A Disaggregated Capital Goods Import Model for Nigeria

Emeka Osuji
(Pan Atlantic University, Lagos, Nigeria)

Abstract: The importance of import demand elasticities has long been established in several studies. Apart from shedding light on the structure of a country’s trade behaviour, they help to highlight the extent to which it depends on foreign sources of goods and services. Many country studies have shown that imports generally depend on price, income and exchange rates. However, there is also a body of research, which shows that some other variables, such as inflation and foreign reserve, play key roles in import demand. This study examines Nigeria’s capital goods import demand behaviour from a disaggregated point of view, which is a departure from the standard approach of existing studies. The results show that while some capital goods items were price elastic, there was a general tendency for most categories of capital goods to exhibit serious levels of insensitivity to price changes. Only five items, out of the eighteen items studied, were price elastic. The study therefore found evidence that lends credence to the argument that need for critical inputs rather than price seems to drive import demand in import dependent economies.

Key words: import demand; elasticity; capital goods; trade

JEL codes: F10