IMPACT OF AGRICULTURAL POLICY ON RELATIVE PRICE VARIABILITY OF FOOD CROPS AND INFLATION IN NIGERIA

Abstract

Prices of food crops in Nigeria tend to exhibit similar trend with inflation. The study therefore established quantitatively relationships among agricultural policy, relative price variability (RPV) of food crops and inflation in Nigeria. Data for the study includes annual producer prices (nominal) and output of food crops and annual inflation rate obtained from the publications of the Central Bank of Nigeria, Nigerian Bureau of Statistics, Food and Agricultural Organisation and Nigerian Institute of Social and Economic Research covering the period of 1970-2009. Analytical tools used were RPV index and Error Correction Method (ECM). The results showed that the variables are stationary at their levels. As inflation increases, RPV of food crops also increases both in short run (0.0002) and the long run (0.0310). Civilian Post-Structural Adjustment Period Policies (CPSAP) caused a significant reduction in inflation and consequently reduced the   RPV of food crops in the long run. There is a need for policies that will buffer the food crop sub-sector from the effects of inflation. Policies that reduce the rate of inflation and minimise RPV among food crops are needed. Effective management of inefficiencies and misallocation of resources in the sub-sector should be explored.