Harmful temperatures and consumption expenditure: Evidence from Nigerian households

We examine the welfare effects of interannual variation in extreme temperatures on consumption expenditure using nationally representative household survey data from Nigeria. Prior work shows that small-scale farmers attenuate the impact of extreme heat on agricultural productivity through the short-term use of non-traded productive inputs, such as land. However, when investment in tradable inputs, such as drought-resistant technologies, is higher, attenuating weather shocks may reduce the welfare of net food buyers if it increases food prices. Using microdata on consumption expenditure from Nigerian households and controlling for seasonality and other time- and zone-specific trends, we examine the effect of changes in extreme temperature on households’ food expenditure. We find that extreme heat increases per capita consumption expenditure during the dry season but not during the wet season. Compared with households in urban areas, rural households pay more for food during the dry season. We interpret this as a reflection of the higher production costs associated with extreme heat during the dry season. Our results support policies that provide income support to vulnerable households to mitigate the impact of weather shocks in agrarian communities in developing countries.