Modeling return and volatility spillovers among food prices in Nigeria

This paper focuses on the return and volatility spillovers among the major agricultural commodities in Nigeria. Specifically, we examine the spillovers across wheat, rice, soybeans, groundnut and palm oil both in terms of returns and volatility using monthly data from January 1980 to June 2017. We employ the Diebold and Yilmaz (2012) spillover approach and consequently, we compute the Total Spillover, Directional Spillover and Net Spillover indices. In a bid to capture the inherent secular and cyclical movements in the Nigerian agricultural commodities market, we carry out the rolling sample analysis which complements the spillover results. We find evidence of interdependence among major agricultural commodities in Nigeria given the spillover indices. Interestingly, return and volatility spillovers exhibit both trends and bursts respectively. In addition, we recognize crisis periods that seem to have motivated the documented fluctuations in returns and volatilities of the Nigerian agricultural commodities market. Our results are robust to the VAR lag structure.