Food Price Spikes and Volatility in Local Food Markets in Nigeria

ZEF Discussion Papers on Development Policy No. 242

46 Pages Posted: 21 Sep 2017

See all articles by Adebayo Shittu

Adebayo Shittu

Federal University of Agriculture, Abeokuta

Dare Akerele

Federal University of Agriculture, Abeokuta

Mekbib Haile

University of Bonn - Center for Development Research (ZEF)

Date Written: September 2017

Abstract

Beside the mixed evidences on transmission of international food price volatility to local markets and the desirability or otherwise of reliance on stabilisation policy to cushion the effects, very little is known about the key drivers of price spikes and volatility in sub-Saharan Africa. This paper is an attempt to bridge this gap, by focusing on the patterns, drivers, and policy responses to food price spikes and volatility across in Nigeria. The study was based on 16 years panel data on average monthly prices (2001:1 – 2016:12) of major food commodities across local markets in the 36 States of Nigeria, supplemented with monthly series of relevant domestic policy variables, and international prices, among other factors. Data analysis was mainly within the framework of fixed effects models. Findings suggest that food price upsurges in an average Nigeria market is more strongly related to spikes than volatility. International factors such as crude oil price, international food prices, and global beginning stock to use of coarse grains, and domestic policy variables such as real exchange rates, monetary policy rates and narrow money are strong influencers of spikes in the price of one or more food commodities in Nigeria’s local markets. Higher petrol price and food production variability may substantially advance price instability in local food markets. Government policy actions at addressing volatile food prices immediately after the 2007/2008 food crises appeared to enhance food price stability. These findings call for greater attention on management of monetary policy, including the exchange rates, ensuring stable petrol price, limiting food production instability, mitigating spill-over of price upsurges from international markets and building farmers and consumer’s resilience against food price changes, among others, as important pathways to address short and medium-term food price upsurges.

Keywords: Price Spikes, Price Volatility, Monetary Policy, Local Food Markets, Nigeria

JEL Classification: E31, E52

Suggested Citation

Shittu, Adebayo and Akerele, Dare and Haile, Mekbib, Food Price Spikes and Volatility in Local Food Markets in Nigeria (September 2017). ZEF Discussion Papers on Development Policy No. 242, Available at SSRN: https://ssrn.com/abstract=3040025

Adebayo Shittu (Contact Author)

Federal University of Agriculture, Abeokuta ( email )

P.M.B 2240 Ogun State
Abeokuta, Ogun State 1110001
Nigeria

Dare Akerele

Federal University of Agriculture, Abeokuta ( email )

P.M.B 2240 Ogun State
Abeokuta, Ogun State 1110001
Nigeria

Mekbib Haile

University of Bonn - Center for Development Research (ZEF) ( email )

Walter-Flex-Str. 3
Bonn, NRW 53113
Germany

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