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Testing for Asymmetric Cotton Lint Supply Response to Price in Nigeria: Evidence from Nonlinear Autoregressive Distributed Lag (NARDL) Model

Bello Mustapha*, Suleima Dahiru, Yusuf I. Maikudi

The study tests for supply response of cotton lint to price changes in Nigeria over the period 1966-2018. To achieve this objective, both linear and Nonlinear Autoregressive Distributed Lag Model (NARDL) were employed to assess which of the models performs better. The study found that nonlinear model performs better than the linear model in analyzing cotton lint supply response. Implying from the result obtained, there is an ample opportunity for price-support programs to improve cotton lint supply if policy makers such as the CBN and the Federal Ministry of Agriculture and Rural Development (FMARD) take into account the differential response of cotton lint supply to positive and negative price changes. Based on this finding, the study concludes that the theoretical relationship between cotton lint supply and its price is best captured in a nonlinear model specification. Therefore, it recommends that CBN and Ministry of Agriculture policy designs should incorporate the differential response of cotton lint supply to price changes.