The Good, Bad And Ugly Sides To Agribusiness Development In The Developing World: A Focus On Nigeria’s Oil Palm

Abstract

This paper examines the reaction of Nigeria’s oil palm output to climate change and international commodity price volatility since its independence. The Fully Modified-ordinary least square (FM-OLS) regression, Generalized Autoregressive Conditional Heteroscedasticity (GARCH), Autoregressive Conditional Heteroscedasticity (ARCH), and Granger causality were employed to analyze secondary data used from January 1961 to December 2015. The GARCH and ARCH results reveal volatility in the international commodity price of oil palm. Consistently, the FM-OLS result showed that temperature, oil palm commodity price, and inflation rate had a significant positive effect on oil palm yield, while the combination of temperature with oil palm commodity price exerted a significant negative influence on it.The FM-OLS result showed that oil palm production was negatively influenced by inflation, real exchange rate, and combination of rainfall with oil palm commodity price and positively by rainfall. Furthermore, the Granger causality test showed that the null hypothesis, which held that rainfall did not Granger cause oil palm output, was accepted, while others were rejected. Ultimately, we present some sound reasons to explain the statistical results and propose policy suggestions to uplift food and environmental security through rubber output. This research is a landmark and pacesetting study. Research combining climate change and commodity price as it reacts to agribusiness is lacking to date.