DETERMINANTS OF AGGREGATE IMPORT IN NIGERIA

Abstract

While productive imports can boost the economy, excessive non-productive imports may negatively impact domestic industries and employment. The objective of this study is to identify the determinants of aggregate imports in Nigeria using an imperfect substitution model. This study analyses annual data for Nigeria that were obtained from 1981 to 2022 from the World Development Indicators and the CBN Statistical Bulletin. Key variables tested include foreign reserves, real effective exchange rate, real GDP per capita, import unit value, export per capita, foreign capital inflows to GDP and tariff rate. Using the autoregressive distributed lag (ARDL) Bounds test, findings reveal that import demand is positively impacted by real GDP per capita and foreign reserves, but not significantly by real effective exchange rates or tariff rates. Furthermore, exports per capita and foreign capital inflows when substituted for foreign reserves all have a positive impact on aggregate import per capita, while import unit value when substituted for real effective exchange rate and tariff rate does not affect real import per capita, all in the long. Based on these conclusions, the study recommends that authorities revise import policies to support local production, adjust foreign reserve holdings, and enhance export-led strategies to manage Nigeria’s import demand effectively.