Abstract

Victor Olusegun, Paul Afolabi and Adeniyi Adebayo

Cashew supply had lagged behind demand for it both in the domestic and foreign markets. While the agroindustry faced serious problems in procuring the kinds and quantities of the commodity they want, producers of the commodity have remained poorly linked to the agro-industrial sector and availability of the commodity as raw material to agro-industry remained inadequate and irregular. This paper therefore examined how economic policy variables affect domestic supply and the prospects for diversification of increased cashew to agro-industry. Data for the study included policy variables such as real exchange rate, interest rate, wage rate, and government investment expenditure in agriculture. Data were analyzed using simultaneous equation regression model. Variables that significantly affected cashew supply included price of cashew, price of complementary crop, rural wage rate, government investment in agriculture and interest rate on agricultural loans. Rural wage rate had significant effect on cashew supply with coefficient of -0.38 at p<0.05. Government investment on agriculture with coefficient of 0.06 had significant effect at p<0.05. Interest rate on agricultural loans, with coefficient of -0.44, had significant effect on cashew supply at p<0.05. Policy strategies to expand supply of cashew and enhance diversification to agro-industry included improved infrastructure that will ensure effective market linkages.