Analysis of Intra-Industry Trade in Agricultural Products Between Nigeria and Partner Nations Within the Economic Community of West African States

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.