Determinants of trade flow of some selected nontraditional agricultural export commodities in Nigeria

Abstract

This study analysed the determinants of trade flow of some selected non-traditional agricultural export commodities in Nigeria, for the period 2007  to 2017. The objective of the study was to analyse the factors that determine the export of these commodities. The study used trade data of thirty-  six importing countries of these commodities around the world. The secondary data used was sourced from various institutions’ databases. A  balanced panel data from 36 countries for the years 2007-2017 were used with one dependent variable and ten explanatory variables (a total of  n=396, N=36, and T=11); all variables were expressed in natural logarithm. The gravity estimation model was used in data analysis. The Hausman  test was used in model selection and the test rejected the null hypothesis (random effects were efficient). Therefore, the fixed effects model was  used in the gravity model results’ interpretation. The gravity model results indicate that Nigeria’s export of non-traditional commodities (classified as  HS12 in the United Nations International Trade Statistics) follows the basic gravity model apriori expectations, implying that bilateral trade flows  will increase in proportion to the trading partner’s Gross Domestic Product (GDP) and decrease in proportion to the distance involved.The level of  openness of Nigeria’s economy and that of the importing countries were major determinants of trade flow of Nigeria’s HS12 commodity exports.  This variable carried the expected positive sign for both Nigeria and its trading Partners and was also statistically significant at the 5% level.  However, the real exchange rate variable was not a major determinant of HS12 commodity trade. The distance variable was statistically significant  indicating the need for regional trade expansion. The dummy variable of the trading partner being an African country was positive and a significant  factor in the determinants of the HS12 commodities. However, colonial or official language ties were negatively signed and significant, implying that  this was not a major contributor to trade in these commodities. The study recommends that favorable import and export promotion policies and  trade openness to boost growth in the quantity of non-traditional exports should form part of government trade policies; and Nigeria should also  take advantage of the proposed African Free Trade Area considering the gains she stands to make through proximity in distance.