Competition, Taxes, Subsidies and Social Welfare Functions: A Case Study of Cocoa (Theobroma Cacao) in Nigeria

Cocoa (Theobroma cacao) remains a vital export crop, an important source of rural income and foreign exchange, predominantly among ageing smallholder farmers in southern Nigeria, and it continues to underperform compared to global competitors. Therefore, this paper examines the nexus among market structure, taxation, subsidies, and social welfare within Nigeria's cocoa sector. Drawing on empirical studies and policy evidence, this review highlights how competition, fiscal policies, and welfare considerations shape farmers' livelihoods and the overall performance of the cocoa value chain. Cocoa farmers face structural challenges, including weak market linkages, limited access to finance and modern inputs, and policy volatility, which ultimately undermine productivity and farmers' welfare. Government interventions through input and seedling subsidies have had limited success due to implementation inefficiencies, while taxation and regulatory frameworks influence incentives for production and value addition. Furthermore, fragmented market governance allows intermediaries to capture rent, thereby reducing the share of benefits accruing to farmers. This study recommends more effectively targeted subsidies, simplified and transparent tax regimes for smallholders, improved market governance, and the integration of welfare indicators into cocoa policy design.