Impact of Cereal Production on Food Inflation in Nigeria

This research investigates how the production of cereal commodities affects the rise in food prices in Nigeria by analyzing quarterly time series data from 2008 to 2022. The focus is to study the link between cereal production (such as maize, rice, wheat, sorghum, millet and soybeans) and food inflation. Additionally, the study investigates the factors influencing cereal output in Nigeria. Data for this research were gathered from the Food and Agriculture Organization (FAO), the Central Bank of Nigeria (CBN), and the National Bureau of Statistics (NBS). Various analytical methods are used, such as the Augmented Dickey Fuller (ADF), Philip Perron Unit Root tests, ARDL model (ARDL), Vector Error Correction Model (VECM), Impulse Response Function analysis, Wald Test and Granger Causality test. The findings show that cereal production has a one-way impact on food price increases; this means that fluctuations in cereal output play a role in shaping food price trends over time. Maize, rice and wheat production were identified as the drivers of food inflation changes, whereas millet and soybeans had little effect on food prices. The VEC Model estimation suggests that corrections to deviations from the long-term balance in food inflation occur slowly at 5%, which means only a small portion of any imbalance is rectified each quarter. The impulse response analysis also reveals that corn (maize), rice, sorghum, and wheat have an impact on food inflation trends, whereas millet shows a negative impact in the short term. The analysis of variance breakdown shows that 83 percent of the fluctuations in food prices can be attributed to factors within the food market itself; specifically, rice, wheat, soybeans and millet collectively contribute to 13.94 percent of the long-term fluctuations. The research underscores the importance of Nigeria’s Federal Ministry of Agriculture and Rural Development (FMARD) focusing on enhancing cereal production methods by ensuring access to quality seeds, fertilizers, machinery and irrigation systems. Additionally, tackling security challenges in all regions is vital for stabilizing food costs and achieving food security.