JAEQM

This paper examines Nigeria’s cocoa export sector and the effects of exchange rate volatility across value-chain components from 1981 to 2023. Using descriptive trend analysis and a panel Gravity Model, the study accounts for zero trade and multilateral resistance. Results reveal a marked structural asymmetry: exchange rate volatility has no significant effect on raw cocoa beans (HS 1801; β = −0.115, p > 0.10), but significantly reduces exports of processed cocoa products, with elasticities of −0.492 for cocoa butter and −0.613 for cocoa powder (p < 0.01). Interaction models and Wald tests confirm that these effects differ significantly from those for raw beans. The findings suggest that currency volatility disproportionately constrains domestic processors through unhedged export prices and variable imported input costs, hindering agro-industrial upgrading. The study recommends targeted volatility mitigation and coordinated fiscal input-duty waivers.

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