Consumerism: Statistical Estimation of Nigeria Meat Demand

ABSTRACT This study estimates the responsiveness of demand for meat to variations in prices and incomes on the basis of food demand data for the time period between 1980 to 2002 using an Almost Ideal Demand System (AIDS) model. These findings are reasonable given the position that beef holds as the dominant and traditional meat in Nigeria. These elasticities also imply that beef and chicken are luxury goods, while other fish and demersal fish are normal goods for Nigeria households consistent with the findings of previous studies. With the exception of some cross-price elasticities, the majority of the price elasticities exhibit the expected signs and magnitudes. This indicates that demand for beef and other meat in Nigeria is very price elastic. In general, the results suggest that own-prices as well as incomes are the predominant factors determining consumer choice and meat consumption patterns in Nigeria rather than relative prices. INTRODUCTION Before the 1970's oil boom, agricultural exports were the backbone of the Nigerian economy with livestock products accounting for a significant share of exports. During this period, the country had a well-developed domestic agricultural market. However, despite this sound potential for growth in the domestic market, Nigeria is currently witnessing a drastic decline in agricultural production, especially in livestock and meat sectors of the industry. This decline in agricultural production coincides with the nation's oil boom. Furthermore, Nigeria has enjoyed yearly economic growth (GDP) of 10.8 percent in real terms between 1980 and 1987 as a result of export earnings from petroleum. Real per capita income rose at 60 percent per year during this period. However, the decline in the world oil prices experienced in 1987, combined with the reduction in world market prices of agricultural products in 1995 brought an end to country's economics growth and real per capita income. Between 1989 and 1997 real per capita income dropped at a rate of 7.8 percent per year. During this period, the federal government of Nigeria maintained a trade policy dominated by quantitative restrictions and price controls on food items. In January 1990, a tax was imposed on meat imports, ostensibly to raise government revenues and stimulate domestic meat production. The abrupt drop in meat imports, coupled with inadequate domestic supply pushed up price of meat and thus depressed domestic demand. For example, per capita meat consumption that had risen from 12.05 kg in 1981 to 13.8 kg in 1986 dropped to 11.6 kg in 1992. Also meat prices rose by 70 percent from 1987 to 1999, resulting in a decline in Nigerian per capita meat consumption from 10.5 kilograms of meat per year in 1987 to 9.4 kilograms per year in 1999 (FGS, 1999) (1). Although the federal government of Nigeria has designed various programs to help stabilize meat prices and consumption, the country is still experiencing meat shortage and price fluctuations. The purpose of this study is to understand the source of the change and fluctuation in meat consumption in Nigeria. In order to determine the cost or likely success of the various government programs, this research paper will examine the responsiveness of demand for meat to variations in prices and incomes on the basis of food demand data for the time period between 1980 to 1999. Additionally, it will also assist in formulating recommendations for policies with the potential to create more stable meat consumption and prices for the nation. In order to understand the source of the decline and instability in consumption and to determine whether the shock is from changing incomes or from changing prices, this paper will determine whether demand for meat is price-elastic on the basis of food demand data during the time period studied from 1980-2001. World demand for meat has risen sharply during the last few decades. The key reasons for these increases in meat demand are increasing population, improving technology and increasing incomes. …