Project – Effect of Food Price Inflation on Household Consumption Patterns. A Study of Selected Households in Agege LGA, Lagos State

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Food is one of the most basic necessities of human life, and household spending on food constitutes an important component of total household consumption expenditure, particularly among low- and middle-income households. Food price inflation occurs when the general level of prices of food commodities increases persistently over time, reducing the quantity of goods that a given amount of household income can purchase. In Nigeria, food prices have become a major economic and social concern because increases in the prices of staples such as rice, beans, maize, garri, yam, vegetables, cooking oil and other food commodities directly affect household purchasing power. The National Bureau of Statistics (NBS) reported that food inflation reached 40.87% year-on-year in June 2024, representing a substantial increase over the 25.25% recorded in June 2023. The severity of the situation is also reflected in the cost of maintaining a healthy diet, which the NBS estimated at ₦1,241 per adult per day in June 2024, with the South-West recording an even higher average cost of ₦1,545 per adult per day (NBS, 2024a; NBS, 2024b).

The consequences of food price inflation extend beyond the simple increase in the amount households spend on food. When food prices rise faster than household incomes, households face a reduction in their real purchasing power and are compelled to make adjustments to their consumption decisions. Such adjustments may involve purchasing cheaper food products, reducing the quantity consumed, changing the frequency of meals, substituting expensive food items with relatively cheaper alternatives or reducing expenditure on non-food necessities to maintain food consumption. Evidence from Nigeria indicates that rising food prices can generate significant welfare losses, particularly among households that are net food buyers. A study by Ochieng et al. (2020) found that 79% of Nigerian farm households in their sample experienced welfare losses from food and non-food price changes, while cereals were identified as particularly important sources of vulnerability to price shocks. These findings demonstrate that food price changes can alter household economic welfare and consumption decisions in significant ways (Ochieng et al., 2020).

The relationship between food prices and household consumption can also be explained through the concept of household budget constraints. Every household has limited income that must be allocated among competing needs such as food, housing, transportation, education, healthcare, clothing and utilities. When the prices of food commodities increase, the amount of income available for other consumption categories may decline if household income does not rise proportionately. In such circumstances, households may reallocate their expenditure toward food and away from non-food items, thereby changing the overall pattern of household consumption. The World Bank (2025) reported that food expenditure accounts for a particularly large share of total consumption among poorer Nigerian households, with the poorest deciles spending approximately 70% of consumption expenditure on food, compared with about 53% among the richest decile. This unequal expenditure structure means that food inflation is likely to have disproportionately severe effects on lower-income households (World Bank, 2025).

Another important dimension of food price inflation is its effect on the quantity and composition of food consumed by households. Economic theory suggests that when the price of a commodity increases, consumers may reduce demand for that commodity and substitute it with another commodity that provides similar satisfaction at a lower price. In Nigeria, empirical evidence supports the existence of such consumption adjustments. A study by Ochieng et al. (2022) found that higher prices of most food categories affected household demand and that poorer households consumed less across the food categories examined than their non-poor counterparts. The study further estimated that 70.1% of the households examined experienced welfare losses amounting to an average of 7.52% of their annual household budget as food prices escalated. This evidence suggests that rising food prices can influence not only how much households spend but also what types and quantities of food they purchase (Ochieng et al., 2022).

Food price inflation can additionally affect household food quality and dietary diversity. When households cannot maintain their previous food expenditure because of increasing prices, they may prioritize calories and basic staples over more expensive sources of protein, fruits, vegetables and other nutrient-rich foods. Such adjustments can create nutritional consequences even where households continue to obtain sufficient quantities of food. Recent evidence from Nigeria’s 2023–2024 inflationary crisis indicates that the inflation shock reduced average household dietary diversity, while households with female income earners exhibited relatively higher dietary diversity. This suggests that household income characteristics can influence the capacity to absorb food price shocks and maintain a diversified diet (Food Policy, 2026). Therefore, the effect of food inflation should be understood not only in terms of the amount of money spent on food but also in terms of the quality, variety and nutritional characteristics of household consumption.

The impact of food price inflation may differ according to household characteristics, including income level, household size, employment status and location. Low-income households are generally more vulnerable because a large proportion of their income is already committed to food and other essential goods, leaving limited capacity to absorb additional price increases. Similarly, larger households may face greater pressure because increases in food prices have to be multiplied across more household members. The Nigerian General Household Survey–Panel recognizes the importance of household-level food consumption and specifically collects information on household food consumption, household size and food-related shocks. The 2023–2024 survey also includes information on whether households experienced difficulties as a result of increasing food prices and the severity of such effects, demonstrating the importance of food-price shocks as a household welfare issue in Nigeria (NBS & World Bank, 2024).

The urban environment provides a particularly important context for examining food price inflation because urban households are generally dependent on markets for a substantial portion of their food requirements. Unlike some rural households that may produce part of their food or have access to agricultural resources, urban households often purchase food regularly from markets, neighbourhood shops and supermarkets. Consequently, increases in market prices can be transmitted relatively directly to household budgets and consumption decisions. This is relevant to Lagos State, where high population density, urbanization, transportation costs, housing expenses and other living costs can place considerable pressure on household income. The evidence from the NBS shows that food prices and the cost of a healthy diet vary across locations, while the South-West recorded a particularly high cost of a healthy diet in June 2024 (NBS, 2024b).

Agege Local Government Area provides a relevant setting for investigating the relationship between food price inflation and household consumption patterns because households within the area operate within an urban market environment where food purchases are closely connected to prevailing market prices. As prices of staple foods rise, households may respond through changes in food choices, quantities purchased, meal frequency, shopping locations, food substitution and allocation of income between food and non-food necessities. However, household responses may differ according to income, household size, employment and other socioeconomic characteristics. Although existing Nigerian studies have established that food price increases can produce welfare losses and changes in food demand, much of the available evidence is based on national, regional or rural household datasets rather than specifically examining households in Agege LGA. This creates a need for a localized study of how food price inflation is affecting the consumption patterns of selected households in Agege LGA, Lagos State (Ojogho & Ojo, 2017; Ochieng et al., 2020; Ochieng et al., 2022).

1.2 Statement of the Problem

The persistent increase in food prices in Nigeria has created serious pressure on household purchasing power and the ability of families to maintain their previous standards of consumption. The problem became particularly pronounced during 2024, when food inflation reached 40.87% year-on-year in June, while the average cost of a healthy diet also increased considerably. Although subsequent inflation trends have changed, the cumulative effect of previous food price increases continues to affect the amount of income households must allocate to food. Consequently, many households may be experiencing difficulty maintaining their previous food consumption levels while simultaneously meeting other essential obligations (NBS, 2024a; NBS, 2024b).

A major problem arising from food price inflation is the possibility of changes in the quantity and quality of food consumed by households. When food becomes more expensive, households with limited incomes may respond by reducing the quantity of food purchased, purchasing cheaper substitutes or reducing consumption of relatively expensive nutritious foods. Evidence from Nigeria shows that escalating food prices affect demand across several food categories and can result in measurable welfare losses among households. Ochieng et al. (2022) reported that 70.1% of the households studied experienced welfare losses associated with escalating food prices, while Ojogho and Ojo (2017) found that a hypothetical 10% increase in food commodity prices would produce substantial welfare losses among rural food consumers. These findings raise concerns about whether households in urban communities such as Agege are similarly modifying their consumption patterns in response to food price increases (Ochieng et al., 2022; Ojogho & Ojo, 2017).

Another problem concerns the displacement of non-food household expenditure by rising food costs. When a larger proportion of household income is devoted to food, less income remains available for education, healthcare, transportation, housing, clothing, savings and other necessities. This problem is especially important among poorer households because food already accounts for a large share of their total consumption expenditure. The World Bank (2025) reported that the poorest Nigerian households spend approximately 70% of their consumption expenditure on food, compared with approximately 53% among the richest households. This means that the same increase in food prices can produce very different consequences across income groups, potentially worsening socioeconomic vulnerability among low-income urban households (World Bank, 2025).

Despite the growing evidence on food price inflation and household welfare in Nigeria, there is insufficient localized evidence on how households in Agege LGA specifically adjust their consumption patterns when food prices rise. Existing studies have examined national household datasets, farm households and rural consumers, while recent national evidence has demonstrated that household responses to price shocks can differ according to income, location and household characteristics. Therefore, it remains important to determine whether households in Agege are reducing food quantities, substituting food items, changing meal patterns, reducing dietary diversity or reallocating income from non-food needs toward food expenditure. This study consequently seeks to examine the effect of food price inflation on household consumption patterns among selected households in Agege LGA, Lagos State.

1.3 Purpose of the Study

The main purpose of this study is to examine the effect of food price inflation on household consumption patterns among selected households in Agege Local Government Area, Lagos State.

Specifically, the study seeks to:

1. examine the effect of food price inflation on household food expenditure among selected households in Agege LGA, Lagos State;
2. determine the effect of food price inflation on quantity and frequency of food consumption among selected households in Agege LGA, Lagos State;
3. assess the effect of food price inflation on household food choices and substitution patterns among selected households in Agege LGA, Lagos State; and
4. examine the effect of food price inflation on household expenditure on non-food necessities among selected households in Agege LGA, Lagos State.

1.4 Research Questions

The following research questions will guide the study:

1. To what extent does food price inflation affect household food expenditure among selected households in Agege LGA, Lagos State?
2. To what extent does food price inflation affect the quantity and frequency of food consumption among selected households in Agege LGA, Lagos State?
3. To what extent does food price inflation affect household food choices and substitution patterns among selected households in Agege LGA, Lagos State?
4. To what extent does food price inflation affect household expenditure on non-food necessities among selected households in Agege LGA, Lagos State?

1.5 Research Hypothesis

The following null hypothesis will be tested at the 0.05 level of significance:

H₀: Food price inflation has no significant effect on household consumption patterns among selected households in Agege Local Government Area, Lagos State.

1.6 Significance of the Study

The study will be significant to households because it will provide greater understanding of how food price increases influence everyday consumption decisions. The findings may help households identify the major ways in which food inflation affects their expenditure, food choices, meal frequency, quantities purchased and allocation of income.

The study will also be useful to government and policymakers because evidence on household responses to food inflation can assist in the formulation of policies aimed at protecting vulnerable households. Such policies may include targeted social protection, food assistance programmes, agricultural interventions, market stabilization measures and policies designed to improve food supply and affordability. The importance of such interventions is reinforced by evidence that food price shocks can produce substantial welfare losses among Nigerian households (Ochieng et al., 2020; Olaoye et al., 2023).

Community development organizations and non-governmental organizations may also benefit from the findings. Understanding how households respond to food price inflation can help such organizations design interventions targeted at vulnerable families, particularly households that respond to rising prices by reducing dietary diversity or sacrificing expenditure on other basic needs.

The study will further be useful to economists, agricultural policymakers and food-system stakeholders because it will provide localized evidence concerning the relationship between food prices and consumer behaviour. Understanding how households substitute food items or change consumption quantities can provide useful information for evaluating food-market policies and programmes intended to improve food affordability.

Finally, the study will contribute to academic knowledge by providing empirical evidence on food price inflation and household consumption patterns within an urban Nigerian context. While existing studies have examined food price changes, welfare and demand responses using national and regional datasets, the present study will provide evidence from selected households in Agege LGA. The findings may therefore serve as a useful reference for future research in economics, development studies, agricultural economics, public policy, consumer studies and related fields.

1.7 Scope of the Study

The study focuses on the effect of food price inflation on household consumption patterns among selected households in Agege Local Government Area, Lagos State.

The independent variable is food price inflation, which refers to persistent increases in the prices of food commodities and their implications for household purchasing power.

The dependent variable is household consumption patterns, operationalized in this study through:

• household food expenditure;
• quantity and frequency of food consumption;
• food choices and substitution patterns; and
• expenditure on non-food necessities.

Geographically, the study is limited to selected households in Agege Local Government Area of Lagos State. The study does not seek to represent every household in Lagos State or Nigeria. It focuses specifically on the experiences and consumption responses of households selected from the study area.

1.8 Operational Definition of Terms

Food Price Inflation: A sustained increase in the general prices of food commodities over a period, resulting in an increase in the amount households must pay to purchase food.

Food Prices: The monetary amounts paid by consumers to obtain food commodities such as rice, beans, maize, garri, yam, vegetables, meat, fish, cooking oil and other food products.

Household: A person or group of persons living together and sharing arrangements for food and other basic household needs.

Household Consumption: The use or purchase of goods and services by household members to satisfy their needs and wants.

Household Consumption Pattern: The manner in which a household allocates its income and resources among food and non-food goods and services.

Food Expenditure: The amount of household income spent on the purchase of food and food-related items.

Food Substitution: The replacement of a relatively expensive food item with another food item that is considered more affordable or provides a similar consumption purpose.

Consumption Frequency: The number of times household members consume particular food items or meals within a specified period.

Dietary Diversity: The variety of different food groups consumed by members of a household over a specified period.

Purchasing Power: The quantity of goods and services that a given amount of income can purchase at prevailing prices.

Non-Food Expenditure: Household spending on necessities other than food, including housing, transportation, education, healthcare, clothing, utilities and other household needs.

Household Welfare: The overall economic well-being of a household as reflected in its ability to meet food, non-food and other basic needs.

Project – Effect of Food Price Inflation on Household Consumption Patterns. A Study of Selected Households in Agege LGA, Lagos State