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International Research Journal of Finance and Economics
ISSN 1450-2887 Issue 174 July, 2019
http://www.internationalresearchjournaloffinanceandeconomics.com
Effect of Liberalized and Restricted Trade Policy Regimes on
Production and Export of Maize of Nigeria
Achoja Felix Odemero
Corresponding Author, Department of Agricultural Economics and Extension
Delta State University, Asaba, Nigeria
E-mail: lixmero40@yahoo.com
Tel: +2348032726201
Panama, Oghenehogagame
Department of Agricultural Economics and Extension
Delta State University, Asaba, Nigeria
Okeke Daniel Chukwujioke
Nwafor Orizu College of Education, Nsugbe, Anambra state, Nigeria
Abstract
International trade in maize grain is one of the drivers of Nigerian economic
growth. Policy fine-tuning is employed as mechanism to stimulate foreign agricultural
trade. Our understanding on the response of trade in maize to policy fine-tuning is not yet
clear. This study investigated the effect of liberalized and restricted policy regimes on
production and export of maize of Nigeria. Fifteen year Times series data (2001-2015) on
maize production, exports and import were obtained from Food and Agriculture
Organization Statistical (FAOSTAT) database and used to achieve the objectives of the
study. Data were analyzed using percentages, tables, graphs, Time-response model, Euler
test and Augmented Dickey Fuller (ADF) Unit Root Test. We found out that maize yield in
Nigeria showed an upward trend. It was also found that positive and negative international
trade balances were 9,729 tons and -199,095 tons, respectively. This result implies that
although maize grain output is on the increase, Nigeria is still a net importer of maize
products. Test of hypothesis indicates that maize output has statistically significant positive
response to trade policy regimes over the period (p<0.05). Trade Liberalized and
Restriction Policy regimes favored significantly maize output (p<0.05). Trade Restriction
Policy has statistically significant positive influence on maize grain export (p<0.05).
However trade imbalance was biased towards maize product import, indicating that Nigeria
has lost some foreign exchange earnings in this regard. We found sufficient evidence to
conclude that restricted trade policy regime has dual effects. We recommended that a
Restricted Trade Policy Regime that encourages more aggregate maize production and
export opportunities (international agribusiness in maize), is important and should be
sustained in Nigeria.
Keywords: Effects, Liberalized and restricted policy regimes, Maize production, Exports,
Nigeria
International Research Journal of Finance and Economics - Issue 174 (2019) 51
1. Introduction
Agricultural sector and agro-industry are still the drivers of economic development of Sub-Saharan
African (Henoa and Baanante, 2006). International agribusiness through foreign trade is one of the
sources of foreign exchange earnings for the sustenance of Nigerian economy, as it contributes about
42% of the Gross Domestic Product (GDP) and provides direct-indirect employment for over 70% of
its people (Central Bank of Nigeria, 2014).
The growth rate of cereal and other staple food production per annum in Nigeria was 2.5%.
This was less than annual food demand growth which was 3.5%. This demand increase was caused
mainly by 2.83% of annual population growth (Kolawole and Ojo, 2007). Ukeje (2002) stated that if
Nigeria’s enormous resources are managed well, this could support a vibrant agricultural sector to
ensure food security, to supply raw materials to the industry sector and to provide gainful employment
for the teeming population. Nigeria’s agricultural sector has shown a decline trend over the last four
decades. In 2011, to transform agriculture from a development-oriented to an agribusiness, the
Government embarked on two new policies such as the Agricultural Transformation Agenda (ATA)
and the Agricultural Promotion Policy (2016-2020) (Aliyu, 2015).
Cereals are the most important food source for human consumption. Of the approximately 2.3
billion tonnes of cereals has currently produced in the world. Roughly 1 billion tonnes has destined for
food use, 750 million tonnes has employed as animal feed, and the remaining 500 million tonnes has
processed for industrial used such as seed or wasted (FAO, 2006). However, the world cereal use in
2014-15 was placed at 2,456 million tonnes which is higher about 1.7% than the use of previous
season. This increase was related to the increase in the feed use of cereal, which increased to about 874
million tonnes (2.6%). Although the industrial use of grains (mainly biofuel production) was relatively
stable, human direct consumption increased by 1,104 million tonnes (0.9%) in 2014-15 resulting per
capital consumption at about 153 kg (FAO 2013a, FAO 2013b).
Nigeria raised its tariff rate from 11.9% in 2011 to 12.7% in 2017. However, tariff binding
coverage ranges from 19.2% to 117.3%. This wide range has made the tariff regime in Nigeria
relatively difficult to predict (Louis, 2010).
Our understanding on the effects of trade policy fine-tuning on maize production and exports is
inadequate and needs to be deepened considering its importance on national economic growth. There is
the need to investigate the degree of response of aggregate maize production and exports to the various
tariff policy regimes (restricted trade policy or liberalized trade policy). In this circumstance, trade
policy regimes are assumed to be predictors of aggregate maize production and exports in Nigeria.
Basically, the essence is to strategically make appropriate trade policy choices that can stimulate
growth in aggregate maize production and while concurrently scaling up exports.
The main objective of this study was to analyze the effect of liberalized and restricted trade
policy regimes on maize production and export in Nigeria for the period of 2001-2015. The specific
objectives were to:
i. ascertain the trend of maize production overtime,
ii. estimate net foreign trade balance of maize,
iii. forecast the trend of maize output,
iv. forecast the trend of maize exports,
v. ascertain the response of maize output to trade policy regimes and,
vi. examine the response of maize exports to trade policy regimes.
The following hypotheses were tested in the study.
H
0
1: Maize output has no significant response to trade policy regimes in Nigeria for the period
2001-2015.
H
0
2: Maize export has no significant response to trade policy regimes in Nigeria for the period
2001-2015.
52 International Research Journal of Finance and Economics - Issue 174 (2019)
2. Previous Studies
Cereals are major contributors to agriculture, food security and Gross Domestic Product (GDP) in
Nigeria. They consist of between 55-60% of subsistent farmers’ output and provide incomes as well as
form the basis of many households’ diets (Balami et al., 2011). The trend in production indicated that
the cultivation and output of cereals has increased. Thus, Balami et al. (2011) found that during the
period of 2000-2010, there was an increase of 199% in maize production, 94% in millet production and
127% in rice production. However, the increase in cereal output was due to rise in sown area rather
than productivity increase. However, Tahir (2014) noted that cereal crop productivity and output rate
has been generally low in sub-Sahara Africa over the last few decades. The reasons attributed to this
decline include failure to modernize agriculture on a large scale, poor access to credit, high cost of
farm inputs, low adoption of research findings, outdated land tenure system, weakened extension
services, over emphasis on inefficient fertilizer procurement and distribution, and inadequate access to
market.
Nigeria is the leading producer of maize in the West Africa sub-region and the tenth largest
producer in the world (FAO, 2008). Maize is one of the seven crops included in the Nigeria’s
government ATA programme (Aliyu, 2015). The poultry sector is the major user of maize for feed, and
many poultry farms are increasingly struggling with the rising feed costs due to inadequate supply of
maize to satisfy local and foreign demands for the commodity and its derivatives.
Nigeria continues to employ trade restrictions policy regimes such as high tariffs, levies, import
bans and other measures to protect its domestic agricultural industry, despite the country's membership
to the World Trade Organization (WTO). Its agricultural export which was 3% in 2001 plunged to
nearly nothing in 2009 and 2010, while import tariff for maize remains at 5% (Uche and Joshua, 2017).
Flexible international trade policy regimes was adopted in 2015 for maize by Nigeria such as 0%, 5%,
10%, 20% and 35% of Common External Tariff (CET). The fifth review of Nigeria’s trade policies and
practices took place on 13
th
and 15
th
June, 2017 (Uche and Joshua, 2017).
3. Materials and Methods
3.1. Study Area
The study was carried out in Nigeria. Nigeria is located between latitude 07
0
to 14
0
N and longitude 03
0
and 15
0
E. Rainfall distribution ranges from a mono-modal annual precipitation pattern of 400-600 mm
in Northern Guinea to a bimodal pattern of 1100-1400 mm of the Southern Guinea. Rainfall variability
often leads to floods and droughts with devastating effects on maize output (Ismaila et al., 2010).
Maize is predominantly produced in the savannah region of Nigeria (Idem and Showemimo, 2004).
3.2. Data Collection and Analytical Techniques
This study covered a fifteen year period (2001-2015) with five years forecasting period to 2020. Times
series data in respect of maize annual production and trade balance were obtained from Food and
Agriculture Organization Statistical (FAOSTAT) database.
Data were subjected to statistical analysis using descriptive statistics (percentages, tables and
graphs). Time response model developed with multiple regression techniques was used for the trend of
maize output and export over time. Time response model was also adopted to determine the back-cast
and forecast trend model, respectively. The effects of policy regimes on maize output and trade were
determined by Euler test. Also, the data were subjected to Augmented Dickey Fuller (ADF) Unit Root
Test to check for auto-correlation/stationality of data. The past trend model and Future Trend
(Forecast) Model were specified in Equation 1 and Equation 2, respectively.
International Research Journal of Finance and Economics - Issue 174 (2019) 53
Maize Output = f(time) = Q
mzt
= β
o
+ β
1
Tm
t-1
+ ei (1)
Exp
mz(t-1)
= β
o
+ β
1
Tm
t-1
+ ei (2)
Where:
Q
mzt
= maize output (tonnes)
EXP
mz(t)
= maize export in time (t)
Tm = years
B
o
= constant
ei = stochastic error term
Equation 3 shows the effect of liberalized and restricted trade policy models.
EXP
mz(t)
= β
o
+ β
1
LBR
(t)
+ β
2
RES
(t)
+ei (3)
Where:
EXP
mz(t)
= maize export in time (t)
LBR
(t)
= Liberalized trade policy regime in time (t)
RES
(t)
= Restricted trade policy regime in time (t)
β
o
= constant
β
1
-β
2
= coefficient of parameter estimator
ei = stochastic error term
4. Results and Discussion
4.1. Result of Stationality of Data
The unit root test was carried out using the Augmented Dickey Fuller analysis. The level of integration
between the output and export data was stable overtime, which was a clear indication that the case of
auto-correlation was not violated.
Table 1: Hypothesis Testing
Variables Output Export
R
2
96% 10%
Adjusted R
2
95% 6%
Coefficients 396079.18 -130.65
t-statistics 17.07 -0.47
ADF I(1) I(1)
4.2. Trend of Maize Production in Nigeria
Results the trend of maize productivity in Nigeria was shown in Table 2. There was a steady increasing
trend in maize yield per hectare from 1.3999 tonnes in 2001 to 1.8182 tonnes in 2006 and then a
declining trend to 1.7049 hg in 2007, and a subsequent rise reached its peak of 2.1961tonnes in 2009.
Though the increase experienced in 2010- 2011 can be attributed to increase in area cultivated
and not output per hectare, the reverse was the case for the yield recorded, between 2012-2015. This
decline in maize yield can only be attributed to other limiting factors such as climate change beside
cultivated land area. The resultant low yield, possibly affected the volume of maize grain for local
supply and restrict export opportunities, cetirus paribus.
54 International Research Journal of Finance and Economics - Issue 174 (2019)
Table 2: Maize Production Trend in Nigeria (2001-2015)
Years Area Cultivated (ha) Output (tonnes) Yield (tonne/ha)
2001 3,283,000 4,596,000 1.3999
002 3,282,000 4,890,000 1.4899
2003 3,469,000 5,203,000 1.4999
2004 3,479,000 5,567,000 1.6002
2005 3,589,000 5,957,000 1.6598
2006 3,905,000 7,100,000 1.8182
2007 3,944,000 6,724,000 1.7049
2008 3,845,000 7,525,000 1.9571
2009 3,350,560 7,358,260 2.1961
2010 4,149,310 7,676,850 1.8502
2011 5,456,540 8,878,456 1.6271
2012 5,751,300 8,694,900 1.5118
2013 5,762,700 8,422,670 1.4616
2014 6,346,551 10,058,968 1.5850
2015 6,771,189 10,562,050 1.5599
Source: FAOSTAT, 2017
4.3. Net Trade Balance in Maize Subsector in 2001-2015
The outcome of international trade balance in maize in Nigeria for the period showed an export
imbalance as only 4 year cases indicated opportunity for export, while the remaining 11 year cases
showed the large amount of maize imported into the country to sustain the demand for maize for
domestic and industrial usage. The positive trade balance was 9,729 tonnes in 2007, while the negative
trade balance was -199,095 tonnes in 2014. Nigeria exported more maize than its import in 2007 and it
imported more maize than its export in 2014. Judging by the volume of trade balance in the maize
sector, Nigeria has lost more foreign exchange than its earnings. Therefore more efforts should be
geared towards reversing this trend.
Table 3: Foreign Trade Balance in Maize Sub-sector (2001-2015)
Years Export Quantity
(tonnes)
Import Quantity
(tonnes)
Net Trade Balance
(tonnes)
2001 5,000 180 4,820
2002 13,100 18,105 -5,005
2003 8,500 1,147 7,353
2004 0 50 -50
2005 2,226 17,668 -15,442
2006 3,666 9,612 -5,946
2007 10,416 687 9,729
2008 1,023 49 974
2009 0 100 -100
2010 8 550 -542
2011 8 812 -804
2012 8 1,000 -992
2013 7,530 1,200 6,330
2014 10,488 209,583 -199,095
2015 6,185 76,025 -69,840
Source: FAOSTAT, 2017
International Research Journal of Finance and Economics - Issue 174 (2019) 55
Table 4: Estimated future trend (2016-2020) of Nigeria Maize Grain output and Export
YEARS EXPORT (Tonnes) OUTPUT (Tonnes)
2016 3,498.6952 10,439,708
2017 3,293.833 10,851,569
2018 4,388.6639 11,253,898
2019 5,310.8639 11,643,859
2020 5,220.2602 12,023,861
Source: FAOSTAT, 2017
4.4. Trend Analysis and Forecast of Maize Grain Output and Export in Nigeria
Table 4 show the estimated future trend (2016-2020) of Nigeria Maize Grain output and Export.
Time series data of maize output and export in Nigeria fitted on line graph was used in
presenting the future trend from 2016-2020. The result in Table 4 shows that there was a steady
increase from 10,439,708 to12,023,861 tonnes in the period of 2016-2020. However, the trend in maize
grain export is a direct deviation from what was experienced in the output trend for the same period.
Maize export experienced slight increase from 3,498.70 to 5,220.26 tonnes during the period of 2016-
2020. From this projection, it becomes clearer that though Nigeria tends to increase more in maize
grain output in the future, more strategic policy efforts needs to be developed and put in place to
improve export opportunities in international market.
Figure 1: Trend of maize production and export amounts of Nigeria
Source: FAOSTAT, 2017
4.5. Effect of Policy Regimes on Maize Output and Export in Nigeria
The policy regime in regards of output and export considered in this study was between 2001-2008,
and 2009-2015. The Tariff Reform Policy was specifically selected as a measure to ascertain if it has
any significant effect on maize production and net trade, or not. The first policy regime was classified
as the “Restricted Trade Policy Regime” due to the double-digit value, while the second regime is
classified as the “Liberalized Trade Policy Regime” due to the single-digit value (also known as open
market system).
However, the analysis in Table 5 illustrated that the Liberalized Trade Policy significantly
influenced maize output, whereas the Restricted Trade Policy significantly influenced both maize
output and export at various degrees.
-4,000
0
4,000
8,000
12,000
16,000
-4,000,000
0
4,000,000
8,000,000
12,000, 000
16,000, 000
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
EXPORT OUTPUT
E
x
p
o
r
t
q
u
a
n
i
t
y
(
T
o
n
n
e
s
)
O
u
t
p
u
t
(
T
o
n
n
e
s
)
56 International Research Journal of Finance and Economics - Issue 174 (2019)
Table 5: Response of Maize Output and Export to Policy Regimes in Nigeria
Variables Lib. Pol./output Rest pol./output Lib. Pol./Export Rest.pol. /Export
R
2
94% 84% 10% 65%
Adjusted R
2
93% 81% -0.3% 58%
Coefficients 425642.86 481275.21 -637.32 1679.89
t-statistics 10.02** 5.19** -0.86 3.06**
The R
2
of 96% shows that variation in aggregate maize output and exports within the period
was as a result of the joint effects of liberalized and restricted trade policy regimes adopted by Nigeria.
Hypothesis Testing
H
0
1: β
1
= 0; β
2
= 0
H
0
2: β
1
= 0; β
2
= 0.
4.5.1. Response of Maize Output to Trade Policy Regimes
Q
mz(t)
= 425642.86 LBR
(t)
+ 481275.21RES
(t)
+ ei (3)
t- values = (10.02**) (5.19**)
4.5.2. Response of Maize Exports to Trade Policy Regimes
EXP
mz(t)
= -637.32LBR
(t)
+ 1679.89RES
(t)
+ ei (4)
t-values = (-0.86) (3.06**)
Hypothesis I and II were tested using the test criteria (t-statistic, R
2
, Adjusted R
2
) or the prediction
models in Equations 3 and 4. The null hypothesis I which states that maize output has no significant
response to trade policy regime in Nigeria for the period 2001-2015 was rejected and the alternative
hypothesis was accepted (p<0.05). Maize output responded positively and significantly to liberalized trade
policy and restricted trade policy. Maize output was more influenced by the liberalized trade policy than the
restricted trade policy. This implies that maize output grew significantly over the period in response to trade
policy overtime. The surplus supply must have satisfied increased domestic population- driven demand for
maize. The increase in maize output over the period could also be traced to the relative increase in the
cultivated land area. It must have been used to satisfy domestic industry demand for maize as raw material
derivatives. This result implies that Nigeria imported more maize than its exports during the period of
2001-2015. Therefore, strategic efforts should be developed and implemented in the right direction to
further intensify maize productivity to generate surplus supply for the export.
Maize export on the hand was negatively influenced but not significantly, by the liberalized
trade policy regime. This implies that there was shortfall in maize grain export over the period under
investigation.
Null hypothesis II which states that maize export has no significant response to the liberalized
trade policy regime in Nigeria for the period 2001-2015 was accepted (p<0.05). However, test of the
hypothesis reveals that maize export was positively and significantly influenced by the restricted trade
policy over the period 2001 to 2015. The export forecast shows that this policy could stimulate maize
export in the future. This result could be attributed to the fact that under the IAT applied by Nigeria
ranges from 5-60% with the highest rates charged on cereals (60%) (Uche and Joshua, 2017).
5. Conclusion
This study analyzed the effect of liberalized and restricted policy regimes on production and export of
maize of Nigeria from 2001-2015 with a projection of five years period to 2020. Our findings show
that there was shortfall in maize export of the country. Maize output grew significantly over the period
International Research Journal of Finance and Economics - Issue 174 (2019) 57
in response to both trade policy regimes overtime. Liberalized trade policy and restricted trade policy
influenced maize output. The growth in aggregate maize output responded more positively to the
liberalized trade policy restricted trade policy. The increase in maize output under the restricted trade
policy regime did not however translate to proportionate growth in maize export. Liberalized trade
policy significantly influenced maize output but not export within the period under investigation.
Restricted trade policy out-performed liberalized trade policy in positively influencing maize exports in
Nigeria. Therefore, restricted trade policy regime is an important predictor of maize production and
export in Nigeria. Restricted trade policy does not support the theory of trade openness, although it is
important in identifying and amplifying international agribusiness opportunities for the maize sub-
sector in Nigeria in the future.
1. Restricted policy regimes should be sustained to encourage more aggregate maize production in
Nigeria. This policy includes but not limited to tariff and interest rate policy fine- tuning.
2. Restricted trade policy regime should be adopted to stimulate more maize exports and correct
the international trade shortfalls.
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