Price Competitiveness and Supply Response of Rice Producers in Nigeria: Implications for Agricultural Trade

Abstract

This study examined the price competitiveness and supply response of rice producers in Nigeria and its implication for agricultural trade. Specifically, it examined the trade balance for rice; examined price volatility; estimated supply response coefficients and the determinants of supply response of rice producers in Nigeria. Data were collected from secondary sources and covered the period 1972 to 2017. Data analyses were achieved using descriptive and inferential statistics. Results indicated a negative trade balance (x = - N20/kg) between imported rice and domestic rice. Price volatility result showed that volatility in agricultural markets was high, with that of imported rice being higher than domestic rice, then maize. Supply response coefficients for rice indicated that production output, price of maize and annual rainfall statistically and significantly influenced supply of rice while domestic price of local rice, price of imported rice and government expenditure on agriculture were not significant. All the series were stationary in the first difference and there was linear combination or long-run equilibrium relationship among the co-integrated variables. There were price adjustments between short-run to long-run equilibrium and the error correction coefficient was -0.209. Further results showed that the price and probably favoured quality of imported rice constrained domestic production and negatively impacted rice exports from Nigeria. This indicates a potentially significant impediment to the expansion of rice production in Nigeria. Government must put in place guaranteed minimum price for rice, and be ready to act as buyer of last resort, as incentives for the farmers, to sustainably increase production and the country to attain self-sufficiency in the short-run. Government and non-governmental institutions should provide improved production inputs and modern processing facilities to enhance the competitiveness of local rice against imported rice, both in terms of quality and price.