Supply Response In The Context Of Economic Reform: The Case Of Maize In Nigeria

Abstract

This study examined the supply responsiveness of maize farmers in Nigeria over a period of twenty-nine years against the background of economic reform. Annual data, sourced from various issues of the Central Bank of Nigeria's Annual Reports and Statistical Bulletins were used in the analysis which was carried out using cointegration and error correction techniques. Results show that the response of maize supply to own-price is very high, with an estimated elasticity of 2.7588 in the short-run and 1.9925 in the long-run. Similarly, the sensitivity of maize supply to the price of rice is equally high, with a cross-price elasticity of -2.6771 in the short-run and -1.8033 in the long-run, indicating that an increase in the price of local rice may be harmful to maize supply. The speed of adjustment of maize and rice prices from short-run disequilibria to changes in maize supply in an effort to attain long-run equilibrium is 207.82% within one year, which is very high. A plausible explanation is that adjustment costs in maize production may not be as high and that the capacity of farmers in terms of land and other inputs may not be as fixed as may have been assumed, implying that farming in Nigeria is not specialised. On the strength of these findings, a policy package that would boost the demand for maize; especially through stimulating its use by small and medium enterprises and large scale industries is advocated. In addition, investment in high-yielding and early-maturing technologies of rice and maize can afford an opportunity of cultivating at least two crops of rice and one crop of maize (or vice versa) on the same land annually. This way, a balance could be achieved between maize supply and domestic rice production: the current diplomatic relationship between Nigeria and the republic of China could be beneficial in the provision of the technologies. All these would increase supply, and ultimately, agriculture's contribution to gross domestic product.

Keywords: Maize, speed of adjustment, cointegration, price incentive, supply response

Global Journal of Social Sciences Vol. 7 (1) 2008: pp. 33-38