How oil prices, exchange rates stoke Nigeria's food inflation ...

The fluctuations in global oil prices and exchange rates have a significant impact on Nigeria’s domestic food prices, according to a study by Babatunde Adesanya, PhD, an expert in Development Economics, Econometrics and Quantitative Economics,  of the University of Abuja.

Adesanya’s study , titled “An Empirical Analysis of the Impact of International Price Transmission on Domestic Food Price Volatility in Nigeria: 2000-2019,” offers crucial insights into the factors driving food price volatility in Africa’s most populous nation.

This comes on the heels of the World Food Day celebration scheduled to hold on October 16, 2024, with the theme “Right to Food for a Better Life and a Better Future”.

According to Adesanya, over the past two decades, international food prices, oil prices, and exchange rates have greatly influenced domestic food price volatility in Nigeria, thereby causing food inflation.

His findings revealed that while world food prices may not directly impact domestic food price volatility, fluctuations in oil prices and exchange rates significantly do.

“Oil plays a crucial role in various stages of agricultural production, from powering farm machinery to manufacturing fertilizers and supporting food transportation.

“When oil prices rise, the cost of producing and distributing food inevitably increases, contributing to price volatility,” Adesanya who is an expert in Econometrics, Quantitative Economics, and Development Economics, said.

Nigeria is currently grappling with rising prices, especially food, which is depleting household disposable income and raising hunger and poverty levels.

Data from the National Bureau of Statistics (NBS) revealed that consumer prices stood at 32.15% in August while food inflation was said to be 37.52% within the period.

This is even as the prices have declined for the straight two months after peaking at about 40% in June, 2024.

A report by the United Nations shows that approximately 22 million Nigerians faced food insecurity in 2023, and about 82 million of the population is projected to plunge into hunger this.

This is even as the most recent data from Global Hunger Index (GHI) shows that Nigeria ranked 110th out of 127 countries in H1:2024, reflecting a drop from its 2023 ranking and an 8-position decline since 2015.

However, Nigeria’s GHI score has risen to 28.8 from 28.3 in 2023, categorizing the country’s hunger level as “serious.”

Adesanya emphasised the importance of consistent implementation of well-thought-out macroeconomic policies in ensuring food security to a nation of over 200 million people.

“Achieving affordable food and stability in the food market will not only enhance household long-term planning but also budget discipline,” he said.

“When household food security is achieved, welfare is improved, and more members of the households can contribute to economic growth and development.”

As Nigeria continues to battle rising food costs and their impact on household welfare, Adesanya’s research provides valuable insights for policymakers and stakeholders in the agricultural sector.

His work underscores the complex interplay of global and local factors in shaping food prices and offers a roadmap for building a more resilient and stable food system in Nigeria.

Adesanya recommends developing a Domestic Food Price Volatility Index to help policymakers monitor and respond to price fluctuations.

The University of Abuja scholar noted that strengthening the domestic oil sector by privatizing redundant refineries and producing agricultural inputs, along with enhancing domestic food production through investment in research and infrastructure, are also vital steps towards ending food crises.

Additionally, he advocates for improved market integration by investing in infrastructure and adopting market-based trade policies to stabilise prices and reduce volatility.