Does Foreign Trade Influence Performance of Food Supply Response in Nigeria 1981-2016: Application of Monte-Carlos Simulation

Abstract

The purpose of this study was to examine the impact of performance in foreign trade on food supply in Nigeria between 1981-2016. Annual time series data from secondary sources were analyzed using descriptive and inferential statistics such as the unit root test, Johansen co-integration test, vector error correction model (VECM), Monte-Carlo simulation, and the t-test. The Augmented Dickey-Fuller unit root test revealed that all variables were stationary at first difference, and the Johansen co-integrated test revealed one co-integrating equation using trace statistics.  The result shows a slight decrease in the mean value of the log of food supply in scenario 1 when compared to the baseline scenario, with values of 29.57 and 29.47 respectively, which are significant at the 1% probability level (t < -5.667 < 000). When compared to the baseline scenario, the simulation revealed a significant increase in the mean value of the log of food supply in scenario 2 (t= 3.500 <0.01). When compared to the baseline scenario, scenario 3 showed a decrease in the mean value of log of food supply, which was significant at 1% (t= -2.158 <0.01). The study concludes that exports and imports have an asymmetric effect on food supply in both the long and short run, with lower exports and higher imports increasing food supply. Finally, the study suggests that policymakers develop export and import strategies that encourage private investment in food industries, and that the government increase agricultural spending to boost local food production.