EFFECT OF TRADE LIBERALIZATION ON OUTPUT OF SELECTED AGRICULTURAL CROPS IN NIGERIA

Abstract

The study assessed the effect of trade liberalization on output of selected agricultural crops (rice, wheat, cocoa and cassava) in Nigeria (1986-2020). Data on the variables of the study were collected from the records of Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS) and Food and Agriculture Organization (FAO) and World Bank database. Data were analyzed using Augmented Dickey-Fuller (ADF) unit root test and Vector Error Correction Model (VECM). The result of the Augmented Dickey Fuller (ADF) test for unit root revealed that cassava output, cocoa output, rice output, wheat output, exchange rate, tariff and trade openness were found to have unit roots and became stationary on first differencing. The result of the long and short-run effects of trade liberalization on agricultural output using the Vector Error Correction Model (VECM) showed that in the long run, a unit increase in trade openness will increase cassava output by 0.603 units, decrease cocoa output by 0.53 units, increase wheat output by 6.03 units and increase rice output by 3.30 units ceteris paribus. The study concludes that trade liberalization is healthy for the agricultural sector in Nigeria. The study therefore recommended that Nigeria should adopt more policies on reducing or eliminating quotas on agricultural produce that will enable the sector to grow at spectacular rates.