Welfare effects from food price shocks and land constraints in Niger

Abstract

Households in low-income and food insecure nations such as Niger are vulnerable to food price shocks as a large portion of their budgets are spent on calories derived from cereals and other staples. However, there is very weak understanding of the structure of food demand in many African nations making proactive food policy recommendations ineffective. This is particularly acute in West Africa where the paucity of quantitative expenditure and consumption information has forced some studies to borrow demand parameters from other low-income nations located in regions outside of Sub-Saharan Africa. We empirically estimate food demand elasticities as tools to conduct a short-run welfare analysis of price shocks and build upon the welfare impacts to assess long-run pressure on farmland and trajectories toward future availability and price scenarios. The welfare analysis finds that an increase in millet price reduces rural welfare while a sorghum price increase primarily reduces urban households’ welfare. Given population growth, acreage-driven millet and sorghum production growth, and the income elasticities for both staples, holding all else constant, any food price shock in the future will likely result in higher welfare losses for consumers. Taken together, food price policy should focus on millet to improve the welfare of rural and the poorest households in Niger. Facing a land frontier constraint reinforces calls for total factor productivity growth in millet and sorghum to reduce pressure on marginal land. Technological change in food production and the identification of import opportunities are required to relieve upward pressure on prices given current consumption patterns, trade, land frontier constraints, and the importance of these two crops in the national food system.