Role of Inflation and Exchange Rates in Shaping the Country's Food Security Landscape: Nigeria's Food Price Puzzle

Goodness Aye, Prosper Edoja, Sarah Enwa, Rangan Gupta and Emmanuel Eshoforen
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Goodness Aye: Department of Agricultural Economics, Joseph Sarwarn Tarka University, Makurdi, Benue State, Nigeria
Prosper Edoja: Department of Agricultural Economics, Faculty of Agriculture, Delta State University, Abraka, Delta State, Nigeria
Sarah Enwa: Department of Agricultural Economics, Faculty of Agriculture, Delta State University, Abraka, Delta State, Nigeria
Emmanuel Eshoforen: Department of Agricultural Economics, Faculty of Agriculture, Delta State University, Abraka, Delta State, Nigeria

No 202430, Working Papers from University of Pretoria, Department of Economics

Abstract: This study investigates the intricate roles of inflation and exchange rates in shaping Nigeria's food security landscape, particularly focusing on food price volatility and its economic implications. Utilizing time series data from 2000 to 2023, the research employs econometric techniques such as the Johansen co-integration test, VAR model, and GARCH methodology to explore long- and short-term relationships among inflation, exchange rates, and the prices of key food commodities, including maize, rice, cassava, and sorghum. Findings reveal significant longterm co-integrating relationships, highlighting the influence of exchange rate fluctuations on food price volatility, with varied impacts across different commodities. While inflation also affects prices, its short-term impact appears inconsistent. The study further identifies volatility clustering in food prices, driven by past shocks, though the persistence of volatility is limited. Granger causality tests underscore directional influences, with inflation rates and some food price volatilities exhibiting predictive power over exchange rate fluctuations. These insights underscore the need for robust monetary and fiscal policies to stabilize exchange rates and mitigate the adverse effects of inflation, ensuring a more secure and sustainable food system in Nigeria.

Keywords: VAR model; volatility; Nigeria; directional influences (search for similar items in EconPapers)
Pages: 14 pages
Date: 2024-07
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Citations: View citations in EconPapers (1)

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