Modelling asymmetries among consumer price index, currency price, gross domestic output and aggregate import demand in an emerging economy: the case of Nigeria

This study investigates the sensitivity of import demand in Nigeria, aiming to determine how it responds to some economic fundamentals. We examine whether import demand reacts differently to negative changes in consumer price index, currency price and national income compared to positive changes. The recently developed nonlinear autoregressive distributed lag model provided strong proof for asymmetry over the short- and long-run. From the long-run non-linear Autoregressive Distributed Lag estimates, import demand was found to be positive, inelastic and significant in response to positive shocks to Consumer Price Index. It was also indicated to be positive, significant but elastic in response to negative shocks. The short-term response of import demand to Consumer Price Index is revealed to be biased towards negative shocks. Import demand showed greater sensitivity to currency appreciation than depreciation. Additionally, our analysis indicates that higher coefficients of income elasticity of import demand are linked to negative changes in Gross Domestic Product rather than positive changes. In the light of these findings, we recommend macroeconomic and microeconomic policies that can drive down domestic inflation and improve internal competitiveness.