEE/IAEE Annual
Conference held between 22nd-23rd April, 2013 in Sharaton
Hotels and Towers, Lagos
Outline of Presentation
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Problem Statement & objective
Theoretical Consideration & Model
Results
Conclusion
Problem & Objective
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(IPCC) stated that climate change is emerging as one of cardinal challenges of the
21st century (APF, 2007).
concentration of greenhouse gases (GHGs) in the atmosphere and food insecurity
are two closely related threats facing mankind (Human Induced).
Climate change due to anthropogenic factors has shown that the globe is warming
(Odingo, 2009, IPCC, 2007).
Studies have shown that the trend is accelerating such that the average temperature
is rising at 0.20C every decade (IPCC, 2007 and Ofori-Boateng, 2012).
With the rising level in temperature globally, local rainfall patterns are changing,
ecological zones are shifting, the seas are warming and ice caps are melting (IPCC,
2007).
African countries and other developing countries have been termed to have at
disadvantage as the tropical areas stand to experience some of the most severe
effect from climate change
agriculture which takes a significant part of employment and food provision is the
most sensitive to climate variability.
Agriculture remains the mainstay of the majority of households in Nigeria and is a
significant sector in Nigeria’s economy.
Cocoa is one of the leading crops in Nigeria & if agriculture is more prone to
climate change.
Problem Statement & Objective Cont’d
•Cocoa production in Nigeria is threatened with recent
trend in global warming.
•It is against this backdrop that this study examines
cliimatic effect on cocoa output in Nigeria.
•Mendelsohn and Dinar (1999), Mathauda et al. (2000),
Torvanger et al., (2004), Kabubo-Mariara and Karanja
(2007), For Nigeria: Agboola and Ojeleye (2007) ,
Ayinde et al., (2011) , Jidauna et al., (2012), Sowunmi
and Akinola (2010);however, followed Ricardian
Approach and the output or production models never
captured core variables and besides the
methodologies…
•hence this study contributes to this literature by using
the CCR & FMOLS approaches.
Theoretical Consideration and Model
•Basically, Four theories linking climate change to crop
production:
•Ricardian theory
•Crop Yield response theory
•Agricultural Investment Portfolio Model
•Metaeconomics Theoretical Model
Model
Follows the Crop Yield response theory which allows for
weather influence on crop production (Angstrom, 1936)
Based on that we specify our model as:
(1) y  f (l , k , p, t )
Model Cont’d
• Where,
Y=output of cococa production
L=labour proxied by active population in agriculture
K=capital proxied by fertilizer import
P=precipitation
T=temperature
Method of Analysis
several estimators are proposed in the presence of cointegration: OLS, Fully Modified
OLS (FMOLS), Dynamic OLS (DOLS) and the Canonical Cointegration regression
(CCR).
CCR & FMOLS:
These estimators correct the standard OLS for serial correlation and endogeneity of
regressors that are normally present in a long-run relationship (Pedroni
1996;Bangake and Eggoh, 2011).
Data Source: FAO Database online.
Fig 1: Temperature in Nigeria
45
1800
40
1600
35
1400
30
1200
25
1000
20
800
15
600
10
400
5
200
0
0
Temp
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Trend Analysis
Fig 2: Precipitation in Nigeria
Precip
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Trend Analysis Cont’d
Fig 3: Cocoa Output in Nigeria
600000
500000
400000
300000
200000
100000
0
Cocoa
Empirical Results
Unit Root Result
Table 2: Cointegration Result
rank
MaxEigen
statistics
Trace
Statistics
prob
r≤0
39.73 (0.02)
100.04
0.006
r≤1
31.25 (0.04)
60.31
0.01
r≤2
18.57 (0.24)
29.06
0.18
Table 1: Unit Root Results
Note: * significant at 1% with intercept and no trend assumption.
Variables
ADF(1)
PP(1)
Rmk
Population in Agric
-4.87*
-4.99*
I(1)
Fertilizer import
-6.63*
-6.63*
I(1)
Precipitation
-5.06*
-6.18*
I(1)
Temperature
-3.49**
-3.59** I(1)
Cocoa output
-10.07*
-10.33* I(1)
Emprircal Result Cont’d
Table 3: CCR and FMOLS Results
Population in agric (+)
Fertilizer import (+)
Precipitation (-) not significant
Temperature (-) significant
Precipitation had a marginal effcet but
temperature had a detrimetal effect to
cocoa production in nigeria.
Variables
Population in Agric
CCR
Coefficients
0.009**
FMOLS
Coefficients
0.01*
Fertilizer import
0.37*
0.43*
Precipitation
-11.71
-23.31
Temperature
AR(-1)
-15648.43**
13446.45***
0.63*
0.58*
C
112505.3
165934.7
Adjusted R2
0.84
0.85
DW Stat
2.27
2.12
Conclusion
• The main climatic variables :temperature and
precipitation; show that Temperature in
nigeria is detrimental to Cocoa production but
precipitation is insignificant though negative.
• Therefore, it pertinent for authorities to
educate farmers to adapt to this worrisome
climate change syndrome, investment in
proper irrigation infrastructure to enhance
cocoa output is necessary. Cocoa shades also
required as safeguard to boast cocoa yield.