Asymmetric effects of global oil price on food insecurity in Nigeria: A NARDL approach

Abstract

This study investigates the short-run and long-run asymmetric effects of world oil price fluctuations on food insecurity in Nigeria, an oil-exporting country that paradoxically struggles with local oil refining and remains heavily reliant on fuel imports. The problem addressed is the disconnect between Nigeria’s status as a crude oil exporter and its vulnerability to global oil price shocks, which exacerbate food insecurity through inflationary pressures, rising transportation costs, and exchange rate volatility. Using a Nonlinear Autoregressive Distributed Lag (NARDL) model, we analyze how positive and negative changes in oil prices affect food insecurity, while accounting for exchange rate movements and inflation from 1970-2020. The results reveal significant asymmetric effects, with negative oil price shocks having a more pronounced effect on food insecurity than positive shocks, both in the short and long run. Both positive and negative shocks consistently worsen food insecurity, suggesting that oil price volatility intensifies the fragility of Nigeria’s food systems. The error correction mechanism indicates a fast speed of adjustment to long-run equilibrium. These findings highlight the need for policies to mitigate the adverse effects of global oil price volatility on food security in Nigeria, including stabilizing exchange rates, controlling inflation, and developing local oil refining capacity to reduce the economy's reliance on fuel imports. Strengthening food systems through diversification and sustainable agricultural practices is also critical.