Competitiveness In The Export Demand For Nigerian Rubber

The study examined the degree of competitiveness in the export demand for Nigerian rubber with focus on the Spanish Market. The study covered the periods of 1961 – 2010 and data comprised national aggregates. Two Stage Least Squares (2SLS) approach was used in the estimation after instrumenting for simultaneity and establishing stationarity cum cointegration relationship. The outcome of the analysis showed that the demand for Nigerian rubber by Spain was affected negatively by export price of the commodity and income of the importing country. The coefficients of export price of the substitute crop and world production excluding participating countries traced out a positive relationship. The result further showed that there is relative competitiveness in the Spanish market on the strength of the Lerner index of 0.015. The study recommends the allocation of more resources to the export crop through deliberate budgetary allocation to the producing states and exchange rate stabilization policies are strongly advocated among others

Agricultural commodity trade has played a prominent role in Nigeria’s economic development. Drawing its strength from the largest sector (agriculture), such important roles include contribution to employment, food production, foreign exchange and industrial inputs (Omonona et al, 2007; Daramola et al, 2007). Nigeria’s agricultural commodity exports can be categorized into namely traditional and non - traditional agricultural commodities. The prominent traditional export commodities include cocoa, palm oil, palm kernel, rubber, cotton, groundnut, kola nut among others while the non - traditional export commodities include pineapple, cashew, eggs, processed fruits, alcoholic beverages to mention but a few which have emerged as the most demanded products in the international markets (UNIDO, 1992).

Among the agricultural commodity exports, rubber is one of the most dominant crops in the export basket of Nigeria. Natural rubber is a vital agricultural commodity used in the manufacture of a wide range of products. Its production from the rubber tree (Hevea brasillensis) plays a major role in the socio-economic fabric of many developing countries. Over 20 million families are dependent on rubber cultivation for their basic income in the world natural rubber market (Aye Aye, 2008). About 48% of the global demand for natural rubber comes from China, India and Malaysia which are three major natural rubber consuming countries within the ANRPC (Association of Natural Rubber Producing Countries). However, the major buyers of rubber from Nigeria include Canada, France, China, Netherlands, Italy, Germany, Malaysia, South Africa, Spain and United Kingdom (Ayemibo, 2010). Nigeria is ranked second in Africa and about eleventh among exporters of rubber in the world (Figure 01).

The European market for natural rubber (NR), to which Spain belongs, has been experiencing price increases and volatility in recent times. Since 2008, natural rubber market evolutions have been huge, quick and apparently not always related to the traditional supply-demand scheme. Prices evolved from 1.2$/kg in February 2009 to 6.4$/kg in February 2011. The EU is import dependent on natural rubber, due to geographical and climatologic reasons there is no domestic production of natural rubber. Moreover, natural rubber production is concentrated in South East Asia (93%) while the remaining is supplied by Africa. Out of 10, 291, 000 tonnes of natural rubber produced in the world in 2010, EU consumed 1,120,000 tonnes representing 11% of the world production (ETRMA, 2011). Based on FAO (2009), Spain has stood out, over the years, as one of Nigeria’s consistent trading partners and imports about 7.7% of the total agricultural exports from Nigeria.

In Nigeria, Rubber is currently grown in Edo, Delta, Ondo, Ogun, Abia, Anambra, Akwa Ibom, Cross River, Rivers, Ebonyi and Bayelsa States where the amount of rainfall is about 1800 mm to 2000 mm per annum. In terms of price, the FOB prices range from USD2,500-3,000 /MT depending on quality and time of year (Ayemibo, 2010).

It has also been observed that those unfavorable domestic terms of trade for agricultural exports, loss of market power and declining output are the principal contributors to the dismal performance of traditional exports, and those factors reflect in the interaction of inappropriate domestic pricing policies and external shocks. It is hoped that the outcome of this study will form a formidable basis for formulating appropriate sub – sectoral policies and dependable platform for taking informed decisions cum act as a reference to further studies. As such, wider interest will be stimulated in this study area and attention drawn to the need for redefining, revitalizing and re-diversifying Nigeria’s economic prosperity. On the basis of the foregoing, the study aimed to estimate export demand of Nigerian rubber to the Spanish market; to measure the market power of Nigeria in the export of Rubber to Spain.