Households’ Rice Demand Response to Changes in Price, Income and Coping Strategies during Food Inflation in Nigeria: Evidence from Oyo State
From Firenze University Press Journal: Italian Review of Agricultural Economics (REA)
Abiodun Elijah Obayelu, Department of Agricultural Economics and Farm Management — Federal University of Agriculture, Abeokuta (FUNAAB)
Adeola Oluwaseun Wintola, Department of Agricultural Economics and Farm Management — Federal University of Agriculture, Abeokuta (FUNAAB)
Elizabeth Olufunmilayo Ayokunnumi Oluwalana, Agricultural Media Resources & Extension Centre (AMREC) / Agricultural Economics & Farm Management, FUNAAB
Everyone consumes food. As a result, everyone is affected to some degree by food price changes. Eco-nomic laws have shown an inverse relationship between the prices of goods and services and the value of mon-ey in an economy. Other things being equal, as prices rise over time, a given amount of money will be able to purchase fewer and fewer goods. In the presence of inflation, a given level of households’ income will buy less goods and services. Food inflation is a general increase in the prices of food or a decline of purchasing power of a given currency over time. The causes of food inf lation are not unconnected with sharp and con-tinuous decline of the value of the naira (for instance, one United States Dollar (USD) exchanging between ₦410 — ₦420 over a long period of times in Nigeria), attacks on farms, forex scarcity leading to an increase in cost of imported items like food, raw materials, and machinery with food insecurity as a major conse-quence. Scarcity of dollars leads to speculative product hoarding which again leads to artificial scarcity and an attendant increase in the prices of food.Rice demand response (DR) is defined as the changes in quantity of rice consumers are willing and able to buy compared to their normal consumption patterns in response to changes in price of rice, the price of close substitutes, the price of complementary items, and household income as well as by several non-economic factors including tastes and preferences, family size, age of family members, geographic location, shopping behaviour, and lifestyle choices (Adeyonu et al., 2021).
In many countries of Africa, rice is a staple food and con-stitutes a major part of the diet. Over the past three decades, rice has witnessed a steady increase in demand and hence producing it is also gaining an important place in the food security policy of many countries (Saka, Lawal, 2009). Cadoni and Angelucci (2013), posited that rice is an essential food item for most people in sub-Saharan Africa, especially West Africa, and forms over 20% of the global calorie intake. In Nigeria, rice is known to be the fourth most consumed food item in terms of calories (Cadoni, Angelucci, 2013) and a major component of Nigerians diet (Okunola, Bamgboye, 2016). Nigerians consume both local and imported (short and long grain) rice in different proportions. Brown rice (unrefined) is health-ier than refined grains and its consumption is linked to a decreased incidence of type 2 diabetes (Sun et al.,2010). The LSBWR is a whole grain mostly short and has bran and germ with about 32% moisture content compared with the LSBDR rice which contains about 10% moisture content (Arije et al., 2019). Brown rice (whether wet or dry) has more nutrients and health benefits than white rice (Ologbon et al., 2012). Some of the major local varieties of rice produced and con-sumed are: “Ofada”, “Abakaliki”, “Bida” and “Igbemo”. Ofada rice is a short, robust brown grain with red ker-nels widely cultivated in all the ofada rice-producing areas of four states (Ondo, Ogun, Oyo, and Osun) in the Southwestern part of Nigeria (Danbaba et al., 2 011).
Abakaliki Rice is the name for the local type that is grown in the Southeastern part of Nigeria and comes from Abakaliki rice mill in Ebonyi State. The polished ones come out white while unpolished ones can also come out brown. Igbemo rice is a local cultivar hav-ing bold extra-long grain with mean sphericity of 0.4 ± 0.03 indigenous to Ekiti State in Southwest Nigeria, while Bida rice are those produced in Bida town and the neighboring states in Niger State, Nigeria. Other varieties of rice produced and consumed in Nigeria include: FARO 44 released by the National Cereals Research Institute (NCRI) which is a slender long grain with mean sphericity of 0.43 ± 0.18, ITA 150, a slender long grain with mean sphericity 0.41 ± 0.04 released by the International Institute for Tropical Agriculture (IITA), and NERICA 1, a bold grain with mean sphe-ricity of 0.48 ± 0.05 released from the West Africa Rice Development Agency (WARDA) now renamed as Afri-ca Rice Center (Okunola, Bamgboye, 2016).The rice (polished rice) imported to Nigeria are of different shapes (long, medium and short) but the long and short grain rice are popular. According to the Inter-national Rice Research Institute (IRR) classification, rice grain is long if it is <6.61 mm in length, medium if between 5.51 to 6.6 mm in length and short if < 5.50 mm in length (IRR, 1996). In addition, the long grain rice is cylindrically longer compared with the short grain rice which is shorter and wider.Over the years, the rate of increase in demand for rice in Nigeria as the largest consumer of rice has been higher than its counterparts in the West Africa region (Tondel et al., 2020; Okpiaifo et al., 2020). Between 2011 and 2019, rice consumption in Nigeria rose from 5.6 million to 6.9 million tons (Morse, 2019). Accord-ing to Erhabor and Ojogbo (2011), rice has gone beyond being just referred to as a normal good in Nigeria and has become a necessary commodity that takes an aver-age of 21–25% of a rice-consuming household’s food budget share.Nigeria’s rice production as indicated in Figure 1 rose from 3.7 million metric tons in 2017 to 4.0 mil-lion metric tons in 2018. In spite of this, only 57% of the 6.7 million metric tons of rice consumed in Nige-ria annually is produced locally, leading to a deficit of about 3 million metric tons which is sourced through rice importation. To stimulate local production, the Nigerian Government banned importation of rice in 2019 with commendable research conducted to ensure a steady and reliant rice industry in Nigeria.
In spite of this, rice production marginally rose from 4.9 million metric tons in 2000 to 5.0 million in 2021, leading to a deficit of about 2 million metric tons (Fig. 1) which is either imported or smuggled into the country illegally. A large proportion of studies on rice only focused on improving the supply side of the Nigerian rice indus-try through improved production efficacy (Shehu et al, 2007), increased returns (Onoja, Herbert, 2012), improved technologies (Saka, Lawal, 2009) among oth-ers, with a gap in the literature on demand response of households, response to changes in rice prices and household income during food inflation.Therefore, this study attempts address the follow-ing questions: (i) What is the households’ rice demand pattern during food inflation? (ii) How does house-holds rice DR change with price and income during food price inflation? (iii) What are the various coping strategies used by households against changes in the price of rice?To address these questions, the broad objective of the study is to assess rice demand response to price and income changes among households during a food price inflationary period in Oyo State, Nigeria. The specific objectives of this study are:1. assess the nature and households’ rice demand pat-tern in the study area; 2. estimate compensated and uncompensated house-holds’ elasticities rice demand in the study area;3. identify the various coping strategies against changes in the price of rice.The study is unique because it estimated price, income and cross-price elasticities of demand for rice types during food inflation using a complete demand system, instead of a partial demand modelling approach often adopted, for all food groups in Nigeria. To the best of our knowledge this is hard to find in the food demand literature. The estimated elasticities are important for policy purposes. The study concentrated on four types of rice [LSBDR, LSBWR, ISGR and imported long grain rice (ILGR)] that are consumed in the study area. The findings contribute not only to the existing literature on food demand but to food inflation.
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