IMPACT OF STOCK MARKET VOLATILITY ON FOOD PRICES IN NIGERIA

Abstract

This study is motivated by the persistent rise in food price amid increasing fluctuations in the Nigeria stock market. Hence, this study investigated the impact of stock market volatility on food prices in Nigeria using monthly time series data from January 2008 to December 2024. Heteroscedasticity and serial correlation test were conducted to ascertain the volatility behaviour. The generalized autoregressive conditional heteroscedasticity (GARCH) and the exponential GARCH (EGARCH) models were used for estimation. The finding revealed that the volatility of all share index, market capitalization and number of deals traded on the Nigeria stock market have significant positive effect on food commodity prices. The number of deals traded showed the strongest influence on food prices, indicating that stock market instability contributes to food price increase in Nigeria. It is therefore concluded that there is evidence of volatility persistent in the market. The diagnostic test confirmed the appropriateness of the estimated models. The study recommend that financial regulators should strengthen risk- monitoring system and introduce early warning mechanism to manage volatility shocks and stabilize food prices in Nigeria.