Role of inflation and exchange rates in shaping the country's food security landscape : Nigeria's food price puzzle

Abstract

This study investigates the intricate roles of inflation and exchange rates in shaping Nigeria's food security landscape, particularly focusing on food price volatility and its economic implications. Utilizing time series data from 2000 to 2023, the research employs econometric techniques such as the Johansen co-integration test, VAR model, and GARCH methodology to explore long-and short-term relationships among inflation, exchange rates, and the prices of key food commodities, including maize, rice, cassava, and sorghum. Findings reveal significant long-term co-integrating relationships, highlighting the influence of exchange rate fluctuations on food price volatility, with varied impacts across different commodities. While inflation also affects prices, its short-term impact appears inconsistent. The study further identifies volatility clustering in food prices, driven by past shocks, though the persistence of volatility is limited. Granger cau-sality tests underscore directional influences, with inflation rates and some food price volatilities exhibiting predictive power over exchange rate fluctuations. These insights underscore the need for robust monetary and fiscal policies to stabilize exchange rates and mitigate the adverse effects of inflation, ensuring a more secure and sustainable food system in Nigeria.