Food demand responses to global price shocks: Contrasts in sub-national evidence from Nigeria

The Russo-Ukrainian war has shocked global food prices and supply chains. Some of the largest impacts are expected in food-importing African countries. This includes Nigeria, where a combination of increasing population, urbanization, and declining domestic production increased households’ exposure to global price shocks. To understand how food demand responds to price shocks, we estimate household-level demand elasticities for selected food categories using the Exact Affine Stone Index (EASI) demand model. We simulate the effect of increasing grain and edible oil prices on demand by households across several food groups and items. Our results vary across regional and income groups and often differ because grains and edible oils represent different proportions of the respective sub-national budget shares. We find that, given their low price elasticity, a shock to the price of edible oils generally leads to changes to the household budget share. We also find that the war is expected to have the highest impact on non-grain starches and vegetable proteins, which had the highest own-price elasticities. Nevertheless, given that palm and groundnut oil are the dominant edible oils in Nigeria, the effects of the war depend on the elasticity of substitution between sunflower and these two oils on the global markets, as well as between edible oils and other foods. One policy implication of the study is the need for targeted food and nutrition interventions in response to crises or global price shocks, given the substantial sub-national variation in observed food budget shares, and in the effects of price shocks.