CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Nigeria as a developing country is known for producing and marketing of primary products. Its agricultural sector plays a significant role in the economy. It employs a high percentage of the labour force, and accounts for over a quarter of the GDP in spite of the dominance of oil. The sector is crucial in national poverty reduction efforts. Agriculture remains important for the diversification of the economy, in particular, its export structure (Okoh,2004:51).

Prior to the discovery of oil, agricultural exports generated over 70% of Nigeria’s foreign exchange earnings (Nwakama,1999:13). Agricultural production is largely a private sector activity. According to Nwakama (1999), Government support to the sector is focused on: the supply of inputs, provision of extension services, stabilization of market prices for certain goods through a strategic reserve programme and provision of financial assistance at a limited level. Exportation in Nigeria started before independence. In the decades of the 1960s and 1970s, Nigeria’s economy was dominated by agricultural commodity exports. Such commodities include cocoa, groundnut, cotton, rubber, palm produce, etc.

The first Nigeria cashew plantation dates back to 1954, with 800 hectares in the present Enugu state and 200 hectares in the western part of Nigeria (Ezeagu,2002). Its production did not greatly increase during the early 60s, with harvests not exceeding 200 tonnes. However, since the deregulation of the economy in 1986, its production has substantially increased.

Major cashew growing areas in Nigeria by geo-political zones are

South-East Zone

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Enugu, Abia, Imo, Anambra, Ebonyi.

South-South Zone

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Cross-River state.

South-West Zone

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Oyo, Osun, Ondo, Ekiti, and Ogun states.

North-East Zone

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Taraba state.

North Central Zone-

Kwara, Kogi, Nassarawa, Benue, Niger and FCT.

North-West Zone

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Sokoto, and Kebbi states.

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The Nigerian economy was deregulated in 1986 and the exportation of cashew nuts started in

1990.  During the same year, a large number of companies and individuals entered the cashew

market, with the resultant increase in production and exports. However, the exporters of cashew

nuts have not been having smooth and fair exportation of their products and this has been causing

some inefficiencies in the export business. Exportation of cashew nuts is operating below its

potential, productivity levels are declining, facilities and incentives are not adequately given to

manufacturing exporters

( Ezeagu, 2002).

Export Processing Zones (EPZs) are being established to promote exports and economic growth in developing countries. An Export Processing Zones (EPZs) are characterized as a geographical area within the territory of a country where economic activities of certain kinds are promoted by a set of policy instruments that are not generally applicable to the rest of the country (Cling et al 2005) . Firms investing in Export Processing Zones receive important subsidies and incentives by host governments in the form of income and sales tax-exempts, duty free imports and exports, free repatriation of profits, provision of enhanced infrastructure and public services, with exemption from local labour and other social protection regulations (Cling et al, 2005, ILO, 2003, Jayanthakumaran, 2003, Jauch,2002, Sargent and Mathew, 2001). In order to enter this billion-dollar industry, the Nigerian cashew industry must seek to transform Nigeria from a low-priced commodity producer to a reliable supplier and exporter of high quality cashew products (USAID,2002).

The activities concerning the non-oil products exportation in Nigeria, cashew nuts inclusive, were handled by the defunct marketing board, then the Nigeria Export Promotion Council, but exportation of cashew nuts fluctuates and production is at its declining stage. The Nigerian government, in order to encourage the investment and help improve the exportation of non oil products in Nigeria, led to the establishment of Export Processing Zones (EPZs) or Free Trade Zones (FTZ) under the management of Nigeria Export Processing Zones Authority (NEPZA).

Export Processing Zones (EPZs) in Nigeria started in 1992 and the subsidies, incentives, tax exempts, etc. have made EPZs in Nigeria a controversial development policy instrument because exporters of cashew nuts in Nigeria do not receive these net benefits. All these pose a fundamental gap for overall estimation of the adequacy of EPZs as a development policy instrument. Export

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oriented manufacturing activities have been the main focus of EPZs where production tends to be dominated by foreign invested firms.

Exporters of cashew nuts in Nigeria are facing several impediments in achieving higher production and processing of their products for exportation which need to be tackled especially, in the areas of

·     Incentives

·     Infrastructural facilities

·     Transportation means