Acta Universitatis Danubius. Œconomica, Vol 8, No 1 (2012)

Abstract

This study uses disaggregated expenditure components of total national income to determine the behaviour of imports demand in Nigeria using annual time series data for the period 1970-2009 and applying the Johansen-Juselius multivariate cointegration and the error correction approach tests to find out if the relevant economic variables are cointegrated in the long run. Variables used in the study are volume of imports of goods and services, consumption expenditure, expenditure on investment goods, relative prices and a dummy variable for trade liberalisation policy in Nigeria. The cointegration analysis therefore suggests that the major long-run determinant of aggregate imports in Nigeria is aggregate consumption expenditure; and changes in the price of imports relative to the price of domestically produced goods appear to have little impact on Nigeria’s aggregate imports demand in the long run, the variations in relative prices are shown to have little impact on import demand. The implication of this result is that exchange rate policies which directly influence relative prices will have very little impact on the demand for import in Nigeria. However, policies designed to influence the pattern of consumption expenditure in Nigeria would be most effective in the long run.