Export supply responses of Nigeria's major agricultural commodities to price and exchange rate regimes

The declining performance of non-oil exports in Nigeria since the mid-70s has largely been blamed on poor domestic policies and deteriorating external terms of trade. The central issue to the problem was the question of exchange rate misalignment. In response to the problems, the government embarked on the Structural Adjustment Programme (SAP) which aimed among others to stimulate agricultural exports. The principal objective of this study is therefore to evaluate the responsiveness of
export supply of major agricultural commodities (cocoa bean, palm kernel and natural rubber) to prices and exchange rate changes. In the line with the above, the study is set to describe the structure of Nigeria's export, identity the major export incentives and instiitutions, determine the impact of exchange rate, price, and trade liberalization regimes on export supply of leading agricultural commodities and make policy recommendations based on findings. To address the objectives of the study, annual time series data (1970-1993) collected from various secondary sources on relevant variables were fitted into
econometric models in linear, semi- and double-logarithmic functional forms using Ordinary Least Square technique. The principal models specified that the quatity exported of a commodity is a function of the ratio of world prices to domestic prices, real effective exchange rate,·· iocal processing capacity, domestic production capability and trade liberalization policy.
The double-log functions produced the best results. The results show that the regression coefficients of price ratio, real effective exchange rate, local processing capacity, domestic production capability and trade liberalization policy are respectively 0.21, 0.91, -1.44, 0.36, 2.08 for the cocoa model; 0.13, 1.62, 0.29, 1.15, -1.06 for palm kernel model and 0.45, 0.46, -0.08, -0.01, 1.62 for natural rubber model. Except for trade liberlization policy, the regression coefficients are direct measures of export supply elasticities. Though the results are mixed, the overall picture is that export commodities are positively but inelastically responsive to prices and exchange rates .effects. The implication is that a change in these variables will produce less than proportionate effect on export supply.