Food price volatility and household food security: Evidence from Nigeria

Abstract

Abstract Food prices vary seasonally, particularly in areas with rainfed agricultural production and imperfect markets, and are also subject to volatility arising from macroeconomic and climatic shocks, such as global supply shocks and abrupt policy changes. The specific nature of these relationships remains a pressing empirical question, particularly in contexts where food insecurity is prevalent, prices are subject to diverse sources of variation, and governments are seeking policy options to reduce price volatility. We use panel data from Nigeria to investigate the effects of non-seasonal food price volatility, in particular unexpected increases in prices, on household food security. Accounting for substitution effects and focusing on both domestic and imported rice—key components of the Nigerian diet—we find that imported rice price increases are damaging to both dietary diversity (downward impact) and the food share of consumption expenditure (upward impact), while impacts of domestic rice price volatility are ambiguous. We find differential effects by wealth status that vary across indicators of food security: an increase in the price of imported rice increases food share more among poor households than rich households, and decreases dietary diversity more among rich households than poor households. Our findings point toward the importance of improving food security by mitigating the effects of global shocks on imported food prices, and also highlight the data challenges and complexity involved in developing precise answers to these important policy questions.