Household Food Insecurity in Nigeria Following the 2015 Oil Price Shock and Food Import Restriction Policy

In this paper, the impact on household food security of the exchange rate effects of the 2015 oil price crash, coupled with the government’s policy response to restrict the use of foreign exchange for major food imports in the same year, are investigated using panel data from three waves (2012, 2015 and 2018) of the General Household Survey. This survey is a nationally representative sample of approximately 5,000 households that have been surveyed six times across the three waves. It is found that despite the decline in real food prices globally, Nigeria experienced a marked rise in food insecurity, from approximately 26% of households in 2012/2015 to 43.7% in 2018. Nigeria had become more reliant on imported food between 2004 and 2015 as foreign exchange became readily available and the appreciated naira at that time made imported food relatively cheap. The precipitous decline in oil prices in 2015 led to a devaluation of the Nigerian naira, which in turn increased the price of imported goods. Moreover, the rise in food prices, to a large degree, is also tied to the restriction of the use of foreign exchange to import food items. This policy only succeeded in pushing food importers into the parallel market and raised the demand for foreign exchange. This weakened the parallel-market exchange rate and pushed up prices, especially food prices, that had already been rising. Consequently, more families were further pushed into food insecurity. This finding is consistent with the conclusion reached by Sen (1982) that food insecurity is rarely caused by nature, much more likely to be caused by poorly thought-out policy reactions to food market shocks.