Supply Response of Selected Agricultural Export Commodities in Nigeria

Abstract

This study investigates the supply response of seven (7) agricultural export commodities from Nigeria between 1970 and 2010. An econometric Error Correction Model (ECM) was employed to estimate export supply behaviors of the seven commodities chosen: cocoa, benniseed, rubber, palm-oil, ground nut, cotton seed, and soybeans. Results indicate that: the response of export supply to changes in relative price was positive and fairly significance for five (5) commodities except cocoa and soybeans, output growth and more credits to agricultural sector have positive and significance influence on the export supply of the commodities, change in road network positively and significantly affects export supply of three commodities. Exchange rate was significance for four commodities and was unexpectedly positive in most cases, rainfall was positive and significance to only perennial crops (cocoa, rubber and palm-oil), short-run export supplies responses range between 0.01 and 0.77 and were generally smaller than the long-run responses (0.22 to 28.09), Short-run price and non-price elasticities were less than unity (0.01 to 0.77 inelastic), Individual commodities shows different patterns of responses to price and non-price variables. These results point to three conclusions: First, the significance sensitivity of the commodities under consideration to output growth, credits to agricultural sector and improved road network suggest that price incentives alone are not sufficient to generate the desired export, attempt to increase the export supply of these commodities should focus more on the productivity of these commodities. Second, exchange rate appreciation may not hurt exports of these commodities much, if at all. Third, policies to stimulate commodity production and exports should attach significance consideration to the agro-climatic conditions as well as cropping patterns of the commodities.

Key word:   Supply, Response, ECM, Agricultural export, Nigeria