FOOD PRICE VOLATILITY IN NIGERIA AND ITS DRIVING FACTORS: EVIDENCE FROM GARCH ESTIMATES

Food affordability is of critical concern to any nation, being a key component of food security. Price volatility phenomenon is linked with food affordability because escalating food prices reduces low-income earners’ food access. With the COVID-19 pandemic, planting activities by farmers in Nigeria have been negatively impacted in the 2019/20 planting season. Hunger may therefore be looming in the coming periods because food production output will be lowered. Understanding volatility in the prices of food therefore becomes very important if any meaningful solutions are to be proffered. In this study, we sought to measure volatility in prices of important staple foods using the GARCH approach and then investigate the factors that drive them over the period 1970-2019. Our result revealed persistent volatility in food prices over the period under review. It was revealed that insurgency, political stability in neighbouring countries, trade liberalization, GDP per capita, inflation rate, government effectiveness, crop production, crude oil price and exchange rate were prominent drivers of volatility in food commodity prices. The study therefore recommends the pursuance of a peaceful nation that is capable of supporting sustainable and increased agricultural production. We as well recommend mechanisms that better regulates inter-border food trading activities whereas strategies of price stabilization policies and government interventions in the pre-liberalization era should be re-visited. It becomes necessary to embrace a holistic approach to economic planning given the tendencies for macroeconomic variables to drive volatility in food prices.