EFFECTS OF PETROLEUM PRODUCTS PRICE HIKE ON THE SUPPLY OF AGRICULTURAL PRODUCTS IN NIGERIA – A REVIEW

Abstract

The supply of agricultural products in Nigeria determines food and nutritional security in the country. One of the factors affecting the supply of agricultural products is technological advancement which encompasses of farm mechanization, irrigation etc. Petroleum products are used to power farm machineries and move farm produce from the point of production to the point of consumption. Therefore, the pricing of the derivatives of petroleum products play key roles in impacting the production and productivity of the agricultural sector. A comprehensive literature review of the effects of petroleum products price hike on the supply of agricultural products in Nigeria was conducted using relevant scientific papers, project reports, books and peer-reviewed journals. The review showed that petroleum products are used to power and drive farm machineries and move farm commodities from the point of production to the point of consumption. The pricing of petroleum products positively correlates with inflation rate through the cost of transportation, cost of production, prices of commodities, cost of living. This shows that petroleum products price hike affects producer decision, consumer behavior, and energy policies. This suggests that an alternative to petroleum products such as renewable energy should be exploited to reduce dependency on petroleum. Strategic petroleum reserve should be kept and used to buffer short-term supply shocks and price hikes of petroleum products. Also, farmers should have access to credit at no or low interest rate to boost the production capacity.