IMPACT OF MARKET-DETERMINED EXCHANGE RATES ON RICE PRODUCTION AND IMPORT IN NIGERIA

Rice is an economically important food security crop, cultivated in almost all of Nigeria’s 36 States. Nigeria spends more than 356 billion naira (2.24 billion US dollars) annually on rice import. This paper set out to analyze the trend in rice production, productivity, import, value of import and consumption that follows the adoption of the Structural Adjustment Programme (SAP) in Nigeria, with emphasis on the effects of exchange rate (ER) deregulation on domestic rice production and rice imports over the period 1986-2010. Relevant time series data were collected and used. A semi-log growth rate model and 2simple linear regression models were developed and estimated. Highlights of the findings include (i) accelerated rate of growth in rice production (Instantaneous Growth Rate (IGR) 2.2%; Cumulative Growth Rate (CGR) 2.2%); rice hectarage (IGR 3.7%; CGR 3.8%); rice importation (IGR 8.5%; CGR8.9%); expenditure on rice importation (IGR 10.6%; CGR 11.2%) and rice consumption (IGR 3.4%; CGR 3.5%) alongside a significant deceleration in rice yield (IGR -1.4%; CGR -201.4%) (ii) The observed significant increase in domestic rice production cannot be confidently attributed to ER deregulation alone because it does not lead to a decrease in rice importation into Nigeria. (iii) The significant increase in domestic rice importation as observed contradicts a priori expectation that ER deregulation will lead to significant decrease in rice importation. The study concluded that free market approach alone cannot stimulate local agricultural production in countries where farmers producing under low-technology-agriculture are put in direct competition with farmers from advancedtechnology-agriculture; hence governments need to restrict importation to protect local producers.