Analysis of factors influencing import demand in Nigeria

Abstract

This paper investigated the factors influencing import demand in Nigeria over the period 1980-2014. The large population size of Nigeria and the surge in importation of goods into the country over the years necessitated this investigation. The study identified real income level, real exchange rate, domestic price level, external debt stock, degree of openness and level of domestic investment as possible factors that influences import demand in Nigeria. In order to achieve our objectives data on the above independent variables and total import demand as dependent variable was sourced from secondary sources. Using the Ordinary Least Square (OLS) and cointegration/error correction mechanism, the study shows that: real income level, domestic price change, exchange rate all have negative and significant impact on total import demand in Nigeria, this implies that these variables significantly retarded total import demand in Nigeria over the period of this study. The result also revealed that degree of openness; gross capital formation and external debt have positive and significant implication on total import demand. This implies that these variables significantly spurred total import over the period of this study. The study therefore concludes that import demand has serious implication on the Nigerian economy over the period. Based on these results/findings, the study recommends: increase in real income (GDP), trade restrictions, review of conditions for foreign investments and a friendly investment climate as possible measures of growing the Nigerian economy.

Keywords: import demands, factors, dependent variable