Ojogho, O. and Ojo, M.P.

Download

Understanding how food consumers in Nigeria change their food consumption when prices change is not enough without the attendant welfare implications, given that consumers have different cultural backgrounds, socio-economic status, lifestyles, different behaviours and needs. This study assessed the impact of food prices on the welfare of rural households in south-eastern Nigeria. Specifically, the study estimated a complete demand function for commonly consumed food items, estimated the compensated price and income elasticities of demand, and examined the change in welfare of rural household consumers with respect to change in prices of commodities in the study area. A three-stage stratified sampling procedure was used to obtain 682 rural household food consumers. Data collected were analyzed using the Linear Expenditure System (LES) of the point-wise separable Stone-Geary utility function. The results showed that all food commodities are normal, non-Giffen, own-price inelastic and gross complements with weak substitutability, and a corresponding loss in welfare as measured by the compensation variation (CV) and equivalent variation (EV). A counterfactual 10% increase in the price of commodities in the region would lead to welfare loss of between 9.56% and 14.13% of initial food expenditure. Increase in price of food commodities impacts on the subsistence level of household food consumers, particularly on their welfare, in South-eastern Nigeria. Policies should be targeted at reducing such welfare impact and the attendant consequences on households, particularly the low-income earners. Key words: price, food, elasticity, welfare, consumer