Forecasting cotton lint exports in Nigeria using the autoregressive integrated moving average model

Abstract

Nigeria was a major global exporter of cotton lint to international market during the colonial and post-colonial era till late 70s when the country fully embraced oil exports to the detriment of the non-oil sector, cotton lint exports inclusive. However, Nigeria is gradually emphasizing agricultural exports again to earn huge foreign exchange, the oil sector having left the country in economic crises. This study utilized time series model particularly, Autoregressive Integrated Moving Average (ARIMA) to make forecasting of cotton lint exports in Nigeria by using 46 yearly observations (1970-2015). The model went through series of investigative and diagnostic tests in order to observe the usefulness of the model. The fitting of the selected ARIMA (2,1,2) model to the time series data, means fitting ARIMA (2,1,2) model of one first order difference. Smaller RMSE, MAE as well as Theil Inequality coefficient are actually preferred and justified that ARIMA (2,1,2) model was justified as adequate for the forecasting of cotton lint exports in Nigeria with AIC value of 20.96771, SIC value of 21.04881, MAPE value of 6751.231, RMSE of 93303.67 and R2 of 0.330951. A thirty-year period ahead of cotton lint exports is predicted. The observations signify a rising trend in exports hence; it will be available especially in the future for foreign trade in the next thirty years. The outcome from the study is valuable for trade organisations and investors in assessing the precariousness of the market structure.