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Working Paper Summaries (WP/94/1 - WP/94/76)
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Working Paper Summaries 94/59: Nigeria’s Non-Oil Exports: Determinants of Supply and Demand, 1970-90

Author(s):
International Monetary Fund
Published Date:
August 1994
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Since 1986, the Nigerian Government has undertaken a series of measures designed to promote non-oil exports, including exchange rate and institutional reforms. The success of the measures will depend, inter alia, on what factors constrain export growth, and on the responsiveness of the exports to price incentives. This paper, therefore, examines the factors underlying the past performance of Nigeria’s non-oil exports, and attempts to estimate the supply-price elasticities of Nigeria’s agricultural exports. It uses a model that specifies both demand and supply side determinants of exports, measures the responsiveness of export volumes to these determinants, and distinguishes long-term developments from short-term fluctuations.

A dominant theme in studies that have examined the erosion of Nigeria’s agricultural and other non-oil exports is that unfavorable domestic terms of trade for exports, declining output, and increasing domestic demand are the principal contributors to the dismal performance, and that these factors reflect the interaction of inappropriate domestic pricing policies and the oil boom. The results of this study accord with findings of earlier studies, and generally support the view that domestic market conditions strongly influenced export behavior in Nigeria. The elasticities derived from the model indicate a positive, although relatively limited, response of agricultural exports to price incentives, a structural shift in the export supply function associated with the export promotion measures, and a fairly short lag in the response of exports to the explanatory variables. There is also evidence that further expansion in exports was limited by growing domestic demand. Overall, the results provide evidence of, and support for, the usefulness of pricing policy in export promotion.

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