This paper focuses on precipitation anomaly as a proxy for climate change to investigate how climate change affects food price inflation in Nigeria. An ARDL model was employed to entangle and quantify drivers behind the relationship between precipitation anomaly and food price inflation. The result shows that a 1 per cent increase in precipitation anomaly implies an increase of 0.58 per cent in food inflation in the short run. At the same time, an increase of 1 per cent precipitation anomaly implies an increase of 0.11 per cent in food inflation in the long run. This means that precipitation anomaly pushes food prices upward, which affects inflationary trend in general and monetary policy effectiveness. To keep inflation under target, policy incentive towards adaptation and mitigation of climate change should be rolled out to tame climate-induced food price inflation in both long run and short run. Additionally, policy makers ought to gauge climate perception of economic agents in anchoring inflation expectation. This is in additional to monetary policy mechanism which ought to be sensitive to precipitation anomalies and other climate related shocks and risks as they affect the primary mandate of ensuring price stability.
Keywords: Climate Change, Food, Nigeria, price inflation
