Empirical Analysis of the Impact of Income on Dietary Calorie Intake in Nigeria. Babatunde, R. O

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1 Empirical Analysis of the Impact of Income on Dietary Calorie Intake in Nigeria. Babatunde, R. O Department of Agricultural Economics and Social Sciences (490b), University of Hohenheim, D Stuttgart, Germany. (ralphag20@yahoo.com) Tel: Abstract This paper analyzes the impact of income on calorie intake in Nigeria. The paper was based on secondary data covering the period and was obtained from Central Bank of Nigeria and the National Bureau of Statistics. The result revealed that domestic food production and per capita income were the significant determinants of dietary calorie intake in Nigeria. The result brings to focus the need to increase domestic food production in order to increase calorie intake and reduce the present level of food insecurity in the country. It also shows the need for increased income so as to increase the purchasing power of households which could allow them increase their calorie intake. Trend of food import, food export and inflation rate revealed a high level of instability over time suggesting the need for appropriate policies that would stabilize the trend. The calorie-income elasticity was very low, implying that increased income alone may not be a sufficient way of achieving improvement in calorie intake. As a result of this, a combination of policies that would address food production, income and nutritional factors would be needed to increase calorie intake and reduce food insecurity. Keywords: Calorie intake, income, food import, food export, food security, Nigeria 1. Introduction Food is the most basic of human needs for survival, health and productivity. It is the foundation for human and economic development (Smith, Alderman and Aduayom, 2006). Hunger-an uneasy sensation, exhausted condition, caused by want of food, remains a pervasive

2 problem in developing countries of the world and how to reduce it has been a major research objective in Sub-Saharan Africa (SSA). This becomes more important especially after the declaration of the Millennium Development Goals (MDG). While national governments are trying to direct available scarce resources towards providing food for the people in need or enabling them to acquire it themselves, many researchers have been trying to identify the determinants of food supply and the factors which enhance access to food (Kijima, Matsumoto and Yamao, 2006). Food insecurity-insufficient access by people to adequate food and nutrients has been identified as the most important immediate cause of hunger (Smith, Alderman and Aduayom, 2006). One of the indicators of food insecurity at the household and national levels is the amount of per capita dietary calorie availability. The percentage of a country s population that does not meet the minimum per capita dietary calorie intake directly measures the prevalence of undernourishment. In Sub-Saharan Africa as a whole, the prevalence of undernourishment was 32% in This translates to about 206 million undernourished people (FAO, 2006). This high rate of undernourishment is partly because in most SSA countries, domestic food production is not up to the consumption level and as such is inadequate in feeding the whole population (Adenegan, Oladele and Ekpo, 2004). Over the past decades, many SSA countries have been net importer of food notably rice and other cereals. In 1991 for instance, total volume of cereals imported was 11.4 million tonnes and this has been more than double by 2001 (Adenegan, Oladele and Ekpo, 2004). In Nigeria, despite the fact that average dietary calorie intake has increased over the past two decades, it is believed that over 40% of the population are still living below the minimum dietary calorie intake. Average per capita calorie intake increased from 2050 kcal in 1979 to 2430 kcal in 1989 and further increased to 2700 kcal in As a result of this, the proportion of undernourished people fell from 13% in 1992 to 9% in 2005 (FAO, 2006). Table 1 shows some of the food security-related indicators in Nigeria. It is generally believed that agriculture is the 2

3 mainstay of the Nigerian economy and that it provides over 80% of the food needs of the country. The neglect of the agricultural sector by successive government has led to a decline in per capita domestic food production, thereby creating a gap between national food supply and demand. Food importation has been increasing and this has created a lot of concern with regards to increased share of food import bill in total Gross Domestic Product (GDP). Table 1: Food security related indicators in Nigeria Selected Indicators Mean Value Food energy intake (kcal/capita/day) 2700 (2003) Percentage of population living below 1 US dollar per day 70.8 (2003) Percentage of population living below national poverty line 60 (2000) Poverty gap ratio (%) 34.5 (2003) Income inequality (Gini coefficient) 0.51 (1997) Food consumption inequality (Gini coefficient) 0.15 (1995) Percentage of undernourished people 9 (2005) Number of undernourished people (millions) 11.5 (2005) Percentage of children (under 5 years) underweight 28.7 (2003) Percentage of children stunted 38.3 (2003) Percentage of children wasted 9.3 (2003) Percentage of children overweight 3.6 (2003) Share of food expenditure in total expenditure (%) 61 (1990) Infant mortality rate (per 1000 live births) 98.8 (2005) Under five mortality rate (per 1000 live births) 198 (2003) Source: FAO (2006). The level of dietary calorie intake is believed to be determined by several factors including food accessibility, food availability, food utilization and food stability. Food access is determined by income and market factors. Income level determines the quantity and quality of food consumed and the composition of the diet (Gross, Schultink and Kielmann, 1999). As the basis of the household purchasing power, income determines food intake particularly for households that are non food producer and this underscores the importance of a country s per capita income in dietary calorie intake and food consumption. There is a high degree of income inequality and the real per capita income fluctuates over the year in Nigeria. This has serious impact on food consumption by the larger percentage of the population. The overall objective of this paper is to analyze the impact of income on per capita dietary calorie intake in Nigeria. Specifically, the study examines the impact of real per capita income 3

4 and other variables such as domestic food production, food import, food export and inflation on dietary calorie intake and makes recommendations based on the result of the analysis. The rest parts of the paper are structured as follows. Section 2 discusses data source and methodology used. Section 3 discusses the result-both descriptive and regression results, while section 4 concludes the paper. 2 Data and Methodology The data used for this study were obtained from secondary sources. The bulk of the data were obtained from various publications such as Statistical Bulletin of the National Bureau of Statistic (NBS), Central Bank of Nigeria (CBN) Annual Reports and Statement of Accounts, CBN Economic and Financial Reviews and CBN Statistical Bulletin. The data collected cover the period between and were analyzed using descriptive and econometric techniques. Specifically, means and summary statistics were calculated and described over time. In addition, graphs showing the trend in per capita calorie intake and the determinants were used to analyze the movement of these variables from This makes sense because graphical methods are generally believed to be good for showing growth of variables in time series data (Adenegan, Oladele and Ekpo, 2004). In addition to the descriptive analysis, per capita calorie intake was modeled as a function of per capita income, domestic food production, food import, food export and inflation in the econometric analysis. The aim is to examine the influence of these variables on calorie intake at the national level in Nigeria. Three functional forms of the model were fitted to the data. Econometric and statistical criteria were used in selecting the model that best fit the data. The implicit form of the model is expressed as: DCI = f (DFO, FIMP, FEXP, PCI, INFL) (1) Where: DCI = dietary calorie intake in kilocalorie/day DFO = domestic food output in thousand metric tonnes 4

5 FIMP = food import in million Naira FEXP = food export earning in million Naira PCI = per capita income in Naira INFL = inflation rate in percentage From theoretical consideration, it is expected that an increase in domestic food output, food import and per capita income should lead to an increase in per capita calorie intake, while an increase in food export and inflation is expected to reduce per capita calorie intake. Population, which is important in per capita calorie intake, was not included as a right-hand variable because, the income variable was measured in per capita and this implies that the total national income had been divided by the population, indicating that the effect of population growth has been factor into the per capita income component. 3. Results and Discussion 3.1 Descriptive Analysis The descriptive analysis starts with the sample statistics of per capita calorie intake and the explanatory variables over the period of This is shown in table 2. Table 2: Variable definitions and sample statistics: (N = 34) Variables Definition Mean value Standard deviation Per capita calorie Daily per capita dietary energy intake in intake kilocalories/day Domestic food output Total domestic food production in 1000 metric ton Food import Food import bill in million Naira Food export Food export earning in million Naira Per capita income Real per capita income in Naira Inflation Inflation rate measure by consumer price index Source: Computed from CBN (2005) Annual Report and Statistical Bulletin Note: In 2006, 1 US Dollar = 120 Naira. For the thirty-four year period, the average per capita calorie intake was 2210 kcal/day. This is lower than the recommended minimum calorie intake of 2250 kcal/day. The average domestic food production for the period was about 534 billion metric tones. This amount of domestic food 5

6 production was shared between local consumption and export. Though data on food export was not given in metric tonne, it was observed that the average food export during the period amount to about 1.4 billion Naira. The average food import bill was about 32.2 billion naira for the reference period. By comparing food import bill with food export earning, it can be seen that Nigeria was a net importer of food during the period under review. This confirms the earlier report that for the past few decades most Sub-Saharan Africa countries have been net food importer (Adenegan, Oladele and Ekpo, 2004). The average rate of inflation was 21%. Judging by the coefficient of variation (CV), it can be shown that food export with a CV of 1.93 was the most varied determinant of calorie intake followed by food import with a CV of Inflation rate rank third with a CV of Table 3 shows the change in average per capita calorie intake and its determinants from It can be seen from the table that average per calorie intake was highest in the period , even higher than the recommended minimum dietary intake of 2250 kcal/day. Many factors including the various economic and agricultural reforms could be responsible for this. Similarly, total domestic food production and food import were highest during the period Though it is surprising for domestic food production and food import to move in the same direction, it may be one of the reasons responsible for the high calorie intake witnessed during this period. Table 3: Change in average per capita calorie intake and its determinants ( ) Periods Per capita calorie intake (kcal/day) Total domestic food output (1000 metric ton) Food import (N m) Food export (N m) Per capita income (N) Inflation (%) Source: Computed from CBN (2005) Annual Report and Statistical Bulletin Note: In 2006, 1 US Dollar = 120 Naira. 6

7 Food export earning was highest between The average export earning during this period was about five billion Naira. Average per capita income was highest during the periods, while average inflation rate was lowest during the same period. The period was unusually difficult for the average consumer in Nigeria as the average consumer price index was highest at 40.3%. The trend in per capita calorie intake and the determinants are shown in figures 1 to 6. Figure 1 shows that per capita calorie intake fell from early 1970s to late 1970s. It fell to about 1500 kcal/day in 1981 and rose steadily afterward to over 2500 kcal/day in Domestic food production stagnated at below 20 billion metric tonnes between 1977 to 1983 but rose steadily from mid 1980s to about 120 billion metric tonnes in Between 1970 and 1991, food import was low, but it increased gradually to 160 billion Naira in In the same way, food export earning was low between 1970 and 1985, it however, begin to rise after 1985 up to 1995 when it was highest at over 14 billion Naira from where it fell again. Per capita income was high between 1970 and 1980, but fell gradually after After 1985, it increased marginally and by 2003, it was a little over 1000 Naira. Trend of inflation shows that it rose and fell alternately between 1970 to 1995 when it was highest at over 70%. In 2003, it was about 14%. 7

8 Figure 1: Trend in per capita calorie intake in Nigeria ( ) 3000 Per capita calorie intake (kcal/day) Per capita calorie intake Figure 2: Trend in total domestic food production in Nigeria ( ) Domestic food output (/1000 metric tonnes) Total domestic food output 8

9 Figure 3: Trend in food import in Nigeria ( ) Food import bill (Naira million) Food import bill Figure 4: Trend in food export in Nigeria ( ) Food export earnings (Naira million) Food export earning 9

10 Figure 5: Trend in per capita income in Nigeria ( ) 1400 Per capita income (Naira) Per capita income Figure 6: Trend in inflation rate in Nigeria ( ) Inflation rate (%) Inflation rate 10

11 3.2 Regression result Considering the three regression functions fitted to the data, the Double-log function was selected as the lead equation. The regression estimates and the model statistics are shown in table 4. Judging by the value of the coefficient of determinant (R 2 ), the lead equation reveals that about 95% of the variation in per capita dietary calorie intake was explained by domestic food output, food import, food export, per capita income and inflation. The F-value of is significant at 1% level indicating the statistical significance of the overall regression equation. The Durbin- Watson statistic, which is used to determine the existence or otherwise of serial correlation (or autocorrelation) is 1.82 and does not fall between the lower and upper critical values of dl = 1.13 and du = 1.81 for a sample size of 34 and 5 explanatory variables. This implies that there is no existence of autocorrelation in the data. Table 4: Regression result of dietary calorie intake model in Nigeria (N = 34) Functional forms/ Explanatory variables Linear function Semi-log function Double-log function Domestic food output (/1000 metric tonne) 0.014*** (12.87) 560.9*** (12.67) 0.279*** (13.24) Food import (Naira million) ** (-2.85) 10.8 (0.84) (-0.54) Food export (Naira million) 0.016** (2.01) 1.62 (0.11) (0.38) Per capita income (Naira) (1.69) 353.0*** (2.83) 0.162** (2.73) Inflation (%) (-0.80) (-0.05) (-0.17) Constant *** (9.72) *** (-6.54) 3.60*** (7.84) R R F-value Prob>F Durbin-Watson ***,**, indicate coefficient significant at 1%, and 5% level respectively. Figures in parenthesis are t-values. Dependent variable = per capita dietary energy intake. Note: In 2006, 1 US Dollar = 120 Naira. With regards to the explanatory variables, the model result shows that the coefficient of total domestic food output is positive and significant at 1% level. This makes sense because higher 11

12 domestic food output translates to higher food availability which could mean increased calorie intake at the national level. The implication of this is that, other things being equal, higher food production would translate to higher dietary calorie intake in Nigeria. The coefficient of per capita income is positive and significant at 5% level. This indicates that other things being equal, higher income would lead to higher dietary calorie intake. This result agrees with apriori expectation and other similar studies which have concluded that income is one of the important variables that determines calorie intake (Taffesse et al, 2000; Smith and Haddad, 2002; Aromolaran, 2004). From theory, it has been shown that in the Double-log regression equation, the coefficient of independent variables indicate elasticity. Therefore, from this result, the calorie-income elasticity in Nigeria was 0.16 implying that a 1% increase in per capita income would lead to about 0.2% increase in calorie intake. This is consistent with other empirical results such as that of Behrman and Deolalikar (1987), which reported very low calorie-income elasticity in India. Furthermore, this result has implication for the search for effective options for increasing food calorie intake among the poor segment of the population. The implication is that income increase would have very little impact on increasing calorie intake. The coefficient of food import, food export and inflation were not significant, even at 10% level. The constant term (intercept) is 3.60 and it is significant at 1% level. This indicates that even at zero production and income, a minimum level of calorie is necessary to maintain life. 4. Conclusion This study has examined the determinants of calorie intake in Nigeria. The study was based on secondary time series data covering The data were collected from Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS). The study brings out the following conclusions. First, the study has shown the need to increase domestic production of food to increase calorie intake and reduce the present level of food insecurity. Formerly, in Nigeria the shortfall in 12

13 domestic output of food had been balanced by food importation especially cereals and livestock products, however, with the recent ban on importation of certain food items, including partial ban on rice and poultry products, there is an urgent need for increase domestic food production. To achieve this would require measures such as increased expenditure on agricultural research, provision of irrigation facilities and provision of credit and inputs at subsidized rate to farmers. Resources that were committed to food importation before could be redirected to provision of these services to boost domestic food production. Second, the study also shows that to increase dietary calorie intake and reduce food insecurity, there is need to increase income. The food that household consumes either comes from their own production or from the market. Increased income could increase the purchasing power of individuals and households which would enable them to demand for more food. More income earning opportunities should be created and conducive environment for production and business development should be guarantee by government. Finally, the study shows that though income increase is important for increased food intake, the calorie-income elasticity was very low implying that other being equal, increased income alone may not be sufficient for achieving improvement in calorie intake. As a result of this, a combination of policies that would address food production, income and nutrition factors would be needed to increase food intake and reduce food insecurity. 13

14 References Adenegan, K.O.; Oladele, I.O. and Ekpo, M.N. (2004): Impact of Agricultural Export on Food Security in Nigeria. Food, Agriculture and Environment, 2 (1): Aromolaran, A.B. (2004): Intra-Household Redistribution of Income and Calorie Consumption in South-Western Nigeria. Economic Growth Center, Yale University, Center Discussion Paper Number 890 Behrman, J.R. and A.B. Deolalikar (1987): Will Developing Country Nutrition Improve with Income? A Case Study for Rural South India. Journal of Political Economy, 95 (3): CBN (2005): Central Bank of Nigeria, Annual Report and Statement of Account, Various Years. FAO (2006): Food and Agriculture Organization of the United Nations, Food Security Statistics, Nigeria Gross, R; Schultink, W. and Kielmann, A.A. (1999): Community Nutrition: Definition and Approaches. In: Encylopedia of Human Nutrition. Sadler, M; Strain, J.J and Caballero, B (Eds.). Academic Press Ltd, London, Kijima, Y.; Matsumoto, T. and Yamano, T. (2006): Nonfarm Employment, Agricultural Shocks and Poverty Dynamics: Evidence from Rural Uganda. Agricultural Economics, 35: Smith, L.C. and Haddad, L. (2002): How Potent is Economic Growth in Reducing Undernutrition? What Are the Pathways of Impact? New Cross-Country Evidence. Mimeograph, Economic Development and Cultural Change, The University of Chicago, USA. Smith, L.C.; Alderman, H. and Aduayom, D. (2006): Food Insecurity in Sub-Saharan Africa: New Estimates from Household Expenditure Surveys. Research Report 146, International Food Policy Research Institute, Washington, D.C Taffesse, Y.; Ayalew, H.; Tebeb, N and W.M. Girma (2000): Impact of Income Growth on Household Protein and Calorie Intake in Addis Ababa. East African Medical Journal, 77 (10):