Can Private Investment Sustain Cocoa Subsector Output in Nigeria? Empirical Evidence using Vector Error Correction Model: 1980-2016

This study was carried out to analyse effect of private investment on cocoa output in Nigeria using Vector error correction model: 1980-2016. Based on the availability of data, secondary data consisting of annual times covering a period of 37 years (1980-2016) were obtained from World Bank development indicators data base, food and agriculture organization. United Nations conference trade and development (UNCTAD), analysed using VECM (vector error correction model), Impulse response and Variance decomposition. Results showed the direction of cocoa (-0.001) and FDI(-0.000) were negative and significant at 1% and 5% level of significance. This implies that the direction of growth of ccocoa was decelerated over the period under review In contrast, gross domestic private investment (0.003) was positive and significant at 1% level of significance. This implies that the direction of GDPI is accelerated over the period under review. Results showed that the coefficient of determination (R2 ) was 0.616 indicating that 61.6% variation in output of the variation of cocoa output were explained by cocoa output in the previous year, foreign direct investment in the previous year, gross domestic private investment in the previous year and labour in the previous year. The study showed that a unit increase in labour will decrease cocoa output by 16.65% and 3.25% respectively. Further, results showed that cocoa output responded negatively to foreign direct investment and gross domestic private investment in both short and long run. The result further showed that cocoa output responded positively to labour in both short and long run. The result showed that in the short run cocoa output contributed to itself by 82.09%, FDI contributed to cocoa output by 4.23,GDPI contributed to cocoa output by 3.98% and labour by 9.68. The result further showed that in the long run cocoa output contributed to itself by 80.16%, FDI contributed to cocoa output by 4.91%. GDPI contributed by 4.97% and labour by 9.93%. It was recommended that incentives should be given to domestic and foreign private investors through tax, improved varieties, credit facilities in order to significantly sustain the subsector.