Explaining Rice Price Shocks in Nigeria: Implications for Policy Intervention

At the microeconomic level, in predominantly agrarian society of Nigeria where majority of the farmers are poor and unable to obtain insurance, price and production shocks would have adverse impact on growth and development. Particularly, there is a growing concern that current levels of rice production will not meet future demand. The general objective of the paper is to examine the key factors influencing rice price variability, and how to address these effects in policy terms. Time series data of price which cover the period of 1990-2004 from the National Bureau of Statistics were used. Coefficient of variation was used in the analysis of variability. The time varying conditional variances were estimated by using a Generalized Autoregressive Conditional Heteroscedasticity model. Coefficient of variation (CV) for rice was calculated as 40.92 %. This value shows that the price of rice fluctuates at important level in the period of 1990-2004. There were price shocks because both the supply of and demand for rice vary widely over time in addition to the effect of some variables, which are not under control of both producers and suppliers. Gross income equals to the value that yield of a product is multiplied by its price. Therefore, a fluctuation in either yield or price affects gross income of farmers. A GARCH based measure indicates considerable time variability. The study suggests policy measures to support research, provide storage and processing technologies.