DYNAMIC GROUNDNUT SUPPLY RESPONSE IN NIGERIA: A PARTIAL ADJUSTMENT APPROACH
Kolapo Adetomiwa, Kolapo Adeyera James
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This paper investigated dynamic supply response of groundnut in Nigeria using a partial adjustment approach. Secondary data were used. Data was collected from various publications of the central bank of Nigeria (CBN) statistical bulletin and Food and Agriculture Organization (FAO) over the period 1975-2015. Unit root test, descriptive statistics, partial adjustment model and error correction model were used for data analysis. The result for unit root by using the Augmented Dickey-Fuller Test revealed that most of the variables were stationary with a constant trend and at first difference. The average groundnut output for the study period 1975-2015 was 7.81. The value of the standard deviation is 1.64 which explains stability and indicates that groundnut output was relatively stable for the period under study. The result of the Partial adjustment model indicates that supply response of groundnut is dependent on price of groundnut, rainfall and land area of which the price of groundnut is significant. The ECM which is the error correction term is significant at 5 percent and has the expected negative sign. Its coefficient of -0.641 indicates that there is 64.1% deviation of groundnut output. This adjustment can be attributed to the fact that famers are constrained by technical factors which limits their ability to adjust immediately to change in price. The production of groundnut in Nigeria could actually be increased such that Nigeria becomes the largest producers of groundnut in the world if proper resources is provided to the farmer to increase their production.