ANALYSIS OF THE RELATIONSHIP BETWEEN CRUDE OIL PRICE AND DISAGGREGATED FOOD PRICES: EMPIRICAL EVIDENCE FROM NIGERIA

ANALYSIS OF THE RELATIONSHIP BETWEEN CRUDE OIL PRICE AND DISAGGREGATED FOOD PRICES: EMPIRICAL EVIDENCE FROM NIGERIA

Author by Mrs. Iyabo Okedina

Journal/Publisher: Salem Journal Of Business & Economy

Volume/Edition: 6

Language: English

Pages: 1 - 13

Abstract

This study investigates the relationship between oil price and food prices (groundnut, maize and rice) in Nigeria. Employing a monthly data spanning the period of January 2000 to January 2018, within a nonlinear auto-regressive distributed lag (NARDL) modelling approach to co-integration to analyse models articulated based on the standard theoretical and empirical literature on oil price – food prices nexus. The results showed that increases in oil price will lead to about 0.81% in prices of groundnut in the long run, while exchange rate is negative in both short and long run. The results of the NARDL showed a positive (0.88 and 0.74) and significant effect of changes in oil price on groundnut. For maize, oil price also yields a positive significant long-run coefficient of 1.186, while real exchange rate show a positive insignificant long and short run impact. Similarly, in the maize asymmetric NARDL, oil price affects maize price significantly (0.65 and 0.54) in an asymmetric manner in both short and long run, while real exchange rate movement appreciation, will improve maize price in Nigeria. The last model on rice symmetric and asymmetric, oil price yields a positive insignificant long-run but significant short run coefficient effect for rice, while real exchange rate show a positive significant long run impact on rice price. In the asymmetric NARDL models, oil price affects rice price significantly only in the short run, while in the long run, real exchange rate depreciation, will improve rice price in Nigeria. In summary, the empirical findings disclose that the oil price matters for food prices in Nigeria.Against the above background, policy attention should be directed to contained market power and adoption of efficient inputs (technology and energy) in the country, so as to benefit from the currently raising world oil price.


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