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

Author

Listed:
  • Goodness C. Aye

    (Department of Agricultural Economics, Joseph Sarwarn Tarka University, Makurdi, Benue State, Nigeria)

  • Prosper E. 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)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Emmanuel Eshoforen

    (Department of Agricultural Economics, Faculty of Agriculture, Delta State University, Abraka, Delta State, Nigeria)

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.

Suggested Citation

  • Goodness C. Aye & Prosper E. Edoja & Sarah Enwa & Rangan Gupta & Emmanuel Eshoforen, 2024. "Role of Inflation and Exchange Rates in Shaping the Country's Food Security Landscape: Nigeria's Food Price Puzzle," Working Papers 202430, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202430
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    References listed on IDEAS

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    1. Pooyan Amir-Ahmadi & Christian Matthes & Mu-Chun Wang, 2020. "Choosing Prior Hyperparameters: With Applications to Time-Varying Parameter Models," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 38(1), pages 124-136, January.
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