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TRADE LIBERALIZATION AND AGRICULTURAL PRICES: Implications for Land Resource Use in Nigeria

TRADE LIBERALIZATION AND AGRICULTURAL PRICES: Implications for Land Resource Use in Nigeria


Abstract: Achieving sustainable growth in agricultural production that is inclusive of all generations is a policy issue in Nigeria. An agricultural production pattern that is efficient in its natural resource use ought to be a core strategy for inclusive growth to be sustained. Although trade liberalization is believed to promote economic growth, empirical studies have not sufficiently provided quantitative evidence of its effects on farmers\\\' production incentives. Therefore, this study analyses the response of agricultural land expansion to trade liberalization in Nigeria. Using a recursive model, an analytical model of the direct and indirect effects of trade policy on agricultural land demand is empirically examined in two stages. The result obtained from this model shows that trade liberalization directly increases the relative prices of tradable crops and thus, increases the production incentives of different categories of tradable crops relative to non-tradable crops. The production incentive for increased agricultural land demand depends on the price elasticity and land requirement of the crop category exported. To achieve efficient forest resource use and sustainable agricultural production with trade liberalization and exchange rate devaluation simultaneously, it is recommended that complementary resource sustainable policies, such as subsidies on agricultural input, that will improve yield per hectare in annual crops need to be implemented. Also, research and development of genetically-modified breeds for environmentally damaging crops that will be accessible to peasant farmers in rural areas should be encouraged.

JEL classification: C39, F18, Q17, Q37

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