Simulating the Impact of Exogenous Food Price Shock on Agriculture and the Poor in Nigeria: Results from a Computable General Equilibrium Model

Abstract

Motivated by the recent global economic crisis, this paper simulated the impact of a rise in the price of imported food on agriculture and household poverty in Nigeria using a computable general equilibrium (CGE) model and the Foster, Greer and Thorbecke (FGT) class of decomposable poverty measures on the 2006 social accounting matrix (SAM) of Nigeria and the updated 2004 Nigeria Living Standards Survey (NLSS) data. Results show that a rise in import price of food increased domestic output of food, but reduced the domestic supply of other agricultural commodities as well as food and other agricultural composites. Furthermore, a rise in the import price of food increased poverty nationally and among all household groups, with rural-north households being the least affected by the shock, while their rural-south counterparts were the most affected. A major policy implication drawn from this paper is that high import prices in import competing sectors like agriculture tend to favour the sector but exacerbate poverty in households. Thus, efforts geared at addressing the impact of this shock should strive to balance welfare and efficiency issues.

Exploring the Effects of Increased Government Agricultural Expenditure on Nigerian Economy Using Computable General Equilibrium Modelling Approach

“…The CGE models unlike partial equallibrium is a standard tool of empirical analysis and are widely used to analyze the overall economy as a system and examing the welfare and distributional impacts of policies that might affect the entire economy. Government spending, investments and taxes have wide effects and such effect can be transmitted through multiple markets (Nkang et al, 2012). However, in spite of its goodness in policy analysis, the use of it remains unpopular, among policy analysts.…”