Time-series analysis of Nigeria rice supply and demand: Error correction model approach

Abstract

The study examined a time-series analysis of Nigeria rice supply and demand with a view to determining any long-run equilibrium between them using the Error Correction Model approach (ECM). The data used for the study represents the annual series of 1960-2007 (47 years) for rice supply and demand in Nigeria, derived from the World Rice Statistics compiled by the International Rice Research Institute (IRRI, 2009). The order of integration and the level of co-integration were determined using the Augmented Dickey Fuller (ADF), Johansen co-integration and Granger causality test. The result of the descriptive statistics showed that rice supply and demand had means of 1.8 and 1.6 million metric tonnes respectively with a demand-supply lag of 0.18 million metric tons. The Trace test indicated one co-integrating equation at the 0.05 level of significance while the Granger causality ran one-way from supply to demand. The result of the ECM shows that the co-efficient of the short-run and long-run relationships between rice demand and supply were 1.102963 and -0.043497 respectively. There is disequilibrium between Nigeria  rice supply and demand in the short-run but re-equilibrates at 0.043. Thus, the more the demand for rice, the higher the production is expected in order to avoid any shortage, in the short-run, which though will always even out in the long-run. Nigeria rice supply-demand exhibit disequilibrium in the short-run but has a long-run equilibrium.

KEYWORDS: Rice, Integration, Co-integration, Unit-Root And Stationarity.