Factors Affecting Groundnut Exports in The Gambia: The Vector Error Correction Approach

Abstract

Groundnut, a leguminous oil seed grown in the uplands serve as food and main export crop in The Gambia. Despite a long tradition of groundnut farming, practical knowledge, favorable climatic conditions, and suitable land, recent declines in production and exports have hampered groundnut farming's contribution to poverty reduction, food security, and income generation.  Revitalization of cash crop, such  as groundnut has emerged as a national priority, embraced on a daily basis by rural development actors, particularly famers seeking to improve and secure their income. Thus, groundnut appears to be obvious and necessary, not only for farmers' income security, but also for the country's ability to attract foreign currency, provide livestock feed, and develop national trade. Given the country’s poor performance in groundnut exports, we deem it necessary to identify the key factors influencing that performance and study their effects on groundnut export earnings in order to draft appropriate policies aimed at increasing exports earnings in The Gambia. This paper employs the cointegration approach, with export value serving as the independent variable, to examine the country’s export performance over a 49-year period using time series data (1970-2018). Once a cointegration vector between the variables is discovered, the Vector Error Correction Model is applied. The findings reveal that  nominal exchange rate, producer price are key factors affecting significantly the country’s export performance in short-run. Furthermore, in the long-run exchange rate, production, producer price, and world export price are significant factors determining groundnut export earnings in The Gambia. To increase the country’s market share and export earnings, especially in the long-run, it is recommended to ensure an effective transmission of international prices increments to farmers and to improve the production by raising yields significantly.

Keywords: Determinants of Agricultural Exports, Agricultural Exports, Cointegration, Groundnut, The Gambia

DOI: 10.7176/DCS/11-8-04

Publication date:October 31^st 2021