Nigeria's Non-Oil Exports: Determinants of Supply and Demand, 1970-90


WP/94/59-EA
Nigeria's Non-Oil Exports: Determinants of
Supply and Demand, 1970-90 by Inutu Lukonga

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 deter-
minants 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.