Hectarage Response of Rice Production to Market Liberalisation and Price Risk in Nigeria

The study was conducted in Nigeria. It covered a period of 38 years from 1970 to 2007. Purposively, the rice was selected because of its importance and data availability. Secondary data were obtained from the FAO Statistics Data Base, Publications of Central Bank of Nigeria and National Bureau of Statistic. Type of data obtained included prices, hectarage and output of the crop, exchange rate, ACGSF loan disbursements and foreign direct investment in Nigerian agriculture. Others included Nigeria consumer price index, world price index, value of agricultural export and value of food imports. Data were analysed using descriptive statistics. Time series properties were determined and dynamic seemingly unrelated regression was estimated while simple linear model or simulation was used to determine hectarage and output responsiveness to selected price and non-price factors. Output ranged from 403,600 to 4,165, 070 tonnes. Fluctuations that characterise prices also marked the price risks. The price risk for the crop was highest from 2005 to 2007. The coefficient of determination for hectarage and output equations accounted for about 84% and 87% of variation in hectarage and output of the crop respectively. Price and price risks were major determinants of hectarage allocation and output. In line with the liberalisation theory, effects of the intensity of liberalisation exercise and the degree of openness have been mixed. Both measures tended to contract hectarage expansion and output. Hectarage allocation was constrained by liberalisation, but its output their output had positive relationship with liberalization. Rainfall had positive relationship with output. Ten percent increase in rice price would lead to about 16 and 24 percent increase in its hectarage and output, respectively. It was recommended among others, that Nigerians should redirect their taste to locally produced rice to limit the effect of market liberalization and price risk through substitution for imported rice.