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Project Topic:

ASSESSMENT OF COMMODITY PRICE VOLATILITY AND THE WELFARE OF HOUSEHOLDS IN NIGERIA (1995-2019)

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 Format: MS WORD ::   Chapters: 1-5 ::   Pages: 56 ::   Attributes: Questionnaire, Data Analysis,abstract, table of content, references ::   196 people found this useful

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CHAPTER ONE

  1. INTRODUCTION

1.1   BACKGROUND OF STUDY

Apart from the general tendency of upward price movement, episodes of price spikes have resulted in extraordinary and problematic changes in commodity prices, leaving adverse impacts on substantial number of households in many developing countries. A price spike refers to a change in price levels over a shorter period of time, normally between two successive observations (von Brown and Tadesse, 2012; Kornher and Kalkuhl, 2013).

Positive price changes are usually viewed as high prices, and the highest positive values are tagged price spikes. The negative impacts of food price spikes in developing countries are evident in the erosion of purchasing power of consumers, reduction in caloric intake, consumption of less varied foods, deepening food insecurity, poverty and malnutrition (FAO, 2011; von Braun and Tadesse, 2012), among others.

Commodity prices have been on a rollercoaster ride (Cashin and McDermott, 2002; Jacks et al., 2009; Roache, 2010). Food price ten-year volatility reached its highest level in almost 30 years in December 2010 (FAO, 2010). Likewise, food prices have reached an all-time high since 1990 in December 2010 (Treanor, 2011). Food price volatility over the past decade or so, punctuated by the food crisis of 2007-2008 and the biggest one-month jump in wheat prices in more than three decades in summer 2010, has rekindled widespread popular interest in commodity price stabilization.

Several governments (e.g., Ghana, India, and Kenya) have recently reintroduced food price stabilization schemes. A simple search finds more than five times as many articles on the topic in the media over the last five years as in the preceding five years.4 Likewise, the 2008 edition of the World Bank’s flagship World Development Report (World Bank, 2008), which focused on agriculture, discussed various policy options for price stabilization.

More recently, the Food and Agriculture Organization of the United Nations dedicated a policy brief to price volatility in agricultural markets, cautioning that “there is emerging consensus that the global food system is becoming more vulnerable and susceptible to episodes of extreme price volatility” (FAO, 2010).

The effects of price volatility on producer behavior and profit have been wellexplored in the theoretical literature. Output price uncertainty generally causes firms to employ fewer inputs, forgoing expected profits in order to hedge against price volatility (Baron, 1970; Sandmo, 1971). The analysis of commodity price risk has been extended theoretically to individual consumers (Deschamps, 1973; Hanoch, 1977; Turnovsky et al., 1980; Newbery and Stiglitz, 1981; Newbery, 1989), who are generally thought to be price risk-loving given the quasi convexity of the indirect utility function.

But because agricultural households can be both producers and consumers of the same commodities, it is entirely possible for some households to be price risk-averse, for others to be price risk-neutral, and for yet others to be price risk-loving, although prior empirical analyses have focused on just a single commodity (Finkelshtain and Chalfant 1991, 1997; Barrett, 1996).

1.2   STATEMENT OF THE PROBLEM

Price volatility (rise or fall) can both be pain and gain to the Nigerians economy simultaneously. The crux of this issue is that the country has extremely relied on some of its commodity over the years example crude oil, and there is strong evidence that there exists a strong link between budgetary operations and the happenings in the international oil market (price, demand and supply) which has triggered several macro-economic shocks and challenges in the economy. 

When price volatility sets in on the high side, it tends to make life very unbearable for most citizens in the country due to the high cost of goods and even services as at that point in time and vice versa; most commodity owners go as far as hoarding their commodities for the economy to experience inflation so that they can in turn make more gains than necessary and thereby making life difficult for other citizens.

Finally several researches has been carried out on measuring commodity price volatility and the welfare consequences of eliminating volatility but not even a single research has been carried out on the assessment of commodity price volatility and the welfare of households in Nigeria.

1.3   AIMS AND OBJECTIVES OF STUDY

        The main aim of the study is to assess commodity price volatility and the welfare of households. Other specific objectives of the study include;

  1. to determine the effect of commodity price volatility on the welfare of household in Nigeria.
  2. to determine the factors affecting commodity price volatility and its effect on the welfare of Nigeria.
  3. to determine the extent to which commodity price volatility affects the welfare of households in Nigeria.
  4. to proffer possible solutions to the problems.

1.4   RESEARCH QUESTIONS               

  1. What is the effect of commodity price volatility on the welfare of household in Nigeria?
  2. What are the factors affecting commodity price volatility and its effect on the welfare of Nigeria?
  3. What is the extent to which commodity price volatility affects the welfare of households in Nigeria?
  4. What are the possible solutions to the problems?

1.5   STATEMENT OF RESEARCH HYPOTHESIS

H0:   there is no correlation between the rates of fluctuation in price of commodities within the year from 1995-2019.       

H1:    there is correlation between the rates of fluctuation in price of commodities within the year from 1995-2019.       

1.6   SIGNIFICANCE OF STUDY

        The study on the assessment of commodity price volatility and the welfare of households will be of immense benefit to the entire Nigeria in the sense that it would exposes the growth implication of the dynamics and erratic fluctuation in the price of commodity on Nigeria’s economy. It will serve as a tool for government policies towards mitigating the negative impact of commodity volatility in Nigeria. Finally, the study will contribute to the body of existing literature and knowledge to this field of study and basis for further research.

1.7   SCOPE OF STUDY

        The study on the assessment of commodity price volatility and the welfare of household is limited to Nigeria from 1995-2019

1.8   LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.9   DEFINITION OF TERMS

Commodity:    A raw material or primary agricultural product that can be bought and sold, such as copper or coffee.

Price:       A price is the quantity of payment or compensation given by one party to another in return for one unit of goods or services

Volatility:        volatility is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns

Welfare:   The health, happiness, and fortunes of a person or group.

Household:      A house and its occupants regarded as a unit.


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Paper Information

Format:ms word
Chapter:1-5
Pages:56
Attribute:Questionnaire, Data Analysis,abstract, table of content, references
Price:₦3,000
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