Heterogeneous Dependence of Oil-Food Price Dynamics in Africa's Net Oil-Exporting Countries

Abstract

The determinants of food prices have attracted sizeable debates among scholars over the last three decades. However, many of these studies ignore the possibility that the impact of oil prices on food prices could vary across the food price distribution. The paper employs a quantile regression technique to ascertain whether food prices respond to the potential heterogeneous impact of crude oil price changes in the six selected African net oil-exporting countries. The coefficient of negative oil price shocks in the panel OLS model is insignificant and positive at the 5% significance level. In contrast, the coefficient of positive oil price shocks significantly affects food prices for the chosen African countries. The quantile regression analysis's empirical findings highlight the diverse dependence effects of various ranges on food prices. All coefficients are non-significant across all quantiles for negative oil price shocks, a conclusion consistent with panel least squares estimate results. Besides, the findings prove that positive changes in oil prices significantly affect the magnitude of food prices in selected African countries. The article concludes that the influence of crude oil price variations on food prices is diverse and positive across quantiles for a subset of Africa's net oil-exporting countries. The findings of this study could have a crucial policy and economic implications for economic agents and stakeholders in diverse fiscal environments. As a result, economic agents must make timely decisions to respond to the effects of oil price uncertainty on Africa's food market.

Revisiting the oil prices–domestic food inflation nexus in Nigeria: the role of global geopolitical risk

“…Studies have further examined the connectedness between oil and food prices in Africa and Nigeria (Rangasamy, 2010;Durevall et al, 2013;Alper et al, 2016;Udoh and Egwaikhide, 2012;Binuomote and Odeniyi, 2013;Nwoko et al, 2016;Fasanya and Akinbowale, 2019;Tule et al, 2019;Adeosun et al, 2021a;Ogede and Ajayi, 2022). Alper et al (2016) showed that high food prices are driven by non-tradable foods, and they further observed an incomplete transmission from world food and oil prices and the exchange rate to local food prices in SSA.…”

“…Applying the augmented Phillips curve framework, Tule et al (2019) showed that agricultural commodities predict food inflation significantly, whereas Adeosun et al (2021a) revealed weak predictive pass-through from oil prices to food prices in the short-term. More recently, Ogede and Ajayi (2022) observed that food prices react to the heterogenous effect of oil price volatility in six African net oil-exporting economies.…”

“…Studies have further examined the connectedness between oil and food prices in Africa and Nigeria (Rangasamy, 2010; Durevall et al ., 2013; Alper et al ., 2016; Udoh and Egwaikhide, 2012; Binuomote and Odeniyi, 2013; Nwoko et al ., 2016; Fasanya and Akinbowale, 2019; Fasanya et al ., 2019; Tule et al. , 2019; Adeosun et al ., 2021a; Ogede and Ajayi, 2022). Alper et al .…”

“…(2021a) revealed weak predictive pass-through from oil prices to food prices in the short-term. More recently, Ogede and Ajayi (2022) observed that food prices react to the heterogenous effect of oil price volatility in six African net oil-exporting economies.…”