Photo for illustrative purposes only: A boy carries a a relief package box he received during the Lagos Food Bank Initiative outreach in Ikotun, Lagos, Nigeria, on June 7, 2020. Oluwafemi Dawodu

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Up, up goes food price in Nigeria

Published 12 Jul,2020 via The Nation - With the unprecedented rise in the cost of staple foods and consumables completely priced out of the reach of majority of Nigerians, obtaining a three square meal these days, is now a luxury many cannot afford. In this report, Charles Okonji examines the causes and effects

One of the sore points of the ravaging coronavirus scourge is the fact that it has adversely affected the cost of staple foods and other consumables in terms of prices.

Before the lockdown in mid-January to February, the prices of fast moving consumer goods (FMCG) and produce, especially, were relatively cheap and affordable.

However, since the spread of the pandemic which led to partial lockdown by the government in March the prices of foods generally has literally gone south thus leaving the consumers already suffering from the bitter pill of a parlous state of the economy, in total quandary and helplessness of sort.

Worries over rising food inflation

In the wake of current pandemic ravaging the world, the global economy has been experiencing a continuous downward drift, hence resulting to a continuous upward movement in inflation rate. However, Nigeria is not spared as inflation rate has hit all-time 12.2 percent, while general food index did not just rise, but has doubled.

During the Q3 of 2019, Nigeria’s economy experienced acute shortage of food, leading some analysts into forecasting that the country would run into serious food crisis in the Q1 of 2020, which became a reality with the lockdown effect that emanated from Covi-19 pandemic.

Data from the National Bureau of Statistics (NBS) reveal that Nigeria’s inflation rate increased by 12.34% (year-on-year) in April 2020. This is 0.08% higher than the rate of 12.26% recorded in March 2020 and the highest rise since April 2018.

According to the latest CPI report released by the NBS, inflation rate increased by 12.34% (year-on-year) in April 2020 from 12.26% recorded in March 2020.

On a month-on-month basis, the index increased by 1.02% in April 2020, a 0.18% rate higher than 0.84% recorded in the previous month.

The report further disclosed that food index rose from 14.85 percent recorded in January to 14.9 percent in February 2020 while core inflation increased by 0.08 percent to stand at 9.43 percent compared to 9.35 percent recorded in the preceding month.

Upward movement in price was recorded in all subsets of the consumer price indexes, and urban and rural inflation rate increased year-on-year by 12.85 percent and 11.61 percent in February from 12.78 percent and 11.54 percent recorded in January respectively.

Food inflation

The composite food index increased by 15.03% in April 2020 0.03 points higher, compared to 14.98% recorded in March 2020.

On a month-on-month basis, the closely watched component of the inflation index increased by 1.18% in April 2020, up by 0.24% points compared to 0.94% recorded in March 2020. According to the report, the rise in the food index was caused by increases in prices of potatoes, yam and other tubers, fish, oils and fats, meat, fruits, bread and cereals, and vegetables.

It is worthy of note that core inflation, which excludes the prices of volatile agricultural produce climbed by 9.43 percent in February 2020, depicting a figure of 0.08 percent higher when compared to 9.35 percent recorded in the previous month.

Key inflation drivers

The foremost increase were recorded in prices of pharmaceutical products, catering services, air transport, furniture repairs, repairs and maintenance of personal transport equipment, water supply and water consumption, major household equipment and appliances, dental care and services, carpet tiles and other floor coverings, vehicle spare parts and vehicle maintenance, durable and non-durable household goods.

Core inflation (All items less farm produce) which excludes the prices of volatile agricultural produce stood at 9.98% in April 2020, a 0.25% increase when compared to 9.73% recorded in March 2020.

On a month-on-month basis, the core sub-index increased by 0.93% in April 2020, up by 0.13% when compared with 0.8% recorded in the previous month.

The highest increases according to the report, were recorded in prices of bicycle, passenger transport by road, passenger transport by sea and inland waterways, paramedical services, hospital services, pharmaceutical products, medical services, motorcycles, and major household appliances whether electronic or not.

Worst hit states

Bauchi state recorded the highest year-on-year inflation rate of 14.44% followed by Rivers state with 14.16% and Sokoto state, which recorded a 13.99% inflation rate. Meanwhile the states with the lowest rise in inflation rate were Kwara (8.98%), Abuja (10.8%), and Edo state with 10.87%.

Sokoto state also recorded the highest year-on-year food inflation rate, followed by Abuja with 17.65% and Akwa Ibom, which recorded 17.55%. On the other hand, Enugu state recorded the slowest rise in food inflation, having recorded a 12.89% increase, followed by Edo state with 12.9% and Ebonyi state with 13.04%.

The latest inflation report implies a fast rise in the prices of overall goods and services in the economy, caused by the lockdown procedure in response to Covid-19 pandemic and the continual global oil crisis. It should be noted that the latest increase in the inflation rate means that the purchasing power of consumers to buy goods and services deteriorated.

That is, the ability of consumers to buy the same quantity of goods with a fixed income level has worsened within the period, despite investment yields being low and economic activity practically kept on hold.

However, Bauchi recorded the highest in terms of all items inflation with 14.47 percent rate followed by Niger State, with 14.06percent inflation rate as Plateau remained at 13.98% percent while Sokoto stood at 13.96 percent and Kano on 13.86% percent.

Implication on the strength of naira

The current inflation rate implies that the purchasing power of consumers has worsened and their ability to afford the same quantity of goods and services they used to enjoy has reduced despite income level maintaining status quo.

Experts have predicted that inflation rate would still rise beyond 12.3 percent as the pandemic is discouraging investors globally, especially in Nigeria.

In his analysis, Professor Akpan Ekpo, a Professor of Economics and Public Policy, agreed with the NBS. He stated that food inflation is an important component of the inflation matrix.

According to him, “Households and their families should not spend more than 20 percent of their income on food. The solution is to empower farmers to produce more using recent and available technology; for now food production depends on nature, that is, rainfall and increased acreage. It would be suicidal to import basic foods in an economy with so much arable land. The key is production, production and production.”

Ekpo noted that farmers ought to be empowered and the country may return to the era of marketing boards and partly have a guarantee price for food products for farmers.

“Farmers should be informed to tap the various intervention funds of the central bank of Nigeria. It would trigger foods import from neighboring countries which should be discouraged. It is difficult to estimate without data. However, if farmers have access to the various intervention funds especially those under Covid-19, the problem would be minimised.”

Echoing similar sentiments, Dr. Muda Yusuf, Director General, Lagos Chamber of Commerce and Industry has pointed that Inflation rate was 12.4 percent, year-on-year in May 2020, which is 0.06 percent higher than the April 2020 inflation of 12.34 percent.

“However, the 0.06 percent increase was very marginal. My expectation was that it would be much higher given the various challenges constraining output in the economy. Meanwhile, food inflation remains high at 15.04 percent, up from 15.03 percent in April. This has implications for poverty and welfare, especially for citizens at the bottom of the pyramid. Rising inflation in a period of economic stagnation is actually a double jeopardy for any economy.”

He explained that the key drivers of food inflation include the security challenges faced by many farming communities across the country, adding that transportation cost, the climate change effect, productivity issues in agriculture and the paucity of commercial agriculture in the country and cost of farm inputs attributed to food inflation.

“A new element impacting on food prices is the restrictions on interstate movements. Different food products are produced in different parts of the country. The inter-state travel restrictions had affected the supply of food products to different parts of the country.

“Although essential items such as food items were exempted from the restrictions, traders in food items complain of harassment and extortion by security agencies. All of these may further compound the food security outlook in subsequent months.

“It is imperative to scale up productivity in agriculture, address the climate change issues and improve the security situation in order to improve agricultural output and reduce the risk of food crisis in the country. The current inflation outlook would continue to predispose the CBN to retain its monetary tightening stance, which means the business community would have to contend with a high interest rate regime in the months to come,” the DG of LCCI stressed.

Nigerians brace up for hunger!

It may be recalled that just a few months ago, the Food and Agriculture Organisation predicted that seven million Nigerians will experience / food shortage/ between June and August, this year as 16 northern states and the Federal Capital Territory (FCT) have been identified to face food and nutrition crisis.

Yet, recent happenings showed that this food shortage will be worse, as the cost of production set to significantly increase within the next six-nine months and every Nigerian will be affected.

A market survey conducted in some cities showed that there was a significant increase in the prices of yam, potatoes, beans and onions while the prices of rice has remained unstable too.

For example, Ketu, Mile 12 and Oyingbo markets in Lagos, all get supplies from the North on a daily basis as countless trucks are seen unloading quantities of onions, tomatoes, pepper, fruits, potatoes, yams, vegetables and the likes at these markets.

Undoubtedly, the devastating effect of the Covid-19, especially when it has to do with the supply of foodstuffs has affected food items are pepper and tomatoes, which mostly come from the Northern states.

In fact, cost of living has never been so high, and the masses are really complaining about the high cost of essential foodstuffs.

At the popular Ile-Epo market along Lagos–Abeokuta Expressway, a small bowl of tomatoes that sold for N600 now costs N500.00.

Another trader, Mrs. Ayomide, a vendor at Iyana Ipaja market, said that since the beginning of the year, prices of pepper and tomatoes have gone up geometrically.

Mr. Jude Okeke of Chuvex venture, major wholesale dealers in food items like Garri, beans, rice, and grains noted that a bag of 50kg rice which used to sell for N17, 000 now sells between N24,000 and N12,000 depending on the brand.

A meat seller, Bala Shehu, complained that a cow which sold for N250,000 about six months ago, now goes for N300,000. And small size tuber of yam from the North which sold earlier in the year for N550 presently costs between N950 and N1200; although there are other species grown in the East and West, which are a bit cheaper.

Traders also attributed swings in the season of plantation and harvest as the cause for the price increase.

Fear of food crisis reverberates across Africa

Sadly, Nigeria may not be alone as far as fear of imminent food crisis is concerned as many households across Africa already live in fear of the pangs of hunger.

According to Simon Ehui, Regional Director for Sustainable Development for Africa – World Bank, “Even before the global COVID-19 pandemic broke out, food insecurity was a serious concern throughout sub-Saharan Africa.”

Citing a report by Food and Agriculture Organisation, he said, 239 million people in the African region were undernourished as of 2018, adding that since long before the COVID-19 pandemic, these chronic food crises have been driven by a variety of factors, including economic shocks, climate, and conflict. “Indeed, areas that are severely affected by climate change—particularly the Sahel region, the Horn of Africa, and southern Africa—have many food insecure people.” In East Africa, intercommunal violence and armed conflicts are perpetuating instability and tensions, particularly in South Sudan, and are the driver of large refugee populations in neighboring countries, such as Uganda. In Nigeria, the region’s most populous country, the number of undernourished people was estimated at more than 25 million in 2018—up by 180 percent over the past decade.”

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Charles Okonji