Determinants of domestic air travel demand in Nigeria: cointegration and causality analysis

Abstract

Air transportation is an important factor of development as it facilitates movements within a country and connects the country with other parts of the world. This paper examines the causal relationship between economic variables—Gross Domestic Product per capita (GDP), index of agricultural production, index of manufacturing production and consumer price index—and domestic air travel demand in Nigeria. Annual data for the period 1982–2005, autoregressive distributed lag cointegration approach and Granger short- and long-run causality tests are employed. The results indicate that Gross Domestic Product (GDP) and index of manufacturing production are determinants of air travel in the short- and long-run. Air travel increases with economic growth. Short- and long-run uni-directional Granger causality runs from GDP to air travel. The impulse response function indicates that changes in air travel were due to its own shocks and shocks to GDP. Thus, GDP is a crucial factor that influences the growth of air travel. Government and policymakers need to develop local industries, infrastructures and educational institutions that will provide skilled labour as well as improve the relative business and leisure attractiveness of the economy to the global economic environment. Stakeholders need to invest capital in airport expansion and ensure compliance with international safety and environmental standards. Investment in aviation infrastructure facilities is necessary so as to accommodate the projected growth in domestic air travel demand since the country is gradually recovering from economic recession.