The Battle of Sugar Imports and Domestic Sugar Production in Nigeria: Roles of Political, Policies, and Economic Environments

The study examined roles of political and economic environments on sugar import demand from 1965 to 2014 in Nigeria. Time series data were obtained from FAO, Central Bank of Nigeria and National Bureau of Statistics as well as World Bank. Augmented Dickey-Fuller-GLS unit root test showed that all series were integrated of order one. The long-run and short-run elasticity of sugar import demand were determined using techniques of co-integration and error correction models. The trend in sugar import revealed an average positive exponential growth rate of about 3.49% from 1965 to 2014. The empirical results revealed that, the long run import demand function of sugar responded negatively to the agro based capacity utilization rate, nominal exchange rate, real GDP and domestic price of sugar; whereas, it reacted positively to period of civilian rule, domestic production and per capita income. The symmetric adjustment coefficient of sugar import demand to a long run equilibrium stood at 33.26% per annum. In the short run, sugar import had a significant negative and inelastic relationship with the external reserves; while it has significant positive inelastic association with the world price of sugar. To improve domestic sugar production; it is recommended that, the Nigeria government should designed programmes and incentives to boost agro industrial capacity utilization in the country. Market determines nominal exchange rate should prevail in the economy, such that import demand will based on equilibrium market exchange rate and not subsidize or regulated rate. The country should regulate its foreign reserve policy by setting a threshold, above which excess deposit should be plough back to the domestic economy inform of investments rather than support excessive importation. Civilian regime in Nigeria should strive to reduce corruption and ensured policy tight from conceptualization to implementation.