Effects of Crude Oil Price Shocks on Food Crops Production in Oil-Exporting Countries: The Case Study of Nigeria

Abiodun Elijah Obayelu, Omotoso Oluseye Ogunmola and Oluwatosin A. Adeyemi ()
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Oluwatosin A. Adeyemi: Federal University of Agriculture - Abeokuta, Nigeria

Journal of Developing Areas, 2022, vol. 56, issue 4, 263-277

Abstract: Crude oil is a basic input to production and commerce. An increase in oil price leads to a rise in the production and distribution of firms' products. High energy prices increase the costs of producing agricultural products with rising prices, thereby, frequently compelling government to modify domestic prices of energy. Thus, this study examines the effects of crude oil price shocks on food crop production in oil-exporting countries like Nigeria. The study uses time series data such as average annual crude oil price, annual food production output, agricultural gross domestic product from 1961 to 2019 obtained from different sources respectively. The effects of crude oil price shocks on some selected food production outputs in Nigeria have been analyzed using a Non-linear Autoregressive Distributed Lags (NARDL) model. The model has been used to analyze the long-run and short-run asymmetric relations between food production output and oil price shocks, because of its robust empirical results. The model also allows us to simultaneously measure the asymmetric nonlinearity and cointegration among the underlying variables in a single equation framework. The bounds test of the NARDL specification suggests the presence of cointegration among the variables, which include the oil price, food production outputs (for maize, rice, sorghum, wheat, cassava and yam) and real agricultural Gross Domestic Product. Results affirm the presence of irregularities in the food production output behaviour. Results also indicate that there are long-term relationships between increase in prices of crude oil and food crop production. In the long-run, there is an inverse relationship between food production outputs and prices of oil, while in the short-run, a direct relationship. With the presence of significant influence of oil price shocks on the food production output, both in the long-run and in the short-run, there is a need for long-term agricultural policies to protect economies from any global food shortage that may result from oil price changes. The effects of oil price fluctuation can be reduced using a price ceiling strategy and through a provision of standard refineries by the public or private sectors.

Keywords: Asymmetry; Food production; Oil price shock; NARDL; oil-producing countries (search for similar items in EconPapers)
JEL-codes: Q18 Q32 Q41 Q48 Q49 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:jda:journl:vol.56:year:2022:issue4:pp:263-277

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