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Vector error correction modelling of Nigerian agricultural supply response

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  • Olubode-Awosola, O.O.
  • Oyewumi, Olubukola Ayodeju
  • Jooste, Andre

Abstract

Undue taxing of the agriculture sector could constitute a disincentive to agricultural production in most low-income African countries where agriculture is being taxed for industrial development. There is an argument that the high level of taxation of agriculture in favour of industrialization is in part due to the underestimation of the supply response of the agricultural sector. This study tests the theoretical hypotheses that only price, non-price and natural disincentives respectively pose problems for agricultural growth. Johansen's approach to co-integration analysis was employed to test these hypotheses using the time-series data from the Central Bank of Nigeria (CBN) statistical database. The long-run price elasticity of supply is 0.13 and capital shift supply 18 per cent. The implication of this is that much more in-depth research is needed to identify those factors that affect supply and to describe the effect of factors that shift supply in response to price incentives. This could provide valuable information for government in the use of appropriate policy measures and variables.

Suggested Citation

  • Olubode-Awosola, O.O. & Oyewumi, Olubukola Ayodeju & Jooste, Andre, 2006. "Vector error correction modelling of Nigerian agricultural supply response," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 45(4), pages 1-16, December.
    • Handle: RePEc:ags:agreko:10141
    DOI: 10.22004/ag.econ.10141
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    References listed on IDEAS

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    Cited by:

    1. Johnson, Michael E. & Takeshima, Hiroyuki & Gyimah-Brempong, Kwabena, 2013. "Assessing the potential and policy alternatives for achieving rice competitiveness and growth in Nigeria:," IFPRI discussion papers 1301, International Food Policy Research Institute (IFPRI).
    2. Donato, Romano & Carraro, Alessandro, 2015. "Modelling Acreage, Production and Yield Supply Response to Domestic Price Volatility," 2015 Fourth Congress, June 11-12, 2015, Ancona, Italy 207278, Italian Association of Agricultural and Applied Economics (AIEAA).
    3. Amina Al Naabi & Shekar Bose, 2020. "Do Regulatory Measures Necessarily Affect Oman’s Seafood Export-Supply?," SAGE Open, , vol. 10(3), pages 21582440209, August.
    4. Antony, Nyerere, 2016. "Determinants Of Rice Supply In Tanzania," Research Theses 276426, Collaborative Masters Program in Agricultural and Applied Economics.
    5. Mahmoud Ali AMASSAIB & Mohammed Salih Adam ABDALLA & Tarig GIBREEL, 2022. "Market Efficiency in Agricultural commodities: Vector error correction model (VECM) Approach," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(9), pages 174-179, September.
    6. Ranjan Paltasingh, Kirtti & Goyari, Phanindra, 2013. "Supply Response in Rainfed Agriculture of Odisha, Eastern India: A Vector Error Correction Approach," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 14(2), pages 1-16.

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