ABSTRACT
The prevalence of household food insecurity in Nigeria is not a result of a shortage of food but of a lack of access to food. Contributing to this are the rising food prices that adversely affect the rural poor, as most of them are net buyers of food. Due to the higher food prices, poor households are forced to spend a large proportion of their income on food. The objectives of this study are to determine socio-economic characteristics that influence household perceptions of food prices and to evaluate the impact of price instability on house hold consumption behavior in Nigeria. The study considers two rural areas that have different food price regimes in Oyo State. The results are based on household level data collected from a sample of 300 households using structured questionnaires. The Ordered Logit Regression (OLR) model was used to evaluate the impact of price instability on house hold consumption behavior status, using the Food Expenditure Income (FEI) ratio as a house hold consumption behavior indicator. The ratio indicates the proportion of household income spent on food. Its components are directly linked to two of the four aspects of food security, namely food stability and food accessibility. According to Engel’s Law, the proportion of income spent on food declines as income increases.
Food price perceptions influence buying and consumption patterns of households. Using the Tobit regression model, households’ socio-economic characteristics that determine household perceptions of food prices were identified. A Food Price Perception (FPP) index was generated using principal components analysis and was used to evaluate the relationship between food price perceptions and household food expenditure patterns. The results showed that households in Oyo had higher perceptions of food prices and that location, total household income and the number of permanently employed household members influence a household’s perception of food prices. Another finding was that households with a higher perception of food prices were low-income households that spend a large proportion of their incomes on food. The study recommends that policy priorities should be focused on the establishment of retail outlets in rural communities. Establishment of new employment opportunities and increased wages will also help improve house hold consumption behavior through increased food affordability.
CHAPTER 1
INTRODUCTION
This chapter outlines the problem, objectives and the hypotheses this study aimed to address. It presents a background and a brief overview of the structure of the dissertation.
1.1 Background
Households are said to be food secure when they have year-round access to the amount and variety of safe foods their members need to lead active and healthy lives. At the household level, food security refers to the ability of the household to secure, either from its own production or through purchases, adequate and nutritious food for meeting the dietary needs of all members of the household (FAO, 2012). However, reports on food security have shown a lack of adequate food and slow economic growth, putting less developed nations and households at risk of being food insecure (FAO, 2009). As such in 1996, 189 nations made a promise to free people across the developing world from extreme poverty and set to reach the eight Millennium Development Goals (MDGs) by 2015 (UNAID, 2025). The MDG’s were to eradicate extreme poverty and hunger, promote gender equality and empower women, reduce child mortality, improve maternal health, combat HIV/AIDS, malaria and other diseases, ensure environmental sustainability and develop a global partnership for development (WHO, 2025).
Despite efforts to combat national and household food insecurity, the increase in future demand for food, as a result of population and income growth, will make it more challenging to ensure food security (FAO, 2009). Slow agricultural productivity, which could be worsened by climate change and limited water supply, will also make it challenging for households to ensure food security. Another important factor negatively affecting food security is food price volatility, which, after the global 2007-2008 price hikes, led to an increase in the number of hungry families (HSRC, 2012). This was especially serious in low income developing countries, where most poor people are net consumers of food (Son and Kakwani, 2009). Some of the causes of these price hikes include increased oil prices, increased demand for food and fuel, export restrictions and reduced production due to unfavorable climatic conditions (Jatta, 2013).
In Nigeria, higher food prices increased the overall cost of living. The food price crisis led to an increase in the cost of purchasing food and made it increasingly difficult for low income households to afford what they could before the 2007-2008 price hikes (HSRC, 2012). This is because low income households rely on the very food that became too expensive. Rising food prices reduced total disposable income available for consumers and added to the financial strain experienced by consumers (Sekhampu and Dubihlela, 2012), forcing households to reduce their non-food expenditure. The low income households in Nigeria purchase cheaper, unhealthy food when prices are high, because healthier diets generally cost more than a diet commonly eaten by poor families (Temple et al., 2010:1). Temple et al. (2010) found that in the Western Cape, a household with five individuals would have to increase their food expenditure by R1090 to afford a healthier diet.
The National Agricultural Marketing Council (NAMC) reported that the cost of a basic food basket increased by about 6% (R485 to R514) from January 2025 to January 2015. This report, The Food Cost Review (2008) showed that Nigerian rural consumers paid more for food items than urban consumers. According to the study, the reason for the difference in food prices between the rural and urban shops are transport costs, which include maintenance, fuel and the frequency of trips to and from suppliers. Other reasons for the difference in prices include low or no volume discounts for the rural outlets, stock losses (spoilage, breakage, products exceeding their expiry dates and stock theft) and loading costs, which entails casual labour associated with loading at the wholesale markets (Ramabulana, 2011).
The impact of prices on house hold consumption behavior however varies between households, depending on the actual price they pay for food. Sellers often offer different prices for the same goods in a given market, a strategy called food price dispersion (Ramachandran and Sundararajan, 2005). Price dispersion exists in the Nigerian food market and its main causes include unavailability of storage, transportation costs, road infrastructure and the monopolistic nature of rural food stores (Anania and Nisticò, 2010, Minten and Kyle, 1999, Effiong and Eze, 2010).
1.2 Problem Statement
Food access is an important determinant of house hold consumption behavior that is affected by households’ total income and the price of food. Prices paid by households in low-income areas for food are higher than those in formal suburbs (Makgetla and Watkinson, 2002). In April 2010, households in rural areas paid R17.78 more for the same food basket as consumers in urban areas (NAMC, 2010). In January 2015, a basket of food, including, margarine 500g, sunflower oil 750ml, a loaf of white bread 700g, maize meal super 5kg, a loaf of brown bread 700g and full cream milk cost R9.84 more in rural areas than in urban areas (NAMC, 2015). Poor rural households are thus worse off, as the higher prices decrease their purchasing power. High food prices also lead to a decrease in the quality of food consumed and the number of meals consumed per day by households (Wood et al., 2009), which could affect the health status of the members. Deterioration of the health and nutritional status of children and lactating women, high school drop-out numbers by young individuals from school, and the selling off of productive assets by households are some of the adverse effects of high food prices (Von Braun, 2008). Presenting her Budget Vote Speech to the National Council of States, the former Minister of Agriculture, Joemat-Pettersson, said that lower-income Nigerian households are the biggest victims of upward trends in food prices and that most of Nigeria’s poorest people spend about 60 percent of their income on food (SANews, 2013). Jacobs (2009) reported that the food expenditure shares of low income households vary between 38 and 71 percent (Jacobs, 2009). This makes rural households vulnerable to future price increases.
Considering the above problems associated with high food prices the following research questions are raised in the study:
(i) What is the impact of high price instability on house hold consumption behavior in Nigeria?
(ii) What are the socio-economic factors influencing the level of food security of rural households in Nigeria?
(iii) Which are the socio-economic factors influencing households’ perceptions of food price levels in rural areas in Nigeria?
1.3 Objectives
The general study objective of this thesis was to evaluate the impact of price instability on house hold consumption behavior. The specific study objectives were to:
(i) Determine the socio-economic factors influencing household perceptions of food price levels in Saki in Nigeria.
(ii) Evaluate the impact of high price instability on house hold consumption behavior of rural households of Saki in Nigeria.
(iii) Determine the socio-economic factors influencing the level of food security of rural households of Saki in Nigeria.
1.4 Hypothesis
(i) Rural household socio-economic characteristics do not affect their food security.
(ii) Food prices do not have an impact on house hold consumption behavior in Nigeria.
(ii) Rural household socio-economic characteristics do not influence their perceptions of food price levels.
1.5 Justification of the Study
Nigeria is largely deemed as a food secure nation, producing staple foods or having the capacity to import food if needed, in order to meet the nutritional requirements of its population (FAO, 2008). The country is food secure at a national level, but the same cannot be said at household level, especially for those in rural areas. Food access, which is affected by food prices, is key in ensuring house hold consumption behavior. Most rural households are net consumers of food, which pay higher prices for food and spend a large proportion of their income on food (Ravallion, 1990). The higher food prices lead to a change in consumption patterns, as households resort to consuming less and buying food of lower quality. The increased food expenditure makes them more sensitive to any increase in food prices (Yousif and Al-Kahtani, 2013) and households end up with less disposable income for other household necessities. It is therefore important to examine the impact of price instability on house hold consumption behavior, as this will give an insight into how prices paid for food affect house hold consumption behavior in areas that pay different prices for food. This will give direction in designing policy measures that can be put in place in order to mitigate the effects of high food prices. Understanding the impact of high food prices could also help government in policy interventions aimed at reducing house hold consumption behavior in the Nigeria.
1.6 Chapter Overview
In Chapter 1, the research problems, objectives and the hypothesis were presented. In Chapter 2, literature on food security, the effects of prices on food, price dispersion and price perceptions, were reviewed. The chapter was concluded by reviewing past research findings of the impact of price instability on food security. Chapter 3, presents determinants of households’ perceived food price in Saki, Oyo state in Nigeria; and the impact of price instability on house hold consumption behavior is presented in Chapter 4. Both analysis used data collected in two rural areas in Nigeria that pay different prices for food, namely Saki, and Oyo, in Oyo State. The conclusions, summary and policy recommendations from the findings of the study were presented in Chapter 5, which was concluded by recommending areas for further study.
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