Evaluation of External And Internal Factors Determining Food Price Inflation in Nigeria

The alarming signs of increasing hunger, food insecurity and high levels of different forms of malnutrition globally and in Africa are indications that more needs to be done towards achieving the SDG goals on food security and improved nutrition. This study contributes to the food security debate by investigating the determinants of domestic food prices in Nigeria. Particularly, we focused on the influence of domestic and external factors on aggregated food inflation and disaggregated food prices. Applying the Variable Augmented Autoregressive- Extended Generalised Autoregressive Conditional Heteroskedasticity (AR(1)-GARCH-X) and panel regression models, we found that global food and crude oil prices have a significant effect on domestic food prices. In addition, exchange rate and local petrol prices have a positive and significant effect on food price volatility. The major implication of the findings is that food prices in Nigeria are linked with activities in the global food and oil market with high import dependence on grains to augment local consumption demands. Therefore, to reduce the exacerbating effects of import-dependence, there is a need for massive investment in domestic agriculture to boost local production and meet local demands.