Effect of Trade Openness on the output of Sorghum in Nigeria

Correspondence: Prof. M.I. Fodio doi.org This paper examines empirically the effect of Trade Openness on Sorghum production in Nigeria for the period 1991–2013. The econometric methodology employed is the Co-integration, Vector Error Correction (VEC) and Granger causality test, linear and log linear regression models. The stationary properties of the time series and its order of integration were tested using Augmented Dickey-Fuller (ADF) model. The variables exhibited stationary at first difference I (1) except for commerce loan. The Johansen multivariate approach to co-integration was applied to test for the long-run relationship among the variables. Empirical results indicated that there is co-integration vector among sorghum, rainfall, commerce loan, export price, exchange rate and the volume of trade of the economy. Granger causality test based on VECM shows: unidirectional causality from Volume of trade to exchange rate; unidirectional causality from volume of trade to quantity of sorghum produced and unidirectional causality from export-pricing to exchange rate mechanism. Consequently the two null hypotheses were tested and rejected. Major findings indicates that the increasing fluctuating global demand of sorghum as captured in volume of trade played a vital positive role in the exchange rate mechanism that bettered domestic/export prices, which stimulates higher production going by the causality. It was further revealed that all input variables employed especially rainfall and commerce loan had aided the increases in production of sorghum, as established by the linear and log linear regression results. Thus, recommending that; the volatile movements in exchange rates which affect export pricing/domestic pricing should be determined by interplay of free market forces. The government and other stakeholders should improve and sustain commerce loans being advanced to farming of sorghum; The government and other stakeholders should encourage farmers within the rain zone of the country to diversify into farming Sorghum. There should be constant positive review and sustenance of trade openness policy geared towards more openness by government and other stakeholders in view of copious gains to farmers and the nations' economy.