The Nigerian cocoa economy has a rich history which is well documented in literature. The contributions of cocoa to the nation’s economic development are vast and have been reported by many authors. In terms of foreign exchange earnings, no single agricultural export commodity has earned more than cocoa. With respect to employment, the cocoa sub-sector still offers quite a sizeable number of people employments, both directly and indirectly. In addition, it is an important source of raw materials, as well as source of revenue to governments of cocoa producing states. Because of its importance, the recent Federal Government’s concern of diversifying the export base of the nation has placed cocoa in the centre-stage as the most important export tree crop. Evidence has however shown that the growth rate of cocoa production has been declining, which has given rise to a fall in the fortunes of the subsector among other reasons. Folayan, Daramola and Oguntade (2006), note that cocoa production in Nigeria witnessed a downward trend after 1971 season, when its export declined to 216,000 metric tons in 1976, and 150,000 metric tons in 1986, therefore reducing the country’s market share to about 6% and to fifth largest producer to date. In fact, the recent cocoa stakeholder’s forum held in Calabar, Nigeria by the Presidential Initiative on cocoa was to deliberate on the state of the cocoa subsector and reach consensus on how investments in the cocoa sub-sector can be strengthened and increased among other issues that bother on the sub-sector, in view of the Government’s renewed interest to boost cocoa production, domestic utilization and export. Prior to the Structural Adjustment Programme (SAP), cocoa marketing was carried out by the erstwhile highly regulated Commodity Marketing Boards, which were known to pay farmers far less than the export price of cocoa. This situation affected cocoa production and export in the past as it served as a disincentive to investment in cocoa production. Even after the abolition of the Marketing Boards structure, cocoa production has still not fared better as is evident in the declining production trend reported in previous studies. One of the possible reasons for this may be the nature of investment in cocoa production, as some worry has been expressed as to whether the returns from cocoa are not being threatened by such factors as rising costs of production, price instability, and differences in management systems and perhaps declining productivity due to ageing trees. Generally, if investment in cocoa production were attractive, farmers/investors would allocate scarce resources to cocoa farming.

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