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.

Effects of Wheat and Fish Trade Restriction Policies on Households’ Vulnerability to Poverty in Nigeria

“…Based on that, the study merged the two approaches such that a macro-micro modeling framework which specifically integrated twelve household categories into a CGE model was achieved. This is a case of a representative household model approach in general equilibrium analysis of distributional implications of macroeconomic shocks and policies (Cockburn, 2001;Bhasin, 2008;Nkang, 2013).…”

“…Hence this policy was recommended for adoption in order to increase growth of sectors and minimize welfare losses to households. Nkang et al (2013) assessed the impact of food price shocks due to global economic crisis on agriculture and the poor in Nigeria. The study simulated the impact of a rise in the price of imported food on agriculture and household poverty in 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) for Nigeria and the updated 2004 Nigeria Living Standards Survey (NLSS) data.…”

Nutrient-Dense Crops for Rural and Peri-Urban Smallholders in Kenya—A Regional Social Accounting Approach

“…Agriculture creates products that meet the food demands of regional populations and enhances their food security status. Depending on the efficiency of the domestic agricultural sector, it is sometimes better for the food security status of the country to increase imports of certain foods rather than favouring domestic production [24,25]. Overall, very little research has been done relating agriculture and food security in the regional context.…”

“…This situation is an "exogenous, demand-side shock" and has direct and indirect effects on the regional economy where those AIVs are produced [6,50]. If the demand for a specific product increases and the capacity for production is available, the production of this good will increase [8,24]. Following this concept, the direct effects are the impacts of an increased AIV demand on the AIV-producing sector itself.…”

The U.S.–China Trade War and the Volatility Linkages between Energy and Agricultural Commodities

“…Firstly, given that the complexity and opacity of today's economic events inhibit accurate prediction (Fridgen et al, 2015), suppliers can effectively optimize asset allocation strategies and risk management by understanding the impacts of economic events on the energy and agricultural commodity markets. Secondly, food price shocks precipitate social distress, food security, poverty and inequality (Nkang et al, 2012). This is especially true for agriculture-based economies, where people derive their livelihood from agricultural practices (Nakamya and Romstad, 2020); thus, this study provides policymakers with insights into solutions that might prevent such situations.…”