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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS
chemicals and crude minerals indelible, and machinery and transport equipments.
However, import of machinery and transport equipment, chemicals and
miscellaneous transactions responded to the lagged value of exchange rate
depreciation as expected, as could be seen in the coefficient of exchange rate in
the immediate past period (EXCrt-1) for MTE and CM, and period 3 (EXCRt-3)
for MTS.
iii. The coefficients of all the explanatory variables have also shown that import
demand for these product groups being investigated is inelastic.
6. Conclusion
The analysis has focused on the effect of exchange rate depreciation on import demand in
Nigeria. By using a model reflective of the lagged effect of currency depreciation, the
paper has examined the direction and extent of exchange rate impact on import demand
for nine different groups of products in the country. The empirical results produced the
following important conclusions.
i. Growth in Nigeria‘s import products has a definite trend which has been found to
be positive.
ii. With the exception of one product group – Manufactured goods, Exchange rate
depreciation made appreciable impact on import demand within the period being
investigated, by increasing the imports of these product groups. The demand for
these import groups was found to be inelastic as the coefficients of all the
explanatory variables have shown.
A possible explanation could be that the Nigerian economy is highly import-dependent
for both consumption and producer goods. As identified by Mordi (2006), virtually all the
major industrial raw materials are sourced from abroad while the country depend wholly
on foreign supply of intermediate and capital goods. It is either that the growth in imports
is politically motivated and as such, cannot address the real economic issue or that the
commitment on the part of government, to bail the country out of this import – dependent
predicament is not yet there. However, with greater commitment on the part of
government, this high import content can be reduced. Effort should be made too to
intensify the diversification of the production and export base, through incentives that
will promote export of manufactured and semi-manufactured goods.
COPY RIGHT © 2011 Institute of Interdisciplinary Business Research 227
JANUARY 2011
VOL 2, NO 9