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This paper analyzed the welfare effects of price changes over categories of farm households in Nigeria taking into consideration the dual role of farm households as both consumer and producer of food between 2010-2016. This study attempts to shed some light on the differences between the direct approach and indirect. Estimated Compensating Variation reveals that 79.0% of farm households were net food buyers and suffered welfare loss (mean = 2.98) with the mean expenditure of N529, 397.5 per annum while 21.0% were net food sellers and enjoyed welfare gain (mean = −1.66) with the mean expenditure of N513, 755.7 per annum. Cereal was identified as food for which the households were most vulnerable to price shocks. When adjustments are allowed, households can adapt their consumption and production patterns resulting in lower deteriorations in welfare with significant differences across quintiles. Therefore, efforts to mitigate extreme price spikes are relevant for improved overall household welfare.

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Purpose – Most demand studies have concentrated on the estimation of expenditure elasticities for single commodity at a time thereby not being able to reveal the details of the relationships among various food items demanded by households. The purpose of this paper is to simultaneously estimate the demand equations for a number of food items and to estimate cross-price elasticities which are necessary for studying consumer behaviours, marketing, production planning and policy making. Design/methodology/approach – Relevant data were collected from 320 randomly selected households in a multistage sampling procedure. The normalized data were analysed in a system of equation with symmetry, adding-up and homogeneity restrictions imposed on the model. Findings – Expenditure elasticities show that gaari and palm oil were inferior food items while others could be classified as normal. Own-price elasticities showed that beans, plantain, yam flour and rice were luxuries while others were necessities. Cross-price elasticities revealed that some were substitutes of one another while others were compliments and some were not related. Research limitations/implications – The data were collected using a month recall approach and generalizing its findings beyond such months of a year may be misleading. Therefore, other researchers should repeat the study across months and locations. Social implications – The study recommended that food policies should be broad based to encompass majority of the food items consumed in the study area given the intrinsic relationship inherent among them as their demands were interrelated and consumer behaviours as revealed by various elasticities be considered in formulating food-related policies. Originality/value – The paper emphasized the need to model food demand in a system of equations as against single equation modelling.