MARKET SUPPLY RESPONSE AND DEMAND FOR LOCAL RICE IN NIGERIA: IMPLICATIONS FOR SELF-SUFFICIENCY POLICY
2008, 9 (3) p. 567-573
This study examined the supply response and demand for local rice in Nigeria between 1960 and 2004. A system of equations using secondary data was estimated by OLS and 2SLS techniques. Area planted with local rice is mainly affected by expected price of output, agriculture wage rate and by the partial adjustment coefficient. The short-run response elasticity is 0.077. The implied long-run response elasticity is 1.578. The partial adjustment measure is 0.049. This, points to the difficulty of supply response to changing economic conditions. The price elasticity of demand obtained is 0.841. The demand for local rice is thus price inelastic. Rice income elasticity is 0.3378. It is also inelastic. The ban on rice importation in Nigeria could be said to be a step in the right direction. This policy should be continued and policed. However, price, output and non-price incentives that can exert significant influence on rice supply response and demand are required if the self-sufficiency goal is to be achieved.