The Effects of Macroeconomic Indicators on Agricultural Commodity Prices in Sub-Saharan African (SSA) Countries

Abstract

Through agriculture, SSA countries contribute enormously to the international market regarding food security. However, the agricultural sector in SSA has become vulnerable due to external shocks and has affected commodity prices as well as the economic stability of member countries. With food prices being projected to increase by 14.84% from 2022 to 2023, concerns have been raised about welfare in SSA regarding rising poverty, food insecurity, and geopolitical tensions in the near future. This made it necessary for this study to investigate how interest rates, exchange rates, and the price of crude oil affect the prices of agricultural commodities in Sub-Saharan African nations. In order to achieve the study's objectives, we used the fixed effect estimating technique, which was supported by Hausman-Wu's test, and data on 16 African nations from the World Bank and UN Food and Agricultural Organization databases covering the years 2009–2022. The study discovered that the price of crude oil and the exchange rate had a major impact on the price of agricultural commodities. The inverse relationship between interest rates and agricultural commodity prices, however, was not supported by any statistical data, according to the study. Therefore, it is recommended that governments in SSA countries must have balanced monetary policies, targeted agricultural credit programs, promote regional trade and currency agreements and encourage investment in alternative energy sources to reduce interest rates exchange rates and crude oil price effect on the agriculture sector.