ECONOMETRIC ANALYSIS OF THE EFFECT OF CHANGES IN PRICES ON CONSUMPTION OF BASIC FOOD ITEMS (A CASE STUDY OF AKURE, ONDO STATE)

CHAPTER ONE

INTRODUCTION

1. 1. BACKGROUND OF THE STUDY

Food prices are a primary determinant of consumption patterns in every society, and high food prices may have important negative effects on nutritional status and health, especially among poor people. The global food price crisis of 2007-08 focused international attention on the effect of changes in food price on nutrition and health and the consumption pattern. Estimates from the United Nations Food and Agriculture Organization asserted that in 2008 an additional 30 million people were pushed into hunger by the global rise in cereal prices and evidence are there that dietary diversity and quality have been negatively affected by food price rises, particularly among the poorest. In contrast, the governments of developed countries are increasingly adopting appropriate fiscal measures that change the relative price of foods to promote healthy diets. 

Food consumption has been a subject of research all over the world not just in Nigeria. It is especially meaningful in developing countries where food expenditures account for a relatively large share of household income. Studies of food consumption critically expatiate on food-related nutritional policies. They provide estimates of how food consumption is affected by continuous changes in prices, income, and taxation policies (Dunne and Edkins, 2005). Food consumption in Nigeria has been an important issue, not only because it is related to poverty and food security, but also because it is highly correlated with living standards and household resource. Essentially, the demand for food depends on population and the dietary habits/per capita daily calorie intake of the people under consideration. On the other hand, the food requirement of the nation is dependent on an additional factor namely; food import and export balance. On the national level, per-capita growth of production of major foods in Nigeria has not been sufficient to satisfy the demands of an increasing population (Kormawa, 1999). The result is a big gap between national supply and national demand for food. Malnutrition is still widespread and eloquently manifested in the high levels of severe and moderate underweight among children coupled with the high rates of infant and under-five mortality and low life expectancy at birth (Maziya-Dixon et al., 2004; UNDP, 2005). Household food consumption pattern in Nigeria has been undergoing dramatic changes over the last few years. There has been an increase in the consumption of carbohydrate foods like yam, cassava, maize and rice and some decrease in the consumption of such food items as fish, fresh fruits, as well as fresh and processed vegetables. Average calorie and protein intake by Nigerians is only at the threshold of adequacy. The daily per capital calorie supply as a proportion of requirement was 90% in 1988-1990 and 85% between 1992-1996 (FOS, 1999).

Fiscal approaches to control tobacco use have identified that responsiveness to raised tobacco prices is higher in low income countries and among poorer households who spend a greater relative share of their income on tobacco.Similar information on the differing response to food price changes by national and household income level is needed to help with the identification of food price policies to protect population health. A recent report by the Food and Agriculture Organization identified the absence of a robust evidence base with which to guide policies on food price,and important questions remain concerning the impact of changes in food prices on food consumption, especially in poor populations.

Several studies of the relation between the price of a given food and demand for that food, known as “price elasticities” have been conducted, but as yet few attempts have been made to synthesise this literature.Currently no systematic review of the empirical evidence on the relations between food prices and demand at a global level has been done, and no study has explored whether these relations differ between income groups within the same country.

1. 1. STATEMENT OF THE GENERAL PROBLEM

The economic recession which has significantly affected all sectors of the economy especially the agricultural has affected the prices of basic food items in Nigerian markets. the poor feeding pattern of Nigerians as a result of rise in the prices of basic food items has had its toll on the level of productivity of the masses as it is often said that a hungry man is an angry man thus the cases of crime and social vices that has been on the increase in these recession.

1. 1. AIMS AND OBJECTIVES OF THE STUDY

The major aim of the study is to examine the effect of changes in price on consumption of basic food items in Nigeria. Other specific objectives of the study include;

1. To examine the necessity of consumption on the economy of Nigeria.
2. To examine the major causes of price instability of basic food items using Akure as the case study.
3. To recommend ways of reducing the price instability of basic food items.
   1. RESEARCH QUESTIONS

1. What is the effect of changes in price on consumption of basic food items in Nigeria?
2. What is the necessity of consumption on the economy of Nigeria?
3. What are the major causes of price instability of basic food items using Akure as the case study?
4. What are the ways of reducing the price instability of basic food items?
   1. RESEARCH HYPOTHESIS

H0: There is no significant effect of consumption of food items on consumers

H1: There is a significant effect of consumption of food items on consumers

1. 1. SIGNIFICANCE OF THE STUDY

The study would be of immense importance to the general public as it would reveal the effect of consumption of basic food items in Nigeria. The study would also be of immense importance to students, researchers and scholars who are interested in developing further studies on the subject matter.

1. 1. SCOPE OF THE STUDY

The study is restricted to the effect of consumption of basic food items in Akure metropolis in Ondo state.