Asymmetric Relationship between Changes in Food Prices and Household Consumption in Nigeria

Abstract

The influence of price changes on consumption is believed to be enormous. This is because consumption expenditure constitutes a significant part of a consumer’s expenditure. For the household, the most important expenditure is on food items. This makes food price changes an important factor in predicting the direction of household consumption in Nigeria. While ffod price changes can be positive or negative, the effect of each on household consumption in Nigeria has not been empirically examined. This study, therefore examined the asymmetric effect of negative and positive changes in food prices on household consumption in Nigeria. The study utilized time series data for Nigeria over 1981 to 2020. The Non-linear Auto Regressive Distributed Lags Model (NARDL) was used to evaluate the asymmetric effects. The study found that food price changes whether positive or negative have no significant effect on household consumption in Nigeria. However, household income was found to have significant short-run and long-run positive effect on household consumption in Nigeria. The study recommends deliberate efforts by households and the government targeted at increasing the income of household so as to meet up with consumption demands.