Nigeria today produces only 1.7 percent of the world’s consumption of palm oil which is sufficient to meet its domestic consumption which stands at 2.7 percent. The production of palm oil in Nigeria has been affected by some factors, this study analyzed the determinants of output supply of palm oil in Nigeria. In addition, the study analyzed the trend and growth in the output supply of palm oil.
The secondary data was used which include time series micro level data spanning from 1971 – 2010. The data was sourced from several of central bank of Nigeria (CBN) statistical bulletin and the statistical database of the Food and Agricultural Organizations of the United Nation. Trend analysis, ADF unit root test, co-integration test and error correction model were used to analyze the data.
The trend in the output supply of palm oil shows significant growth rate based on the coefficient of the time trend. The unit root test using Augmented Dickey Fuller test (ADF) shows that all the variables have constant mean except for palm oil yield which led to the Auto regressive Distributed Lag (ARDL) co-integration test which reveals the presence of long run relationship existing between the variables and short run relationships with error correction term. Imports of palm oil has negative significant short run and long run impacts on the output supply of palm oil while in the short run palm oil exports has a significant negative impact on the palm oil output supply of palm oil negatively as this impedes the local production of palm oil.
This study therefore, recommends the promotion of export and formulation of export promotion policies to stimulate international market for out palm oil and encourage our farmers to boost their output.
In conclusion: the trend indicated the growth in the production of palm oil over the years, also the import of palm oil shows that the consumer will go for the imported products, leaving the output supply by our farmers to suffer.
Keywords: ADF, ARDL, VECM, Palm oil.