The Impact of Food Importation on Food Production in Nigeria: The Case of Rice Importation and Production
Chapter One
Objectives of the Study
The broad objective of the study is to evaluate the impact of food importation on food production in Nigeria. The specific objectives of this study are:
- To ascertain the impact of rice importation on rice production in
- To ascertain the impact of government expenditure on rice production in Nigeria.
- To ascertain the impact of Balance of Payments on rice production in Nigeria.
CHAPTER TWO
LITERATURE REVIEW
Theoretical Literature
Literature on food production abounds and their tenets stem across a wide area of microeconomics on the consumer preferences and efficiency in production. This section is therefore dedicated to examining the various theories that have tried to explain issues in food production and importation and their applicability to the Nigerian context.
Theory of Comparative Advantage
Ricardo believes that free international trade is desirable and that nations and their populations benefit from it. He demonstrates this point with his famous England-Portugal example, in which both nations initially produce cloth and wine. To produce the same amount of cloth, England needs 100 labourers and Portugal 90 labourers. England needs 120 labourers to produce the same amount of wine that Portugal produces with 80 labourers (Ricardo 2004b, p. 135). These different labour requirements are due to their dissimilar circumstances that result from a nation’s situation, climate and other “natural or artificial advantages” (Ricardo 2004b, p. 132) and are exogenously given. With these “four magic numbers” (Samuelson 1972, p. 678), Ricardo shows that it would be advantageous for both nations if they specialized according to their respective comparative advantage and started trading with each other. England should specialize in the production of cloth and import wine from Portugal. The opposite applies to Portugal. As a result, they would both benefit. Due to the more efficient employment of labour and capital, “the amount and variety of the objects on which revenue may be expended” (Ricardo 2004b, p. 133) and “the sum of enjoyments” (Ricardo 2004b,p. 128) increase. The whole population, as consumers, benefits from international trade because goods become cheaper and available in larger quantities. There are no other economic gains from international trade. Dynamic developments like economic growth are not integrated into the theory of comparative advantage by Ricardo. Ricardo illustrates with his example that no nation needs to fear free international trade because it will be advantageous for both nations, even if one nation has a lower productivity in all goods and the other nation produces both goods more efficiently. This shows that absolute production costs are insignificant internationally, only comparative production costs matter. If the cost ratios are different in both nations, specialization and trade will benefit both. However, the opposite is also true, namely when production cost ratios are equal in both nations no gains can be made by specialization. In this situation trade will not take place at all because there would be no incentive for it.
CHAPTER THREE
RESEARCH METHODOLOGY
Model Specification
Models according to Gujarati (2008) should be developed from economic theory and mathematical representation. On this premise, this study draws variables from relevant theoretical literature reviewed. First and foremost, the study focuses on rice production hence it adopts rice production (RPROD) as the dependent variable. From comparative advantage theory we understand that technical efficiencies in production leads to reduction in prices of goods hence prices of rice imports (ARIP) entered the model. The human capital theory advocates for a knowledge rich population and the Malthusian theory points the need for self sufficiency in feeding the local population. The study therefore adopts population proxy by population growth rate (PGR). The IS-EP theories incorporate workings of interest rates (IR) for domestic demand and exchange rate (ER) for foreign demand. The study includes price of other substitutes (PSUB) and government expenditure on Agriculture (GEA) as explanatory variables.
Therefore, in keeping with theoretical postulations and in order to capture the specific objectives of the study, the research employs the model thus;
RPROD= ¦ (GEA, BOP, ARIP, RIMP, PSUB, EXR, IR, PGR)
CHAPTER FOUR
PRESENTATION AND INTERPRETATION OF RESULTS RESULTS
Impact of rice importation on rice production
To ascertain the impact of rice importation on rice production, the study first tests for unit root and co-integration to verify if the necessary and sufficient conditions of the ECM model are met. The table below shows unit root test results.
CHAPTER FIVE
SUMMARY OF FINDINGS, RECOMMENDATION AND CONCLUSION
Summary of Findings
The saying that “agriculture is the mainstay of the Nigerian economy may have become a cliché. It nevertheless underscores the emphasis placed on agriculture as the engine of growth in the Nigerian economy. Because rice has become a strategic commodity in the Nigerian economy, the Nigeria government has actively interfered in the Nigerian rice production over the last thirty years. However, policy has not been consistent. It has included oscillating import tariffs and import restrictions. Expenditure on rice imports have been rising year in year out. The country currently imports more rice than it produces to feed her growing population the study was able to discover that there is huge growth in rice imports and these huge rice budgets have macroeconomic implication including the country’s Balance of Payments position. From the results it was also confirmed in line with other similar studies that the demand elasticity for rice is low hence high tariffs would hamper demand for the product and increasing demand would higher imports. Policy recommendations favoured protectionism approach of bans on the product to encourage domestic production and only after self sufficiency in rice production has been attained can the country now proceed to export the commodity which would better her Balance of payments position.
Policy Implications
This study has brought forth a number of policy implications that shall advance policy simulation and promote further research. The study has first of all highlighted the importance of rice, the nature of domestic demand and the size of the expenditure on the product in Nigeria. This implies that the government must look into better ways of making the product available to locals and reduce expenditure on imports which could be channeled to other productive uses. Agricultural production proxy with government expenditure on agriculture is negatively related to rice production however the t value of GEA -2.38 shows that it is a significant determinant of rice production in Nigeria. A good explanation is that government expenditure on agriculture may have not been duely channeled to rice production; an attribute of corruption that is rampant in Nigeria.
Most importantly is the fact that rice importation significantly affects rice production in Nigeria which is expected. Major reasons for this could be that consumer preferences are tilted towards foreign imported rice which is superior in quality to locally produced rice. Consumers are rational agents who sek to maximize utility hence preferences are easily influenced when need be hence the government should look for ways to improve the quality of locally produced rice by giving farmers incentives to improve on cultivating, milling, packaging and marketing. Balance of payments is positively related to rice production which is expected since BOP is one of the key macroeconomic goals of all economies hence when there is favourable BOP, the production of commodities is positively affected. Exchange rate and prime lending rates have positive impacts on rice production hence policies on rice should incoporatate the workings of interest rates and exchange rates. Exchange rate dynamics have real implications for a special crop like rice, high exchange rates and low interest rates could be used to discourage excess imports and encourage domestic production and exports.
The need to have a healthy population is also key for economic growth and development. If the country must get the best out of her vast human resources, she has to keep them healthy this means that the government should ensure that food production and indeed rice production statistics is properly done and it should keep pace and even outstrip population growth rate. This would be a big task but it is achoievable considering that agriculture currently employs majority of Nigerian workforce. Hence with the right incentives given to farmers, self sufficiency in food production would be achieved.
Recommendations
The impact of food importation on food production in Nigeria as it involves rice importation and production in Nigeria is a study that shows how importation of food affects food production in Nigeria. Rice is a vital food which has relative stable consumption but has also become an important cash crop where it provides employment for more than 80% of the population in the major producing areas (Okoruwa and Ogundele, 2006).
The observation made in the working hypotheses agreed that rice importation has significant impact on rice production in Nigeria.
Therefore Nigeria should discourage importation and encourage drastic rice production; this process would impact human capital development. Nigeria could employ human capital theory which is the most influential economic theories of western advancement setting the framework for government policies since the early 1960s with its roots in the works of British economist Sir William Petty (1623-1687) and Adam Smith (1723-1790). The theory explains how knowledge increases productivity and efficiency of workers by increasing the level of cognitive skills as tested and confirmed by Schultz (1961).
In order to promote drastic increase in rice production, government would have to increase expenditure on Agricultural production giving rice production preferential attention, providing sophisticated machines and skill training to produce products that can compete in the international market, raise customers taste to take advantage of the teeming population.
Limitations of the Study
All research works generally record a number of limitations as the hindrances in the course of the research and this research was not an exception. The availability of data was a constraint to the analysis given that, it took a lot of time to assemble the data from the various data banks. It is however fortunate that the explanatory variables were able to determine the dependent variable as proved by the goodness of fit (R2) test for all the regressions. Also finance was another constraint that is more general to research in the developing countries which stems from the high cost of IT application, transportation, data sourcing, maintenance and nutritional upkeep amongst others.
Suggestions for Further Research
This study has been able to lay some key foundations on which other researchers can further build upon. The study has been able to ascertain that food importation and indeed rice importation has a significant impact on food production. The study has also been able to point other determinants of rice production such as population, government expenditure on agriculture, production of other substitutes, price of rice. Further research could be conducted to ascertain other possible determinants of rice production in Nigeria.
Conclusion
This study examined food production and food importation in Nigeria with particular focus on rice from 1980-2011. The model specification was based on the OLS multiple regression. Akaeze (2010) using annual time series data from 1961 to 2006, investigated consumer preferences for imported rice in Nigeria. Study results indicate that habit persistence and perceived quality differences both play important role in explaining consumer preference for imported rice in Nigeria. An important implication is that policies designed to encourage production of relatively high quality local rice, thereby replacing imported rice in consumption baskets, will face considerable inertia due to the persistence of consumer habits and mindset regarding purchase and consumption of imported rice, even if the locally produced rice is of comparable quality. Companion policies designed to shift consumer-buying habits and alter already established cultural mindset via advertising and promotion programs may be required to overcome this consumption inertia. This probably explains the growth of rice imports in Nigeria. Notwithstanding, there is the need for government to raise domestic production as well as improve the quality of milled rice in Nigeria in a bid to increase itpreference among rice consumers in Nigeria vis-à-vis imported rice. Policy actions to significantly reduce rice imports in the long-run should not only rely on reducing total imports, but should explore alternative measures such as trade agreements and perhaps restriction of rice imports to increase production for local population and exports for foreign exchange earnings as well.
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